Issuu on Google+


of the

RISE MACHINES “Gone will be the adage that a wealthy person will only want to deal with a banker instead of machines.” - Alvin Lee, Maybank’s group wealth management head

Bridging the trillion-dollar

trade finance gap

Death of the tokens as banks use apps for authentication

Are Asians ready

to bid goodbye to cash?


d a t a

Which Singapore bank

is winning the financial talent war?



Roxanne Primo Uy Elizabeth Indoy

Rochelle Romero


Accounts Department



This issue features an exclusive interview with Alvin Lee, Maybank’s group wealth management head, who talks about the three most pressing issues in the industry today. He believes that affluent customers will soon prefer to deal with machines over bankers. Find out more as you read about this 23-year banker and what he has to say.

Tim Charlton

SINGAPORE Charlton Media Group 101 Cecil St. #17-09 Tong Eng Building Singapore 069533

Also, our channel checks with Trade Finance experts reveal that banks focussing their efforts on SME expansion, digital transformation, and blockchain utilisation can take advantage of unique opportunities amidst a $1.6t trade finance gap. In our Vendor View section, we talked to some of the biggest names in big data and found that one of the emerging challenges for Asian banks that want to leverage big data is: How to collect valuable and often highly personal information from customers — information critical to prevent identity fraud and other financial crimes as well as improve banking experience — whilst assuring them that their data will be protected. We also explored the effects of revitalising bank contact centres, the Asian banks’ recent efforts to fend off fintech, they key to Islamic banking’s expansion, and more. Enjoy the issue!

+65 3158 1386

HONG KONG Charlton Media Group Hong Kong Ltd. 19/F, Yat Chau Building, 262 Des Voeux Road Central Hong Kong. +852 3972 7166

Tim Charlton

Printing Sun Rise Printing & Supplies Pte ltd 10 Admiralty Street #02-20 North Link Building, Singapore - 757695

Asian Banking & Finance is a proud media partner and host of the following events and expos:

Can we help? Editorial Enquiries If you have a story idea or just a press release please Email: and our news editor will read it. Media Partnerships please Email: and put “partnership” on the subject line and it will forward to the right person. Subscriptions Email: Asian Banking and Finance is published by Charlton Media Group. All editorial is copyright and may not be reproduced without consent. Contributions are invited but copies of all work should be kept as Asian Banking and Finance can accept no responsibility for loss. We will however take the gains.


Retail Banking Forum

*If you’re reading the small print you may be missing the big picture    

MICA (P) 249/07/2011 No. 67




INTERVIEW Affluent customers will soon prefer machines over bankers: Maybank’s Alvin Lee


country report Singapore banks to be hit by declining asset quality, weakening profitability



20 Why solving the big data

22 How do banks bridge the $1.6t

FIRST 08 Revitalising bank contact centres


case study Maybank Singapore: Winning the financial talent war

09 Death of the tokens as banks use

conundrum must be Asian banks’

top priority

24 Asian banks take the fast lane

apps for authentication

to real-time payments

10 The key to Islamic


banking’s expansion

12 More Asians saying goodbye to cash

trade finance gap?

28 Philippine bankers discuss branch

14 Expect more banking chatbots in 2017

vs digitalisation, security, AML, fraud

COMMENTARY 30 Why Asian bankers are thinking differently about risk

32 Robo-advisors: Booming in Japan

Published Bi-monthly on the Second week of the Month by Charlton Media Group Pte Ltd, 101 Cecil St. #17-09 Tong Eng Building Singapore 069533

For the latest banking news from Asia visit the website



ASIA’S BEST SME BANK. Your confidence is the accolade that means the most to us. We’re committed to helping your business grow both locally and beyond.

Asia’s Best Bank for SME 2016 ASEAN SME Bank of the Year 2016 SME Bank of the Year - Indonesia 2016 SME Bank of the Year - Malaysia 2016

Marquee Award for Best SME Bank in Southeast Asia 2016 Best SME Bank in Singapore 2016

Co.Reg.No.: 193200032W

News from Daily news from Asia most read


Full financial integration amongst ASEAN banks “a very distant goal” ASEAN countries have made slow and uneven progress toward regional banking sector integration. Further moves are likely to remain gradual, and full regional integration looks like a very distant goal, says Fitch Ratings.


How will the MFRS 9 affect Malaysian banks’ capital ratios? The more significant impact of MFRS 9 would be to the capital positions of banks from the additional provisions that they may have to make, according to Maybank Kim Eng.



Singapore banks’ asset quality and profitability face downward pressure Moody’s Investors Service says that Singapore’s three largest banks - DBS, OCBC, and UOB - face continued downward pressure on their solvency metrics of asset quality and profitability in 2017, but the impact will be manageable.


Chinese banks to be more cautious in issuing WMPs in 2017 Natixis Research believes banks will be more cautious in issuing wealth management products leaving more space for other actors to capture the growing market, especially funds and securities firms.


Thai banks’ net profit up 23% in the fourth quarter of 2016 Analysts at Maybank Kim Eng expect sector net profit to have risen 3% QoQ and 23% YoY in 4Q16, led by an 18% QoQ decline in provisioning. “Toplines should have been soft. Despite high seasonality, we look for only 1.4% QoQ loan growth.”


Singapore banks’ loan growth suffers 11th consecutive month of negative growth in November Singapore’s banking system data for November validate Maybank Kim Eng’s negative view on the sector. “Fundamentally, our outlook on Singapore banks has not changed.”

Thought leadership article

Find out why it’s high time to change the conversation on branch transformation

Raja Bose, Vice President of Branch Transformation and Global Advisory Services at Diebold Nixdorf, talks of the importance of experience-driven banking. Our research suggests this group would like to do these five things at our bank. Let’s take our investment dollars to improve how we deliver those five things – that could include integration of capabilities into the mobile app, improving the experience at the ATM, adding new service concepts at the branch, improving data mining capabilities … the list goes on. But the point is, it shouldn’t matter which team in the bank is getting Initiating the Shift the investment, it should be more about I’m a big believer in small changes that delivering the right experience for the FI’s happen rapidly. You don’t need to pull out your entire middleware infrastructure to create target consumers. Through the experience-driven approach, omnichannel solutions. You don’t need to we’re trying to move FIs to an environment renovate your entire branch network with where they can fancy technological provide more bells and whistles. “Our team partners with services and You can make financial institutions (FIs) interactions quick changes or enhancements, see on strategic initiatives that through existing or what works, and will drive long-term success. new touchpoints add to it. Think As part of Diebold Nixdorf’s … And, perhaps even more of how software customer-centric approach importantly, enable companies work to connected commerce, FIs to take more today. They create we’re working to help FIs advantage of an app, make it available, and the reframe their perspective on the data they’re getting from first version has branch transformation.” their consumers some kinks. But to provide more every two weeks individual experiences. there’s an upgrade (pushed out automatically, Is your curiosity piqued by experiencemind you), and finally you have a solution that driven banking? Find out more at works really well. When we talk to bankers around the world, about how our approach can help you drive long-term success for your and ask them about how they’re investing, entire physical and digital network. they’re often focusing more on digital investments rather than branch investments. While the reality is that the majority of their new deposit and loan accounts still originate in their branches. And the accounts opened in branches are generally more profitable than those opened through digital channels. This is where that experience architect can help guide an FI from outside of that internal perspective, and bring different teams within the CONTACT organization together to build collaborative solutions. We have the ability to act as experience architects for our clients, because our expertise is very targeted, and our teams are incredibly knowledgeable about the challenges and opportunities in the financial industry. We can partner strategically with our customers to build customized solutions that fit their current-state and future-state needs.

