Issue No. 104 DISPLAY TO 31 DECEMBER 2021
THE 2021 ASIAN BANKING & FINANCE AWARDS RECOGNISED THE MOST EXCEPTIONAL BANKS ACROSS APAC Asian Banking & Finance
BANK RAYA ZONES IN ON INDONESIA’S GIG ECONOMY THE PHILIPPPINES’ FINANCIAL DIGITISATION AMBITIONS: BSP WHAT’S IN STORE FOR THE CRYPTO INDUSTRY WITH CHINA’S ANTAGONISM? WHY THE ISLAMIC BANKING SECTOR WILL BE THE BIGGEST WINNER POST-COVID
FROM THE EDITOR PUBLISHER & EDITOR-IN-CHIEF
Tim Charlton
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t’s our highly anticipated awards issue! Head over to page 36 where we celebrate the achievements of hundreds of banks across the region for their exceptional commercial banking, retail banking, and wholesale banking initiatives at the Asian Banking & Finance Awards 2021.
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We chatted with Deputy Governor Mamerto Tangonan of Bangko Sentral ng Pilipinas on the goal of pushing up financial inclusion across the Philippines by hingeing on the launch of the national ID and QR payment system. Jumio Asia’s Vice President Frederic Ho also weighs in on building successful Philippine digital banks and warns to get it right on the first try or fade under a bad reputation. Read the full interviews on pages 16 and 20. We also highlight China’s antagonistic stance on cryptocurrency mining activities as it deals a massive blow to the global crypto mining industry. Islamic banks adhering to Shariah laws, ethics, and values are also gaining popularity amongst the Millennials and Gen Zs. Read the full stories at pages 24 and 26. Read on and enjoy!
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ERRATUM Asian Banking & Finance erred in the July-September 2021 issue on the Singapore Bank Rankings with the rankings and figures of the following banks: United Overseas Bank Limited (UOB), OverseaChinese Banking Corporation Limited (OCBC), Citibank Singapore Limited, and Standard Chartered. For the full corrected Singapore Bank Rankings, visit the digital version at: https://issuu.com/charlton_media
MICA (P) 249/07/2011 No. 67
ASIAN BANKING AND FINANCE | Q4 2021 1
CONTENTS
36
COVER STORY GET TO KNOW THE WINNERS OF THE ASIAN BANKING & FINANCE AWARDS 2021
INTERVIEW
RETAIL BANKING 08 Artificial intelligence and advanced analytics are key to open banking
VOX POP 10 What do SMEs expect from modern
16 PH’s financial digitisation ambitions: BSP
20 Building successful digital banks in
BRANCH WATCH 11 Citi opens new Busan office to expand securities services to the KSD
24
COUNTRY REPORT WHAT’S IN STORE FOR THE DECENTRALISED CRYPTO INDUSTRY WITH CHINA’S ANTAGONISM?
EVENT COVERAGE
12 Bank Raya zones in on gig economy
payments solutions in 2021?
16
INTERVIEW PH’S FINANCIAL DIGITISATION AMBITIONS: BSP
the Philippines
FINTECH WATCH
86 Mitigating risks and ensuring regulatory compliance through Nexis Diligence
88 How to combat fraud in a hybrid banking environment
90 How financial firms can take climate action beyond CSR campaigns
23 Currenxie for a better cross-border payment platform
28 Siam Commercial Bank’s restructuring highlights Thai banks’ need for complexity
Published quarterly on the second week of the month by Charlton Media Group Pte Ltd 101 Cecil St. #17-09 Tong Eng Building 2 ASIAN BANKING AND FINANCE | MARCH 2019 Singapore 069533
For the latest banking news from Asia visit the website
www.asianbankingandfinance.net
Visit crealogix.com | Visit crealogix.com |
Leveraging Leveraging financial financial ecosystems: ecosystems:
5 5 myths myths debunked debunked When it comes to leveraging financial ecosystems to maximise commercial When it comeswhat to leveraging financial ecosystems to maximise commercial opportunities, are the common myths and what is the reality? opportunities, what are the common myths and what is the reality?