Raja Bose, Vice President of Branch Transformation and Global Advisory Services, Diebold Nixdorf


s an industry we have talked so much about branch transformation and the branch of the future. And what we’ve come to realize is that this is not really the most useful way to think about it. Today, the challenge is less about, how do I update my branch? Instead, FIs should be thinking, how do I deliver the right experience to my consumers when and where they want it? It’s a very strategic question that moves past the branch or the smartphone and focuses on the sum of a consumer’s engagement with an FI — regardless of their interaction method. We’re helping our customers shift the way they think about the entire consumer journey and drive “experience-driven banking,” as opposed to “banking transformation.” So it’s more about building and enabling consumer-focused ecosystems that will support transactions and data flow among every single touchpoint and channel in their network, whether physical or digital. The ideal partner for FIs on this journey is someone with the capability and insight to orchestrate solutions above all the channels and silos, a sort of “experience architect” who can identify emerging opportunities and execute innovative strategies in a more holistic way. I think that’s one of Diebold Nixdorf’s biggest differentiators in the marketplace:

Solution-Based, Not Department-Based So for bankers, it’s saying, OK, we’ve looked at the numbers, we have an opportunity to increase wallet share among millennials with an income of more than $100,000 per year.

Company Name: Diebold Nixdorf Contact: Phillip Bedford, Head of Marketing and Communications, Asia Pacific Email: Website:


FIRST be a dealbreaker for customers, adds Glusac, and the bank must place a good deal of focus on the contact centre if this is to be so. “Contact centres are uniquely positioned to identify friction and failure points in the digital experience, as tens of thousands of customer interactions may flow through the centres each day, providing a wealth of data,” says Glusac. Whilst clients have significantly better experiences in digital channels, Glusac says that some issues are still best handled by phone and some customers prefer to speak to a real person.

Banks and ATMs

More banks around the world are now turning to off-site ATMs to reduce costs whilst still being able to serve customers, especially in rural places where setting up a branch in every town is not feasible. A recent study by research and consulting firm RBR reveals that the share of ATMs located away from bank branches rose to 51% in 2015. According to RBR, in countries with large rural populations, the ATM is often the first and only physical point of contact between banks and their customers. Off-site machines serve as an important tool in efforts to increase financial inclusion and compete for new customers. Revenue generators RBR also notes that off-site ATMs can be a lucrative revenue generator. “A well-chosen location in a high-footfall area can attract high transaction volumes, bringing in surcharge and/or interchange fee income for the operator — and where ATMs can be made to run at a profit, banks will often find themselves competing with independent ATM deployers (IADs) for market share.” IAD terminals now account for 16% of ATMs globally, the majority of which are installed in non-branch locations. RBR forecasts that, with the notable exception of China, most markets with non-bank deployers will see the IAD share grow over the next few years. In China, where IADs deploy on behalf of partner banks, their share will fall as banks increasingly take control of their own off-site ATMs. “Coupled with increasing off-site deployment by banks, it will be even easier for customers to find a convenient ATM away from branches in the future,” says Rowan Berridge, leader of the RBR research.


Clients still need live interaction

Revitalising bank contact centres


hen Standard Chartered reported a 12% decline in call volume to its contact centres, it also discovered that conversation lengths are longer, complaints are lower, and sales are higher. Meanwhile, Bain & Company’s banking survey of 115,000 customers shows that contact centres are ranked last when it comes to bank interaction over various channels. This may not be surprising, but banks should be careful to interpret this as an eventual demise of customer engagement over the phone. Mobile apps may be the name of the customer engagement game, but emerging trends prove that clients still need a live and audible interaction. This led to renewed attention to contact centres as they prove to play a huge role in identifying clients’ most crucial concerns. According to Nikola Glusac, partner at Bain & Company, most customer interactions at bank contact centres are moment-of-truth encounters, such as a customer calling to report a stolen credit card. Contact centre engagements may form just 10% of customer interactions at most banks, but they represent nearly 30% of real-time crucial encounters. The outcome of conversations over the phone can

Contact centre engagements may form just 10% of customer interactions at most banks, but they represent nearly 30% of realtime crucial encounters.

Need-based model Stuart Beaumont, voice and virtual head at Standard Chartered, says that banks also have to recognise that contact centres are not just a place for service resolution, but for need-based conversations. “Analytics helps us to understand and serve our clients better. We use analytics to have better and more personalised conversations — we understand why the client is calling and can, at times, pre-empt their needs. We can then route them to the best person who can help them with their enquiry,” Beaumont adds. Bank contact centres have to ride the wave of digitalisation and innovation in order to find their meaningful place in the customer engagement process. Standard Chartered, for instance, has ventured into speech analytics to help understand real-time client needs and resolve issues more effectively. Glusac says that whilst the reimagining of bank contact centres may prove to be a challenge, it is a risk that is definitely worth taking.

FIRST About three in five banks surveyed by McKinsey & Company lack the ability to authenticate a user’s mobile device, which can deter higher usage.

Simplifying authentication processes is a must

Death of the tokens as banks use apps for authentication


hen Citi launched MobilePASS — an appbased soft token that removes the need for physical tokens when corporate users access Citi e-banking platforms — it showed that the bank was willing to play the technology game to meet customers’ heightened expectations. Experts reckon Asian banks must deploy the next generation of technologies, especially on mobile, to withstand the assault of hungry fintech rivals, and some, like Citi and UOB, are stepping up to the challenge. “Amongst some banks use of the secure-site channel has begun

to shrink, as some customers enthusiastically shift most of their interactions to mobile banking,” says Vinayak HV, partner in McKinsey’s Singapore office. In the case of Citi, the new MobilePASS feature was designed for corporate clients — from chief financial offers who need to view transaction analytics to corporate treasures who approve transactions on-the-go, says Keng-Mun Lee, Asia Pacific head of channel and enterprise services, treasury, and trade solutions at Citi. Similarly, UOB has launched UOB Mighty Secure, a digital security token on smartphones, allowing

customers to add a new payee to transfer funds or pay credit card bills through the UOB Mighty app without having to toggle between two devices. The feature also requires a PIN or fingerprint login, then a UOB Mighty Secure PIN to generate a one-time password — a two-factor authentication. For Vinayak, simplifying authentication processes to make them both secure and user-friendly should become a best practice for banks. Currently, about three in five banks surveyed by McKinsey & Company lack the ability to authenticate a user’s mobile device, which can deter higher usage. “In our experience, banks that store device information and allow users to log on simply by entering a personal identification number or fingerprint see three times more digital interaction than banks that require users to enter data via alphanumeric digits each time they log on,” concludes Vinayak.

Digital channel adoption, active digital retail banking customers as % of total retail banking customers1

Source: Asia Pacific Digital and Multichannel Banking Benchmark 2016, Finalta by McKinsey

The Chartist: Singapore banks’ loan growth still “lethargic” Singapore banks’ system loans increased 0.5% in December for the first time in 2016 (Nov: -1.2%) but Maybank Kim Eng notes that this was partly due to the low base in Dec 2015. Asset quality continued to worsen, as the percentage of exposures classified in the doubtful and loss categories are now at their highest level since 4Q09. “Improvement in lending was broad-based across all sectors, mainly from manufacturing, building & construction, and financial institutions. However, consumer sentiment remained weak, as consumer loans rose only 0.2% yoy(Nov: +0.7%), the slowest pace since Sep 2009,” notes Maybank Kim Eng.

Slight improvement in system loan growth

Source: MAS. System loans comprise Domestic Banking Unit (DBU) and Asian Currency Unit (ACU) loans. DBU-ACU split is 53%-47%. Business-Consumer sector split is 74%-26%.

Weak consumer sentiment

Source: MAS



The key to Islamic banking’s expansion

Slow salary hikes for bankers in 2017


hen Bank Muamalat, Indonesia’s biggest Sharia bank, launched a locationbased analytics platform to optimise asset network performance, it was proof that Islamic banking is also picking up on the digitalisation trend dominating the industry. Bank Muamalat is working with Esri Indonesia to use an advanced location-based analytics platform called ArcGIS that aims to cut operational costs and increase service quality across nearly 2,000 ATMs and 500 branches. Bank Muamalat notes that the location-based analytics platform addresses inefficiencies created by information gaps and siloed intelligence by integrating business data from multiple departments into one dynamic smart map. Previously relying on paper maps to develop strategies, the new tool will now deliver information to the bank’s decision-makers through a dynamic executive dashboard - presenting a literal picture of Bank Muamalat’s whole operation in real-time. With Islamic banking assets posting growth rate declines across all regions in 2015, digital solutions promise to

Digital solutions in Islamic banking

be the fresh fuel the industry needs to enter a new era of expansion. “The adoption of fintech innovations is not an option, but an absolute imperative for participating banks to continue to gain market share,” says Ashar Nazim, partner at EY’s Islamic banking centre. Innovations could add 150m new Islamic banking customers by 2021, based on EY estimates, and help push Islamic banking assets, which stood at US$924b in 2015, well past the trillion-dollar mark. Islamic banking can focus on several fintech innovations such as peer-to-peer lending platforms, person-to-person payments, digital authentication, and digital wealth management.

Innovations could add 150m new Islamic banking customers by 2021.

bank Watch

POSB enables chat banking on Facebook Messenger POSB has officially launched chat banking on Facebook Messenger. This makes POSB the first bank in Singapore to leverage an artificial intelligence-driven chatbot to enable its customers to bank conversationally on a social messaging platform. For a start, customers are able to enquire about the bank’s products and services via the AI-driven “POSB digibank Virtual Assistant”. Customers simply have to visit the POSB Facebook page and go directly to Facebook Messenger to access this service which is available round-the-clock. Since the launch of the service on January 13, all enquiries made on the social messaging platform were answered promptly without being re-routed to the bank’s customer centre. The majority of the enquiries centred on the bank’s branch locations and foreign exchange rates.


If the Willis Towers Watson’s recent survey is anything to go by, then bankers hoping for a salary increase should not get their hopes up this year. Findings reveal that banking salary budget increases for 2017 are set to be well below those in the tech sector, and also below those in the financial services sector as a whole. Salaries in Asia Pacific’s banking sector are set to grow by 4.8% in 2017, the second slowest rate of salary growth amongst industry sectors in the survey. Eleven of the markets in the region have banking pay increases ranked amongst the bottom three in cross-industry comparison. “The data, allied with what we’re hearing on-the-ground, shows that as traditional banks move services online, they are competing for the same pool of skills as the traditional high-tech sector,” says Sambhav Rakyan, data services practice leader, Asia-Pacific, at Willis Towers Watson. Tech vs banking Banking salaries in the financial hubs of China, Hong Kong, and Singapore are projected to grow by 6.3%, 3.6%, and 3% respectively in 2017 — well below the expected high-tech salary growth rates of 7.5% for China and 4% for both Hong Kong and Singapore. Rakyan notes that whilst there is a slowdown in salaries in the banking sector, salaries for digital roles within the financial sector are holding steady. According to Willis Towers Watson, unlike in pre-financial crisis times, banking no longer stands alone as the industry of choice amongst top-tier university graduates.


More Asians saying goodbye to cash


hen an Asian customer steps up to the cash register of a store these days, presenting a card or mobile phone for payment no longer raises an eyebrow, as both cashless payment methods become increasingly common. According to RBR’s Global Payment Cards Data and Forecasts to 2021, 471b cashless payments were made worldwide in 2015 — up 52% since 2011 — and analysts attribute this surge to the introduction of more sophisticated solutions such as contactless payments through cards and mobile phones. “The soaring use of contactless cards for low-value payments as well as immediate payment initiatives, which will facilitate person-to-person mobile payments, will further displace cash usage over the coming years,” says Chris Herbert of RBR. He notes that, at the same time, ATM cash withdrawals increased at a slower rate of 33% as consumers start to move away from using cash and take advantage of alternative payment methods. Worldwide, cards account for 55% of cashless payments in 2015, up from 50% in 2011. In some Asian countries, card usage is expected to grow faster due to strong institutional support. “The predominance of cards is driven by their common use for retail payments branch WATCH

CIMB Thai’s new branch inside a 7-Eleven store

Whilst some banks are shutting down physical branches and ramping up their digital offerings because of the evolving customer preferences, one bank in Thailand thought of setting up a new branch, which is a first of its kind. It’s not in the city centre or in one of the major malls in the country. It’s inside a 7-Eleven store. The CIMB Thai Sitabutr Mini Branch is only about 3-4 square metres, just enough space to accommodate one staff. But unlike the 24-hour operation of the store it’s in, this branch is open daily from 10:30AM - 7:30PM. It provides account opening, deposit, SpeedSend, foreign currency exchange, personal loan as well as debit and credit card services. The Digital Solution Engagement or DSE innovation is also introduced here, with quick credit approval requiring only the presentation of a national ID card.


— and campaigns by governments and the banking community in less developed markets to promote card usage at the point of sale are making this more widespread,” says Herbert. Smartphone payments in Singapore In Singapore, physical cards are still popular, but mobile wallets have been gaining more traction as an even more convenient method for payment, especially amongst young professionals. Mobile wallets have now been adopted by one in four Singaporeans, and one in three millennials. “We expect overall usage to increase, as people move more to having their cards and loyalty programmes on the smartphone rather than in the physical wallet,” says J.D. Power director Gordon Shields. He reckons the advantage of a mobile wallet is it allows transactions to be made quickly and also for notifications to be registered on the mobile phone, which allows cardholders to have access to their most recent account activities, as well as to receive any alerts or messages from the card issuer on their account. “It also helps to improve overall transparency over the account and can work to provide greater control on spending – either for someone who wants to manage their spend on

Number of cashless payments worldwide by type

Source: Global Payments Cards Data and Forecasts to 2021 (RBR)

certain categories, or others who may be working towards a certain cashback or rewards spend target,” Shields adds. Whilst the utilisation of mobile devices for payments remains relatively small, it is a growing market with a reported 42% increase in use between 2013 and 2016, reveals a recent KPMG report on Singapore’s payments ecosystem. Most consumers surveyed even consider it “quite likely” for physical payment cards to be replaced by smartphones, mobile devices, and wearables in the future. But there are still barriers to usage despite Singapore having more than 30,000 retail points that have enabled payment through apps like Apple Pay, Samsung Pay, and Android Pay. The acceptance level of such apps across merchants remains inconsistent, and many cardholders are wary of fraud or misuse when they switch to a mobile wallet.



Fintech went mainstream in 2016

Expect more banking chatbots in 2017


rom a mere focus on customer payments, the fintech market has now rapidly evolved into a growing web of services that includes blockchain, new digital lending, telematics, and next-generation trade finance. In Asia, it has been taking off with megadeals upwards of $300m and an expanding B2C fintech in China, amongst other bright spots in the region. “2016 was the year fintech went mainstream,” says Henri Arslanian, PwC’s fintech and regtech lead for China and Hong Kong. Mainstream fintech “Chatbots, which mimic human conversations in apps such as Facebook Messenger and WeChat, went from novelty to mainstream in 2016. Several customer-facing chatbot applications are now being tested for uses ranging from retail banking to insurance claims. Expect many more of these to be pilotted and rolled out in 2017, as chatbots start to become part of our everyday lives,” says Arslanian, adding that the largest tech firms in Asia, such as Tencent and Ant Financial, will continue to push into financial services in 2017. Miklos Dietz, senior partner of McKinsey and Company, says that as the industry evolves, it will play a role well beyond financial products and services. Dietz adds 14 ASIAN BANKING AND FINANCE | MARCH 2017

that individual companies will vie to become undisputed leaders by size and breadth, and ecosystems will develop that have a tight grip on customer loyalty. The banking industry definitely feels the pinch as fintechs continue to dominate the payments space, leading bankers to consider collaboration as still the key to keeping their customers and their revenues. After all, fintechs admit that they still rely heavily on the traditional infrastructures and the institutional memory of banks. “Whilst fintechs have developed applications that create improved customer experiences, many lack skills in customer acquisition and other fields needed to grow quickly. Incumbent banks, on the other hand, already have hard-won capabilities in these areas, but they will have to work harder to create a true digital enterprise,” says Dietz.

The banking industry definitely feels the pinch as fintechs continue to dominate the payments space.

Asian annual financing trends to VC-backed companies (2011 – Q3’16)

Source: The Pulse of Fintech, Q3 2016, Global Analysis of Fintech Venture Funding, KPMG International and CB Insights (data provided by CB Insights) November 16th, 2016.