1
MYTH MYTH “We don’t need an eco“We don’t needstrong an ecosystem – we're system – we're strong enough without it”
enough without it”
2
REALITY REALITY There are benefits from
There are benefits from ecosystems, including ecosystems, including increased customer increased new customer retention, forms of retention, new forms of revenue generation and revenuecosts generation and reduced reduced costs
MYTH MYTH “Ecosystems can slow
“Ecosystems can slow growth and innovation” growth and innovation”
33
MYTH MYTH “It’s too expensive to
“It’s too to foster andexpensive maintain an foster and maintain an ecosystem” ecosystem”
REALITY REALITY that transform Companies
REALITY REALITY Modern digital banking
Companies that transform into ecosystem-centric into ecosystem-centric businesses experience new
Modern digital banking engagement platforms engagement platforms allow you to create
businesses experience new sources of innovation that sources of innovation that drive growth
allow youwhere to create structures structures where ecosystems can grow and
drive growth
ecosystems can grow and prosper, with little technical prosper, with little technical effort effort
4 4
MYTH “We can’t cover MYTH everything ourselves “We can’t cover in one ecosystem” everything ourselves
in one ecosystem”
55
MYTH “We’re MYTH too small to make this successful” “We’re too small to make
this successful”
REALITY
REALITY
Yes, you can – working with REALITY partners. You–don’t needwith to Yes, you can working
Open banking and open REALITY wealth are not just large Open banking andfor open
be strong You in every of partners. don’taspect need to service provision be strong in every aspect of
tier 1 banks networks wealth are–not just for large enable small – and mid-sized tier 1 banks networks
service provision
organisations provide enable small to and mid-sized aorganisations full range of relevant to provide
Take action now Take now about Talk toaction CREALOGIX Talk to CREALOGIX realising your digitalabout realisingfaster your digital roadmap and more successfully at roadmap faster and solutions@crealogix.com more successfully at solutions@crealogix.com
services a full range of relevant
services
At CREALOGIX, we work with banks and financial institutions every day to leverage At CREALOGIX, the value with of ecosystems, innovation every and personalise we work banks and accelerate financial institutions day to leverage customer We’re ready to innovation help address the key the value experience. of ecosystems, accelerate and personalise challenges for your digitalisation customer experience. We’re readyproject. to help address the key
challenges for your digitalisation project. ASIAN BANKING AND FINANCE | Q4 2021 3
News from asianbankingandfinance.net Daily news from Asia MOST READ
BANKING TECHNOLOGY
ISLAMIC BANKING
INFORMATION TECHNOLOGY
Why Malaysian banks are spending more on financial wellness apps
Expect more mergers amongst SEA, South Asian Islamic banks
Digitalisation creeps into Singapore banks’ non-tech roles
About 64% of Malaysian retail banking decision-makers said their company is increasing spending on digital and engagement financial wellness initiatives—the highest in APAC.
Expect more Islamic banks to consolidate in South, Southeast Asia, and those in countries that are part of the Gulf Cooperation Council as the sector seeks to improve revenue generation and cut costs, reports Moody’s.
As the year progresses, banks will likely only continue to go into a ‘reform and transform’ path, spurred by the granting of digital bank licenses, according to a study by Randstand Singapore.
RETAIL BANKING
CARDS & PAYMENTS
Security Bank CEO Sanjiv Vohra on future-proofing a bank
‘Buy now, pay later’ speaks to convenience for the unbanked
For the head of one of the Philippines’ oldest banks, the key to thriving in the future is not just in digitisation and realignment of long-term goals: it’s in offering a customer-centric banking journey.
The rise of BNPL in the Philippines not only speaks to its convenience but also to the population’s willingness to manage their budgets more optimally, according to Robocash Group chief executive officer Sergey Sedov.
4 ASIAN BANKING AND FINANCE | Q4 2021
MARKETS
China deems 19 banks ‘too big to fail’ The People’s Bank of China placed the D-SIBS in four buckets in order of their systemic importance. These 19 institutions account for over 60% of system banking assets as of June 2021, according to a report by Fitch Ratings.
ASIAN BANKING AND FINANCE | Q4 2021 5
THOUGHT LEADERSHIP ARTICLE
Meeting the challenges of SME Banking during the COVID-19 pandemic Understanding the needs of SMEs is key to a bank’s sustainability—and even success—during the current crisis. lack of engagement between the two. According to a research study made by Strand: • 69% of SMEs see banks as a utility provider and only 8% view banks as a business partner • 43% of SMEs are considering switching to a challenger bank • 16% were open to exploring other providers, with more than two-thirds open to non-traditional lenders that can give them a faster loan approval process before the COVID-19 crisis happened
Karsten Kemna, Managing Director (APAC) at CREALOGIX
T
he COVID-19 pandemic has caused massive economic disruption that has severely tested the strength and resilience of many businesses. With global economies experiencing the biggest public health crisis in history, many businesses have been compelled to close down as lack of cash, decreases in sales, difficulties in loan installment payments, complications in bank financing and changes in consumer behaviour have proliferated. The result has been weakened economic conditions that have challenged the banking industry and inflicted massive instability in financial systems. If there’s one thing that SMEs have learned from this crisis, it’s the urgency to adopt digital strategies to manage and improve their sustainability. Yet this assertion in using technology and digital servicing has been anchored in place even before the pandemic. A study made by Accenture revealed that technology—particularly software and services that enhance their website and digital marketing—has been the number one area of investment for SMEs before and during the COVID-19 pandemic. What’s interesting is that the percentage gap before and during the 6 ASIAN BANKING AND FINANCE | Q4 2021
pandemic isn’t significantly huge: Prior to COVID-19, 61% of SMEs have already been investing in technology—after the pandemic, the figure only increased to 64%. However, what the crisis has done is magnify SMEs’ interest in expanding their businesses online. Prior to the pandemic, ASEAN SMEs ranked the need to continue digitalising as their fourth most important approach (49%) and the improvement in customer experience as their top priority (63%). The COVID-19 outbreak resulted in a significant priority shift, with SMEs across the region recalibrating their strategies to focus on digitalising as their top priority (60%), with improving customer experience dropping to third place (52%). Repositioning future-ready SME banking services As SMEs focus on regaining a more secure foothold, banks should take this opportunity to act as a partner/enabler to help these businesses emerge stronger even during the pandemic. An EY survey found 37% of SMEs wanted to increase the level of engagement with their banks. Despite this, traditional banks often regard SMEs as too costly or risky to serve, resulting in
The results show that banks need to improve their SME digital service offerings to remain competitive. To do this, they need to focus not only on the SMEs’ financial needs, but also their entire business process. Here are three
key areas they should consider:
of digital automation and efficiency. Rethinking the strategy of going beyond 1. Enhance digital channels and tools banking, banks can equip SMEs with a in banks new level of SME digital banking that is The expectations of SME banking have more than providing valuable banking elevated and evolved through the services, enabling them to grow and pandemic, and banks need to be more succeed. creative in meeting their needs with a wider range of services via digital 3. Improve personalisation in banks channels, including access to credit, Consumers exposed to digital technology flexibility of loan repayments, and are aware of how technology can facilitating face-to-face meetings in a provide them with more personalised digital setting. experiences. According to Salesforce, SME banking services could offer 52% of customers expect financial the same type of SME platforms with institutions to always personalise offers, relevant data-driven insights and and 66% expect them to understand analytics. Banks will be able to predict their unique needs and expectations. when a capital injection is needed and Those days when personalisation was tailor appropriate loan offerings. limited to special offers and promos Banks have to leverage their digital have long gone. Now, it has expanded capabilities to support SMEs against to include the entire customer journey non-bank challengers and alternative itself—from purchasing to customer lending providers by building meaningful engagement, to transaction, buying relationships, increasing touchpoints frequency, and cross-selling, to product and making hybrid services such as loyalty and customer retention. video chats with relationship managers According to Strands, 40% of SMEs available. cite “lack of personalisation” as a reason to leave. When banks fail to provide 2. Offer holistic solutions: The them with the kind of personalised “Going Beyond Banking” Concept financial management services that Banks should also go beyond banking they want, the likelihood of turning by offering holistic solutions to improve to challengers and fintechs becomes e-commerce. Consulting firm Oliver greater. Wyman lists the following suggestions: Creating a seamless and consistent • Improve e-commerce (growth and customer engagement experience