Source: Singapore Payments Roadmap by KPMG


In wealth management, gone will be the adage that a wealthy person will only want to deal with a banker instead of machines.

Alvin Lee Head Group Wealth Management Maybank 16 ASIAN BANKING AND FINANCE | MARCH 2017


Affluent customers will soon prefer machines over bankers: Maybank’s Alvin Lee Lee says customers’ private banking experience will be driven increasingly by automated channels.


lvin Lee, group wealth management head at Maybank, has more than 23 years of experience across wealth management, corporate, consumer banking, and treasury. He has worked with banks such as Burgan Bank, Citibank, Barclays, as well as JP Morgan, and has spent time working in Asia, Europe, Africa, and the Middle East. This strong track record helped Lee to lead Maybank Private Wealth to success despite being established for only three years. Maybank Group’s assets under management currently stand at US$50b across all countries, and the company aims for a 15% growth in 2017. In an exclusive interview with Asian Banking and Finance, Lee talks about the trends and challenges in the wealth management sector, as well as the impact of digitalisation in the way customers do private banking. ABF: As Asia leads the way in global wealth creation, what trends and challenges do you see in the private wealth management sector in the countries you cover? Asia Pacific as an economic bloc will very likely overtake North America as the wealthiest region in the world within the next two decades, if not sooner. This is driven by several factors including the continuing expansion of the three most populous countries in Asia — China, India, and Indonesia — the opening up of developing economies within ASEAN which will benefit from investments in in-country infrastructure, and the transnational One Belt One Road initiative. All of the above will lead to wealth creation not just amongst the high-net-worth individuals but middle-income families as well. Banks with their key long-term strategy centred in Asia will continue to grow their wealth management capabilities. However, wealth management will have to contend with three key issues of regulation, competition, and digitalisation. Increased regulations will make the cost of compliance higher and cost of non-compliance even more so for banks. Tighter regulatory requirement will necessitate banks to review and implement controls around know-your-customer and anti-money laundering risk disclosure, as well as cross-border funds transfer. The second challenge that banks will face is competition. Whilst several European banks have scaled back their wealth management and private wealth business, competition remains keen as Singaporean and Chinese banks are investing heavily in this segment. Competition also comes in the form of non-traditional players such as family offices, independent financial advisors, and even asset management companies which offer products directly to investors. This will likely lead to increased strategic partnerships between banks and non-traditional players. As information technology gets increasingly entrenched in our daily lives and affects almost everything we do, digitalisation will also revolutionise financial services. In wealth management, gone will be the adage that a wealthy

person will only want to deal with a banker instead of machines. With increasing digital adoption by people from all walks of life, banks will have to incorporate mobile financial services as a core part of their offerings. ABF: How have the customers’ private banking experiences and investment preferences evolved in Asia, especially with the emergence of new technology such as robo advisors? Traditionally in Asia, customers tend to set aside a bigger percentage of their incomes as savings. They prefer investments in real assets, with property as a favourite asset class, and if they are into active investment, many would prefer to make their own decisions instead of relying on professional fund managers to do it for them. There is, however, a shift in mindset, and customers are more willing to delegate their investments to family offices and through discretionary portfolio management. Technology has also impacted customers’ investment behaviour. With easier access to trading platforms on the go as well as a reduction in transaction costs, trades are made more frequently and the holding period has become shorter. They also come to expect instant access to their portfolio balances and performances. Customers’ private banking experience will gradually shift from being a high-human-touch service to one which is more driven by automated channels. Whilst they will continue to have face-to-face encounters with their bankers, when it comes to day-to-day trading and investment activities, they will expect to be able to do it through technology.

Asia Pacific as an economic bloc will very likely overtake North America as the wealthiest region in the world within the next two decades, if not sooner.

ABF: What are some of your milestones since the establishment of Maybank Private Wealth? It’s been a fantastic journey first building and then operationalising the business. We now have a platform, a team of professional relationship managers, and the strategy to be a sustainable and viable business. If I have to list specific milestones, it will firstly be our ability to have generated consistent returns above benchmarks for each of the past three years. Secondly, as a new business unit, we are enhancing the Maybank Group’s proposition as a Universal Bank. Lastly, we have been able to meet most of the financial KPIs that help to create shareholder value. One first key success factor is a conviction that this is a segment that we as a bank want to be in. Both Maybank’s board of directors and group executive committee are extremely supportive in this business which allows us to have the resources to make the necessary investments in capabilities and the people required to build a strong business. The second factor is people. Having the right work culture that allows employees from front to back offices to hone their skills to bring value to clients ensures we have a team of engaged and productive bankers. ASIAN BANKING AND FINANCE | MARCH 2017 17

Country report: Singapore

Banks will spend 2017 licking profit wounds

Singapore banks to be hit by declining asset quality, weakening profitability

Solvency issues are weighing heavily on the Singapore banking sector but optimists insist the worst is over, especially with banks’ solid capitalisation that is expected to keep them afloat this year.


hen credit rating agency Fitch Ratings downgraded its sector outlook for Singapore banks to “negative” last December, it warned that softer macroeconomic conditions and a more challenging operating environment would pummel the sector in 2017. “This could place broadening pressure on asset quality and dampen earnings over the next year,” says Mark Young, head of AsiaPacific banks at Fitch Ratings. However, Fitch Ratings maintained “stable” outlooks for Singapore banks, supported by solid credit profiles characterised by steady funding and liquidity positions, strong loss-absorption buffers, and healthy profitability. Singapore banks will be most wary of the troubled oil & gas (O&G) sector in 2017, which will likely continue to exert moderate pressure on asset quality. “Prolonged economic weakness could lead to


Moody’s expects further negative pressure on asset quality in 2017 to create downward pressure on profitability due to higher credit provisions.

broader asset-quality risks which may also affect small- and medium-sized businesses. However, we believe the downside risks to be manageable,” says Young. Young estimates that Singapore banks’ combined exposure of S$16.1b (US$11.2b) to the distressed offshore support services sector accounted for 17% of their core equity Tier 1 capital at end-September 2016. “Asset quality continues to deteriorate across banks with weakness still coming from the O&G support services,” says Young. Deteriorating solvency metrics — namely asset quality and profitability — led Moody’s Investors Service to downgrade baseline credit assessments (BCA) for the three Singaporean banks — DBS, OCBC, and UOB — last December. “The ongoing credit challenges that these banks face at home and broadly in Asia — where around 50% of their loans are — have translated

into higher problem assets this year, and Moody’s expects further negative pressure on asset quality in 2017 to create downward pressure on profitability due to higher credit provisions,” says Eugene Tarzimanov, vice president, senior credit officer, financial institutions group, Moody’s Investors Service. DBS, for example, saw its problem loan ratio rise to 1.3% at endSeptember 2016 from 0.9% a year ago, mainly due to asset quality issues from its offshore & marine sector exposures, including Swiber Holdings Ltd., a large Singapore-based services company that defaulted on its bond repayment and filed for judicial management in August 2016. Then in November 2016, DBS indicated that its remaining oil services exposures with potential asset quality weakness had increased to 20% of its oil service portfolio, from 13% in the previous quarter. As such, DBS expects more

Country report: Singapore NPLs to surface from its oil services portfolio in the coming quarters, says Tarzimanov. Problem assets in China have also been a key stress point for Singapore banks, so they are focussing on relatively less risky top-tier stateowned enterprises, large corporations, foreign investment enterprises, and short-term trade loans. Tarzimanov says that the BCAs of the banks can face further downward pressure given three scenarios. First, if new nonperforming loan formation remains elevated and points towards a material worsening of asset quality metrics. Second, if return on assets ratios deteriorates significantly due either to lower core profits or increased credit costs. And third, if capital buffers decline continuously over several quarters, indicating a deterioration in loss-absorption buffers. Ng Li Hiang, analyst at Maybank, shares the negative outlook on the Singapore banking sector especially in the face of worsening asset quality and how system loan growth continued into its 11th consecutive month of negative year-on-year (yoy) growth. As of September 2016, banks’ special mention and classified exposures continued to worsen, with system NPL ratio reaching 2.1%, a level not seen since June 2010, according to Ng. Softer profitability Aside from the declining asset quality, Singapore banks will also spend 2017 licking their profit wounds. “We expect banks’ profitability to weaken slightly in 2017, driven by higher credit costs and a subdued domestic lending environment,” says Young. “This is balanced, however, by their diversified revenue, with core noninterest income forming close to 40% of operating income — more than half of which represented recurring fee income over 2012-2015.” Young adds that banks will experience a net interest margin (NIM) uplift from higher short-term rates which tend to track the US Fed funds rate. Amongst Singapore banks, DBS has shown more resilience relative to its peers when it comes to profitability, but has, nevertheless, been impacted as well by higher credit costs stemming from asset quality deterioration, says Tarzimanov. The

bank’s return on tangible assets deteriorated slightly to 0.98% at end-September 2016, from 1.05% a year ago. Moody’s expects OCBC’s profitability to decrease slightly in 2017, due to elevated credit costs and an uncertain outlook for the net interest margin. Solid capitalisation Despite the solvency issues they face, Singapore banks have aces up their sleeves. One is solid capitalisation that will help them keep afloat despite plunges in asset quality and profitability. Long-term prospects also seem to be in favour of Singapore banks. Melissa Kuang, analyst at Goldman Sachs, reckons higher LIBOR should benefit NIM in the longer term though banks may see near-term funding pressure, with a potential Fed rate hike posting further upside to NIMs. Sue Lin Lim, analyst, Singapore research team at DBS, reckons FY1718F earnings will climb on the back of higher NIMs in anticipation of rising interest rates. “With rate hikes almost a certainty in the coming quarters, the Singapore banks are almost surely to deliver higher NIM. We have imputed 8-10bps rise in NIM for FY17F. Our sensitivity analysis suggests that every additional 25bps increase SIBOR/SOR translates approximately to a 6bps increase in NIM (ceteris paribus), and will lift earnings by another 4%,” says Lim. Kuang notes that operating expenses of Singapore banks remain well managed. Aggregate operating cost was up 3% yoy as of September 2016, with DBS performing the best at 2% yoy mainly on productivity gain. “We expect banks to continue to tighten cost control as topline growth is likely to remain weak,” says Kuang. Young, meanwhile, expects capitalisation to remain stable despite modestly higher risk-weight charges that will affect the banks from the beginning of January 2017 due to healthy internal capital generation. “Our internal stress tests show that sound capital buffers should enable Singapore banks to weather a significant deterioration in credit quality. We expect Singapore banks to retain their domestic deposit franchise strengths,” Young adds.

FY17-18F earnings will climb on the back of higher NIM in anticipation of rising interest rates.

Singapore dollar LCR stood soundly in excess of 200% for the third quarter of 2016 (3Q16), and their Singapore dollar loan-deposit ratios had improved to 86% by end-September, from 88.7% in June and 87.2% in March. The banks’ all-currency LCR also averaged a comfortable 132% for 3Q16. Lingering concerns Lim says investors should lean towards OCBC, a preferred bet due to its ability to maintain lower than peers’ credit cost trends, for serving as a better wealth management play, and posing possible earnings surprises from its insurance business in a rising interest rate environment. But she warns that loan growth will likely remain sluggish, which will limit net interest income growth. Lim also believes that the bulk of NPL issues has passed, although there are still lingering concerns, especially given increased government intervention in the troubled O&G sector. The Ministry of Trade and Industry announced enhanced support measures for the O&G sector in the form of new incremental loan facilities from SPRING Singapore and IE Singapore to Singapore-based industry players. “We believe this has brought some relief to companies which are experiencing tight cash flow, and, hence, extend some respite to banks in terms of NPL incidences,” notes Lim. “The market appears to be disregarding any downside risk to further NPL issues albeit on a smaller scale and the sluggish economy. A more sustainable earnings and growth trends to watch would be what banks can do over the longer term,” says Lim.

NPL ratios have continued to rise mainly from O&G services.

Sources: Company data, Goldman Sachs Global Investment Research ASIAN BANKING AND FINANCE | MARCH 2017 19

Vendor View: big data

Big data, big problems

Why solving the big data conundrum must be Asian banks’ top priority How can banks improve clients’ banking experience without compromising data security?


hen Hong Kong millennials were asked to provide information to financial services companies, 7 out of 10 were reluctant to do so due to fear that their identities will be stolen through their online, mobile, and app-based activities. This represents one of the emerging challenges for Asian banks that want to leverage big data: How do you collect valuable and often highly personal information from customers — information critical to prevent identity fraud and other financial crimes as well as improve banking experience — while assuring them that their data will be protected? Solving such conundrums should be a top priority for Asian banks that want to use big data analytics to woo customers in increasingly powerful ways, according to industry analysts. Banks that are successful will be able to deliver impeccably smooth transactions, provide offers before 20 ASIAN BANKING AND FINANCE | MARCH 2017

customers even know they need them, and ensure customer loyalty amidst an intensely competitive field. Seamless customer experience For many Asian banks, big data analytics presents an excellent opportunity to create a deeper yet more seamless customer experience. This is a trickier task than it seems since customers demand increased convenience and better data protection, but the two can sometimes be at odds with each other. “A natural conflict exists — companies, like banks, need specific types of information to make the customer experience frictionless and financial crime-free, yet consumers hesitate to share the necessary information,” says Mike Shaw, vice president, global market development at LexisNexis Risk Solutions, citing the study on Hong Kong millennials. “One way

When combined with artificial intelligence, predictive analytics can further help banks learn and understand user behaviour and patterns, and thus define their product strategy accordingly.

to overcome this challenge and optimise bank operations is for Asian banks to come together and form a consortium that enables them to perform customer onboarding screening, for example, in a more efficient manner.” Shaw says a customer due diligence consortium currently does not exist in Asia, and because of this, banks are not capturing customer learnings from peer banks. Customer onboarding also remains highly inefficient in the region, especially for clients that must open accounts and transact with multiple banks. “Each bank asks for the same documents and information and screen the same small business customer multiple times. The time to get the small business onboarded becomes lengthy and frustrating for all involved,” says Shaw. “When a bank consortium exists though, that small business customer could be screened only once and all

Vendor View: big data the banks in the consortium would have access to the same information about that small business. This logical method of data sharing makes banks more efficient and creates a much more desirable customer experience,” he adds. Predictive analytics Asian banks are also embracing big data and advanced predictive analytics to speed up banking processes, boost fraud detection, and generate insights that will enrich the customer experience. Around 82% of banks, retailers, and billing organisations in the Asia Pacific region wish to increase investments in payment systems in the face of increasing competitive pressure for faster processing, says Giselle Lindley, APAC solution and fraud consultants leader, payments risk solutions, and big data at ACI Worldwide. “It is more pertinent than ever to match seamless customer experiences with responsive security measures. When security measures are too general or conservative, some genuine transactions are prevented and unintendedly result in customers having to produce further authentication or being falsely declined,” she adds. Lindley reckons that predictive fraud analytics assists in this area, identifying real-time fraud by sifting through huge volumes of both financial and non-financial data. Thus, Asian banks ensure that their fraud detection solutions accurately allow genuine transactions to occur, without overly inconveniencing customers who want their payments quick and frictionless. Aside from preventing fraud, predictive analytics unlocks a treasure trove of insights for Asian banks with which to improve and personalise their products and processes. “By analysing individual customer experience, preferences, and satisfaction data along with the customer’s actual usage and demographics, predictive analytics enables banks to offer personalised services to their customers,” says Anna Gong, CEO at Perx. “When combined with artificial intelligence, predictive analytics can further

help banks learn and understand user behaviour and patterns, and thus define their product strategy accordingly.” Mike Shaw