via all sales) through different platforms channels enables banks to personalise like online sales and marketing, your service to end users, whilst making customer insights it easy for them to interact via the • Manage cash flow with enhanced channel of their choice. digital lending process, accounting Banks should consider adopting these forecast, automated alerts, and etc. ideas: • Create various payment transactions that include mobile, e-wallets, and other digital payments Mobile-first • Manage logistics through data Reaching key target capture, cross-logistics, and online groups, particularly the legal and shipping services younger generation, • Improve productivity by using with a focus on app Enterprise Resource Management development that aims (ERP) solutions, customer document to ensure a positive user and sales management software, experience and customer etc. centricity • Offer lending solutions like supplier and buyer financing, discounts, retailer cash advances, and more CREALOGIX provides a holistic, modular, digital platform—including all the necessary business logic—that enables banks to achieve new levels
Conversational banking Offering on-demand access to a relationship manager, enabling the delivery of personalised advice that builds trust and enhances relationships
UX/UI Simplifying the customer journey and making frequently used functions accessible via mobile devices, with more intuitive and less redundancy of steps to perform tasks to enhance satisfaction
Final Word The SME segment is growing strongly as a main driver of economic growth in the region. When left to fend for itself—compounded with dwindling capital during the pandemic—there is an increased likelihood that SMEs will feel the most impact, resulting in sudden closures or bankruptcy. As there are many challengers, with non-bank and BigTech players disrupting the market, the only way that banks can stay competitive is to accelerate innovation and adopt digitisation strategies. This can be complemented by working with technology partners with scalable, agile solutions that allow faster time-to-market. At CREALOGIX, we focus on enhancing personalised experience, accelerating innovation and leveraging ecosystems in developing our solution, steered by customer demand, market insights and digital trends. With our technology, we enable banks to grow their existing business and take advantage of upselling and cross-selling opportunities. You can learn more by visiting our website: https:// crealogix.com/en/solutions
As SMEs focus on regaining a more secure foothold, banks should act as a partner/enabler to help them emerge stronger during the pandemic ASIAN BANKING AND FINANCE | Q4 2021 7
THOUGHT LEADERSHIP ARTICLE
New technologies transform data validation and reconciliations in banking AI and Machine Learning (ML) technologies improve operational efficiency and decision making for middle and back office.
L-R: Robin Hasson, Senior Product Manager, Reconciliations, SmartStream ,Andreas Burner, Chief Innovation Officer, SmartStream, Vikram Gupta, Executive Director, Head of Technology, Data Science, Automation, Data Analytics and AI/ML, Standard Chartered Bank
T
he current global pandemic has not just driven banks and financial institutions to up their digital transformation, but it has also compelled them to face the greater demand for data and transaction lifecycle validation, which is spanning higher volumes in more complex areas. As such, many have been maximising artificial intelligence (AI) and machine learning (ML) to enable financial institutions to take big strides in improving their operational efficiency and decision making. The past years have also seen a significant increase in the use of data validation solutions in the region, especially as an accuracy check needed with the surge in digital payments processing. Today, the dual challenge brought by the rapid change, as well as the increased volume and complexity, mean event lifecycle validation tools must evolve to take advantage of the AI and ML landscape. In a recent interview with Asian Banking and Finance (ABF), Standard Chartered Bank’s Executive Director and Head of Technology - Data Science, Automation, Data Analytics & AI/ML Vikram Gupta shared the traditional data and transaction
14 ASIAN BANKING AND FINANCE | Q4 2021
controls and checkpoints that are adopted by financial services firms, as well as the drivers for the increased demand and dependency on AI and ML. “As a bank, we are really pushing the way we are managing our reference data systems, our sanction screening systems, our confirmation processes, settlements, balancing positions, so all these ecosystems where the data gets generated rigid digital footprint, those are areas which the banking is very much focused on,” he said. Gupta has also observed that with new business models emerging in banking, customer expectations also change. According to him, customers are now looking for 24/7 operations, personalised
services, and all digital. “In addition, there are areas where we are putting a lot of focus, which are around single control frameworks to ensure we have the right level of oversight and transparency. Lastly, innovation is going to drive the future of businesses and technology advancements such as AI and ML. They are going to be the key differentiator for businesses to succeed in the future,” he said. AI cuts performance time, human error Meanwhile, SmartStream Senior Product Manager - Reconciliations Robin Hasson pointed out that if stakeholders want to understand where the efficiencies and