Giselle Lindley

Anna Gong

Luca Zuccoli

Anneliese Schulz

Erich Gerber

Martin Häring

Actionable insights Asian banks might be lured into thinking that the success of big data initiatives lies in how much meaningful data is captured. But this step is only a prerequisite for a more important action: Generating actionable insights. “Capturing meaningful data is however only half the battle won — the real challenge lies in interpreting the data to extract relevant and actionable insights,” says Luca Zuccoli, head of analytics for APAC at Experian. “Data must be analysed across the banks’ operations, rather than in isolation, in order to make informed decisions. It is imperative for banks to take a more proactive approach to data management — rather than a reactive one — to drive improved customer experience and robust operations,” he adds. When used proactively, predictive analytics grant Asian banks the ability to better target marketing offers and predict fraud, says Anneliese Schulz, vice president at Software AG Asia. But gaining access to the right data at the right time can be a headache for some banks due to the plethora of channels and applications from which they need to extract. Asian banks must also grapple with making sense of enormous streams of data and acting on it in real-time, sometimes in as short as a fraction of a second. “Banks in Asia require the ability to analyse huge volumes of data in a short period of time coupled with automation of actions and predictions,” says Schulz. “Whilst deploying off-the-shelf analytics solution may seem like an easier option, the solution might not be able to manage the huge volumes of data or provide banks with the flexibility to set and change analytics rules as required.” It does not help that some banks are implementing multiple but isolated software and platforms to collect and manage customer information and interactions. “These platforms are often not integrated or able to communicate with each other.

As such, these organisations are stuck with voluminous amounts of data from multiple data sources, but are limited in being able to analyse this data, and even more so in being able to act upon it,” says Erich Gerber, general manager, Asia Pacific and Japan at TIBCO Software. “Whilst a majority of Asian banks have already built the infrastructure necessary to handle securely raw data, the main challenge they now face is extracting value from all that data. Without the tools to extract and load the data into analytics platforms, the value from big data analytics is not realised. This leads to an inability to cater to their consumers, especially to their retail customers, in a personalised and context-relevant manner,” he adds. Customer-centric data analytics To avoid costly mistakes in setting up their big data efforts, Martin Häring, chief marketing officer at Misys, advises Asian banks to follow a four-step plan that ensures a more customer-centric approach: Connect, Collect, Communicate, and Close. Häring reckons that banks must first “connect” with customers by priming operations to reach the target audience and focussing on a targetted segment to better understand client requirements. After this, banks can then move to the second step of “collect”. This involves finding and analysing the transactional data that banks have at their fingertips, which now also includes gathering geo-data or location-based services, as well as personal finance management data. Then for the third step, banks should “communicate” by telling customers what they need to know and when they need to know it. Häring says if a person is saving for a laptop, a bank could send an email offering to provide a small loan, whilst high-net-worth clients can be introduced to exclusive seminars or webinars on investment management. The fourth and last step is to “close”. Asian banks should implement swift and easy processes when it comes to closing customer transactions. Häring reckons onboarding a customer should take no more than five minutes if their data is already in the system elsewhere in the bank. ASIAN BANKING AND FINANCE | MARCH 2017 21

SECTOR REPORT 1: Trade Finance

Bankers face a trillion-dollar trade finance gap

How do banks bridge the $1.6t trade finance gap?

Asian banks that expand services to SMEs, embrace digitalisation, and harness blockchain may find the risks well worth the rewards.


ith surveys and experts proclaiming a continued global shortage of trade finance in 2017, Asian banks have two choices: sit on the sidelines or take bold actions, with the latter seeming like a better move for those that want to grow their customer base and get ahead of the digitalisation race. This year, banks that focus their efforts on SME expansion, digital transformation, and blockchain utilisation can take advantage of unique opportunities amidst a trillion-dollar trade finance gap. The global trade finance gap stood at $1.6t in August 2016, with 43% or $692b in developing Asia including India and the People’s Republic of China. Indicators like the International Chamber of Commerce 2016 Global Survey on Trade Finance suggest this trade finance gap may worsen, so some Asian banks are coping by ramping up services for 22 ASIAN BANKING AND FINANCE | MARCH 2017

The global trade finance gap stood at $1.6t in August 2016, with 43% or $692b in developing Asia including India and the People’s Republic of China.

the underserved small- and mediumsized enterprise (SME) sector. “For Asia and, especially, Indonesia, domestic demand plays an important role in alleviating the effects of the global slowdown,” says Margaret Tjahjono, transaction banking services & implementation head at PT Bank Danamon Indonesia, Tbk. “Banks are focussing more to capture this market through extending financing and services for the SME segment and dealing with open account financing.” The focus on SMEs will become an important theme in the near-term horizon given that more than half of SME trade finance proposals are rejected compared to large corporates and multinational corporations that only face rejection rates of about 34% and 10% of the time, respectively. Experts also point to an excellent opportunity in the Association of Southeast Asian Nations (ASEAN)

— a fast-growing region whose gross domestic product is forecast to grow by as much as 4-5% in 2017 and 2018, and is also expected to become a hotspot of increased trade flows in Asia. “Despite the worsening global trade slowdown, trade has continued to grow in parts of Asia, and ASEAN is one of the bright spots in the world economy,” says Pornnit Dunnvatanachit, executive vice president at Bangkok Bank. The ASEAN region is now the world’s third-largest market — after China and India — with a total population of more than 600m. Four of the ASEAN countries — Cambodia, Laos, Myanmar, and Vietnam (CLMV) — are major growth drivers, and the average growth rate in these countries has lingered at around 6-8% during recent years. “China has been increasing its investment in this region as an alternative production base, as have other Asian countries such as Japan and South Korea, and this will further boost the growing regional trade flows,” says Dunnvatanachit of CLMV. ASEAN’s trade and investment outlook is further enhanced by recent

SECTOR REPORT 1: Trade Finance developments that will improve integration and connectivity such as the establishment of the ASEAN Economic Community, under which barriers to trade and investment will be steadily removed. Double-edged digitalisation In a landscape of a slower-growing China and declining regional commodity prices, Asian banks will also have to figure out how to leverage the digitalisation trend or risk getting left behind. Digitalisation is becoming a powerful tool to close market gaps, including those in trade finance. “A push to adopt digital solutions would be a welcome move as this could revolutionise trade operations, enhance risk mitigation, and raise process efficiencies for corporate banks and their clients,” says Jan Bellens, Asia-Pacific banking & capital markets leader and global emerging markets leader at EY. In Indonesia, Tjahjono observes that most banks are trying to adopt digitalisation through e-channels to improve the market penetration of trade finance and supply chain products, whilst providing easy and accessible solutions for clients. But whilst banks are starting to explore more digital solutions, the multiparty nature of trade transactions may complicate the implementation process. “The level of digitalisation in Indonesia is still very low, as many parties need to be involved for effective implementation, not only banks, but also regulators, port authority, shipping agents, and customers. Most of them take a ‘wait-and-see’ stance to see the real case and learn more about the impact and benefit before deciding,” says Tjahjono. Despite the execution challenges and substantial resources involved, the global push for digitalisation is gaining steam as it can unlock higher trade flow transactions. “Trading partners are easily matching their business around the globe through digitalised commerce,” says Silawat Santivisat, executive vice president at Kasikornbank. “For example, an exporter in Thailand can find better source of supplier in Laos, they order from that supplier instead of a

domestic supplier, then produce and export again to other countries.” Dunnvatanachit says digitalisation also enables trade payments to flow easily and quickly under a secure and transparent process. In the case of Bangkok Bank, digitalisation efforts have helped transform the bank’s services and increase capacity. Bangkok Bank has started to integrate their payment systems into the online platforms of export clients. “Although there are many new players and new technologies in the market, only a few will achieve a commercial status and comply with rules and regulations, so digitalisation will be an ongoing process as new technologies are adopted,” says Dunnvatanachit. So Lay Hua, head of group transaction banking at UOB, acknowledges that technology and digitalisation are quickly transforming many areas of the banking industry such as risk management, fraud prevention, and transaction processing. But when it comes to full trade automation, banks could face a longer uphill battle. “To enable fully automated trade, banks have to address various concerns, including the costs required to establish the necessary infrastructure and systems as well as the reconciliation of different processes adopted by different industries,” says So. “Further, banks would also need to agree on the legal terms used in relevant contracts, documents, and for cross-border trade, especially for industries such as shipping and commodities to enable smooth transactions.” Blockchain as a game-changer? As digitalisation gains stronger momentum in banking, there has also been a burgeoning interest in using blockchain technologies to digitise and authenticate records.“Blockchaintype capabilities such as distributed ledger technology (DTL) could well be a game-changer for trade finance,” says Bellens. “International banks are already reviewing the use cases for blockchain in various lines of businesses and initiating adoptions in operational areas like trade finance.” He explains that blockchain technologies provide workarounds to traditionally paper-intensive

Margaret Tjahjono

Pornnit Dunnvatanachit

Jan Bellens

Silawat Santivisat

So Lay Hua

processes. As an example, Israeli supply chain startup Wave is collaborating with the United Kingdom’s Barclays Corporate Bank to help business clients minimise expenses associated with supply chain management by incorporating industry-standard workflows and replacing printed documents with electronic versions stored in blockchain transaction metadata. In Singapore, DBS Bank along with Standard Chartered Bank and the Infocomm Development Authority of Singapore developed a proof of concept for a blockchain-based invoice trading platform in late 2015. Bellens says this was probably one of the first few such applications within the trade finance space by financial institutions, using financial settlement solutions startup Ripple’s DTL for tracking invoices, backing loans to suppliers, and reducing risk of invoice duplication whilst using cryptographic identity to retain client confidentiality. The banks are looking to widen the project scope, and then eventually have it commercialised with more banks joining in the efforts. Regulatory support will be crucial to allow more of such blockchain applications to flourish. “Blockchain will definitely revolutionise the trade finance world,” says Tjahjono. “Everyone is excited to participate, since it is in line with the global trend on trade finance, which is moving away from traditional trade to open account. But again, to make it happen, regulators play a very important role, as they will provide a legal umbrella and necessary regulations to cover the detailed implementation.”

Distribution of proposed transactions and rejections (by region, %)

Sources: ADB, 2016 Trade Finance Gaps, Growth, and Jobs Survey ASIAN BANKING AND FINANCE | MARCH 2017 23

SECTOR REPORT 2: Custody & Clearing

Banks are after time and cost efficiency

Asian banks take the fast lane to real-time payments

Asian banks are zooming towards faster and more secure transactions whilst navigating the region’s mounting regulatory hazards.


hen the electronic interbank funds transfer service Fast and Secure Transfers (FAST) was launched in Singapore in 2014, UOB thought it would be a nice addition to its line-up. But three years after its debut in the island, FAST transactions for corporates have risen exponentially by more than 20 times — a sign that there is not only an interest, but a deep hunger for real-time payments. Analysts point to leaps in fintech as one of the biggest enablers of this trend, providing banks with systems to fast-track transaction processing and screening. Related technological advances in the field have also facilitated the increased use of RMB as a global payments currency. Both developments stand to benefit Asian banks, but only if they can afford the higher compliance costs and roll with the regulatory punches. “Innovation in financial technology 24 ASIAN BANKING AND FINANCE | MARCH 2017

Some banks have started pilot projects and invested in the new technology, with time criticality and more efficient cost as the two of major goals for market players.

has enabled banks to change the way they engage their customers as lifestyles and preferences evolve with time. One of the ways in which banks have catered to customer needs is the implementation of real-time payment systems to make fund transfers faster and more efficient,” says So Lay Hua, head of group transaction banking at UOB. She reckons the rapid growth in the use of real-time payments can be attributed to greater collaboration amongst banks and the high level of participation from regulators, central banks, and industry bodies. Across Asia, banks are racing to ready their markets for real-time payments. Some are adopting faster payment schemes that allow for immediate availability of funds and clearing of low-value transactions every 20 seconds. Thai banks are developing new payment systems that enable consumers to transfer funds by only providing identification

numbers or mobile numbers. Whilst in Indonesia, banks are starting to study promising new digital schemes whilst waiting for clearer regulation, says Margaret Tjahjono, transaction banking services & implementation head at PT Bank Danamon Indonesia, Tbk. “Digital evolution for the banking industry has progressed rapidly, and everyone in the market is so keen to see and participate in this new technology,” she adds. “For Asia, some banks have started pilot projects and invested in the new technology, with time criticality and more efficient cost as the two of major goals for market players,” she adds. Jimmy Chan, COO & head of operation management department at ICBC (Asia), reckons 2016 was a year when faster payment schemes mushroomed in Hong Kong and throughout Asia. More electronic payment companies received licenses to offer an array of convenient payment schemes, including JETCO person-to-person funds transfer across different banks, Octopus and TNG electronic wallets for consumer payments over physical and nonphysical channels, as well as Applepay and other third-party payment mobile phone applications.

SECTOR REPORT 2: Custody & Clearing

Security must not be compromised

He says banking customers are starting to turn to these “quicker, cheaper, and more convenient” forms of settlement. There may even come a time when a new form of financial product called a “credit phone” emerges with the rising use of convenient payment devices such as Applepay and Androidpay. Bank card issuers may think of attaching the same payment and credit functions to mobile devices with more addedvalue functions to the credit phone holders — a shift that can slash banks’ card issuance costs. Acknowledging that customers now demand fast service and processing, Silawat Santivisat, executive vice president at Kasikornbank, says his bank is studying a faster payment scheme for low-value transactions. But he argues that a faster payment scheme for corporate payments may not be as urgently needed because the current same-day payment service still adequately serves customer requirements. Speed vs security Asian banks that adopt faster and real-time payment systems could attract more customers and reap efficiency gains, but they must not make the mistake of taking security shortcuts, analysts warn. “With real-time payments comes the corresponding need for Asian banks to quickly authenticate and verify all information before a payment is approved. However, security cannot be compromised for speed,” says Li-May Chew, banking & capital markets Asia-Pacific associate director at EY. Chew reckons that regulators themselves are pushing for faster payments but this is putting the

pressure on central banks to expand their operational oversight, and consult payment stakeholders to gather and implement feedback on payment systems. It also falls on regulators to craft solutions for fraud risk reduction and support the adoption of relevant payment security standards such as the ISO 20022 standard for greater end-toend efficiency for domestic and crossborder payments. Banks, for their part, are under pressure to share what they know and work with other banks to deter cyberattacks and terrorist money laundering. These activities will hike up compliance costs and push away customers who do not want to go through a diligent screening process. “Anti-money laundering is the important issue due to the increase of terrorism, so banks have to focus on and screen each transaction more. Meanwhile, the fintech screening process is less strict which could attract customers to use fintech instead to reduce the complicated process. This is certainly another challenging aspect for banks,” says Santivisat. “The ability of banks to share such cyberattacks or attempts to attack with the banking community at large will be a regulatory direction for the years to come,” says Chan. “Increasing international cooperation to fight against tax evasion, money laundering, and terrorist financing poses a constant pressure for international banks to carefully monitor and follow up on all fund transfer transactions, especially for those cross-border funds movement.” He reckons that the heavy penalties imposed on major international banks due to failure to comply with such local and international

So Lay Hua

Jimmy Chan

Kee Joo Wong

Li-May Chew

Margaret Tjahjono

Silawat Santivisat

regulations have “seriously eroded” the capital base and credibility of these market players — and some banks may not get the breathing room they need. He expects the implementation of the US FATCA Ordinance two years ago and the incoming implementation of the OECD Common Reporting Standard to further test the capability of banks to inspect each transaction in the prescribed manner. Chew agrees that raised compliance expenses can be a major regulatory hurdle for banks, but she deems this “an unavoidable necessity” especially for countries that want their banking sector to move towards faster payments and keep pace with other markets that already offer that option. RMB on the rise Together with the proliferation of faster payment schemes in Asia, there has been a notable advancement in RMB payments, and banks in the region are preparing to pounce on this emerging opportunity. Experience in making RMB payments is improving globally because RMB payments processing has improved with efficiency gains and transparency aligned to international standards using China’s Cross-border Interbank Payment System, launched in October 2015, according to Kee Joo Wong, regional head of global payments and cash management at HSBC Asia-Pacific. RMB is currently one of the top 5 global payments currencies, shooting up from its 13th position in 2013, according to SWIFT. In 2010, only 3% of mainland China’s trade was settled in RMB. But by 2020, HSBC predicts this will reach 50% on the back of accelerating integration between China and countries along the Maritime Silk Road, which will boost trade and provide exciting opportunities for banks seeking growth. “With the significant number of trade volume between Asian countries and China, RMB settlement will also increase in terms of volume and will play an important role as one of the leading payment currencies. Most banks in Asia are ready for this,” says Tjahjono. ASIAN BANKING AND FINANCE | MARCH 2017 25