SmartStream is conducting pilots to provide high-value AI business cases for the financial industry
opportunities lie, they have to consider today’s challenges in the industry, such as increased volumes, diversity of a wider range of data, which is also more complex. “All of these challenges mean that the reconciliations tools themselves have had to evolve. And that’s certainly where we’ve invested heavily as a firm into AI and machine learning technologies,” Hasson said. He also mentioned SmartStream’s latest AI observational learning capability called Affinity, a tool which learns from user interactions, as well as how to correlate and perform user interactions automatically, and mimicking those users automatically. Hasson noted that the efficient simulation reduces the time taken to perform matching types. “So just by either a few clicks, or by learning from existing historical process data, Affinity is able to simulate that effect, really, very quickly. And that really reduces the time it will take to perform many of these new matching types, whether it’s complex or simple. It can do all of that,” he added. At the same time, Hasson emphasised that using Affinity will give customers an improvement in accuracy and manage key man dependency, as it can identify patterns. With such capability, it can also manage volumes and complexities that otherwise would take a long time with manual task force. “You could use your staff more effectively for more strategic or more risk management, risk-focused tasks, because we would expect you to complete the core reconciliations quicker. You will be able to manage breaks earlier and manage any kind of risk and exposure much earlier in the day. So that’s a high level, that’s where I see benefits,” Hasson said. Gupta added that banks like Standard Chartered are interested in the adoption of AI and ML as they have big data everywhere. “I mean, we are talking about millions of transactions, thousands of flows, and, and it becomes a natural fit for AI and ML, to drive future efficiencies and increased revenues. And our bank, we are applying AI to grow new areas of business, to tap customers, markets, to streamline our operations, to build efficiencies, and we are accelerating our digital transformation journey and automating our operations,”
SmartStream’s Affinity learns from user interactions and mimicking those users automatically
he said. Accelerating digital transformation in banking To aid in this change, SmartStream’s Innovation Lab based in Vienna, Austria, has been conducting pilots to fast track and prove high-value AI business cases for the financial industry. SmartStream Chief Innovation Officer Andreas Burner said that to do this, they work with their largest customers and create a team where their customer provides the business know-how, and the data scenarios. “Our target really is to allow quicker processes, better data enrichment and to help the financial services industry to improve their processes,” Burner said. He added that the Innovation Lab was launched to address big business problems in the industry, an area where AI thrives. “AI is a solution to have better control for the financial services industry, to reduce the costs and to really gain more efficiency,” Burner said. However, he said that building a product and getting AI into production takes time as it has to work in many ways, be stable, and be sustainable. “SmartStream has done that for many years, so we know how to build that. But what is interesting is that with AI and ML technology, new things come in,” he pointed out. Burner noted that there are instances where AI technology learns something in production that it is not meant to. “In general, AI and ML technology is very robust. If people make mistakes, if you do things a thousand times, and one time you do it wrong, it would not mind. It would
learn from the other thousand times,” he said. Hasson added that what is really important is to be able to integrate AI and ML technologies into the products as seamlessly as possible. “When the users are seeing the information that comes from that as a prediction, it feels very natural. And as part of the workflow and the process flow, there’s no interruption, so it continues to be a standard cycle. But it makes use of these new capabilities, gets the enrichment, gets the predictions and the benefits of machine learning as part of the standard cycle,” he said. Lessons in adopting AI and ML Burner also revealed that adopting AI and ML capabilities into their solutions enabled them to more easily identify business problems, find API capabilities, recruit the right experts, increase awareness of the fintech space, and start discussions on product development. “So there are a lot of things that are changing at the moment. And I think it’s very interesting to see how users respond to that. And they see a lot of benefit, but they also see that they need a lot of confidence from the software and guidance from the software to allow that automation,” he said. Gupta noted finally that infrastructure requirements for AI deep learning should also be addressed. “It is very important to have the right suite of technology and tools, and the right governing process is going to be the biggest
Innovation is going to drive the future of businesses and technology advancements such as AI and ML. They are going to be the key differentiator for businesses to succeed in the future ASIAN BANKING AND FINANCE | Q4 2021 15