Case study: Maybank singapore

LittleOnes@Maybank, an annual event where kids visit their parent’s workstations

Maybank Singapore: Winning the financial talent war About 15% of Maybank Singapore’s employees are aged 50 and above, of which 62% have been with the organisation for more than 20 years.


hen Maybank Singapore surveyed its more than 1,700 employees across the island, it gathered statistics that would make human resources proud: Around half of the staff have stayed with the bank for over five years, most were highly engaged, and relatively less talent were leaving than in rival firms. Not only did the bank’s employee engagement index consistently rank above other global financial services companies, its retention rate was consistently better than industry and national statistics. In FY2016, the bank’s monthly attrition rate was at a low 0.75% compared to the financial service industry’s rate of 1.3% and the national rate of 2%. Maybank Singapore says its impressive engagement and retention rates — both valuable in a time of cutthroat competition for financial talent — are a result of genuinely


The bank’s current workforce is comprised of around 41% Gen X, 48% Gen Y, and 11% Baby Boomers.

rooting for each employee to succeed in their role. “Our employees are the backbone of our organisation and we are mindful to place our employees as top priority,” says Wong Keng Fye, head, human capital, at Maybank Singapore. “This ‘people-first’ culture, our employee engagement programmes, together with fair and inclusive hiring practices, have helped to shape a thriving familylike culture within the bank and hence a lower turnover rate. The consistent low attrition rate translates to high employee engagement and a competitive edge. It also promotes a sense of unity and teamwork which helps the entire organisation better adapt to the changing business landscape with more agility and ease,” he adds. Wong says one of the pillars of the bank’s engagement thrust is career mentorship and senior leadership involvement, which enables

employees to better connect with the organisation and feel empowered to take on bigger roles. This lessens the need to constantly hire and train new employees. More than a top-down approach Maybank Singapore’s senior management takes responsibility for a cluster of bank branches or units. Depending on the need, the senior manager assumes the role of career mentor, organisation advisor, trusted friend, or facilitator. Senior management also embrace diversity and champion fair employment practices in the workplace. More than a top-down approach, the bank also facilitates engagement sessions to promote two-way communication in the form of townhalls, skip level dialogue sessions, management walkabouts, and dinner or chillout sessions. These sessions allow employees to hear from and interact with senior management directly. Management feedback is also encouraged through an Ask Management Forum where employees can raise issues or send suggestions to senior management. The response to these forum entries will then be published in

Case study: Maybank singapore the internal portal for all employees to see, creating a more transparent and engaging feedback platform to complement traditional internal feedback channels. Maybank Singapore also improves hiring, engagement, and retention by valuing prospective and current employees based on talent — not on age. The bank’s current workforce is comprised of around 41% Gen X, 48% Gen Y, and 11% Baby Boomers. Age is just a number Wong argues that an age-diverse workforce, which Maybank Singapore tries to nurture, helps boost innovation and creativity. Young and older workers both contribute unique and valuable skills to the bank. “Maybank is a fair employer and we hire talents based on merits such as their competencies, experience, and knowledge,” he says, highlighting that about 15% of Maybank Singapore’s employees are aged 50 and above, of which 62% have been with the organisation for more than 20 years. “Employees who have been with the organisation for decades are often ‘key knowledge repositories’. Many of them possess institutional skills, collective wisdom, and experience which are extremely valuable, and can be transferred as they work alongside their younger colleagues.” Older workers, especially those that have been in the company for decades, also have a knack for gaining and keeping client trust since customers like to deal with familiar faces who have a good understanding of their past dealings with the bank and their needs. Maybank Singapore, believing the potential of older workers, has so far hired more than 40 professionals, managers, executives, and technicians who are aged 45 and above. It was the first mover in the financial industry in committing to support the recommendations made under the Tripartite Advisory on the Reemployment of Older Workers. It was also the first unionised company in the industry to go beyond a Memorandum of Agreement to sign a re-employment policy in line with the Tripartite Guidelines in 2009. The bank also finds ways to accommodate the special needs of

older workers in the workplace. When one of the new employees was found to have had poor vision due to her high myopia at the time of hiring, the bank provided bigger computer screens. Ergonometric adjustments are being made to selected workplaces and stations with a high percentage of mature workers to make them more convenient and comfortable. The building’s pathway and entrance were also reconfigured for colleagues with disabilities. And even though Singapore’s official re-employment age will only be extended from 65 to 67 this year, Maybank has already pro-actively extended this beyond the age of 65 since 2011 for staff whose work performance is satisfactory and are certified fit. The bank currently has 30 employees who have stayed beyond the official retirement age, and those who choose to retire instead are given the option to remain as part of the bank’s talent resource pool with flexible work arrangements as temporary staff. “Age is just a number and what’s important is the individual’s mindset. More companies should be pro-active in extending employment of workers past the official retirement age, if they are fit and would like to continue working,” says Wong. Nurturing the young Together with valuing older workers, Maybank also focusses on nurturing the young workers that come into its fold through an array of flexible work and career mobility programmes. “Engaging the younger generation of employees has always been one of our key considerations when designing a more creative and inclusive workplace. The bank understands that the younger generation of employees tends to be constantly connected and tech savvy. They are more socially minded, adventurous, and eager to take on challenges to be more creative. They embrace worklife balance and appreciate instant feedback on their work performance,” says Wong. It is no secret that younger workers crave for flexibility and work-life balance, so the bank lets them apply to available vacancies. If found suitable, the current resident unit

More companies should be pro-active in extending employment of workers past the official retirement age, if they are fit and would like to continue working.

Wong Keng Fye, head, human capital, Maybank Singapore

must release them within a period of a maximum of two months. Internal employees with relevant skills and competencies are also prioritised for vacancies, which has resulted in a strong tradition of training homegrown talent to take on senior management roles. This should inspire younger workers to stay on and grow with the bank. “The bank gives ample opportunity to internal employees to extend their career bandwidth and longevity whilst gaining new skills and knowledge,” says Wong. “As such, the majority or more than 80% of the bank’s management team have grown and developed with the bank instead of being hired externally.” Ambitious younger staff can apply to work in overseas branches and units. They are also encouraged to hold meaningful conversations with supervisors on their short- to medium-term career plans. Younger workers that want a semblance of work-life balance are also provided with a suite of pro-family leave benefits, including 14-day marriage leave, family care leave, sabbatical leave, compassionate leave, volunteer leave, leave for pro-creation, and even spousal relationship building support. “We focus on understanding the different engagement drivers for different generations of employees, and in doing so, we take a life-cycle approach when providing activities and initiatives to sustain engagement in our diverse workforce,” says Wong. ASIAN BANKING AND FINANCE | MARCH 2017 27

event coverage: Fiserv roundtable

Bankers convene at the Makati Shangri-La for an insightful discussion

Philippine bankers discuss branch vs digitalisation, security, AML, fraud

Find out how regulation is stalling digitalisation amongst Philippine banks.


hilst some may argue that the branch will remain relevant to customers over the next few years, it is undeniable that the digital phenomenon is revolutionising the way customers do banking. The Asian Banking and Finance team organised quite a few forums in the region last year, and based on what we hear from the bankers themselves, there’s not one country where banks aren’t looking to reduce their number of branches. One banker from Malaysia revealed that 85% of all their transactions are already digital. Another banker said they shut almost half of their branches in Indonesia, but managed to not lose a single customer as their digital transaction level in the country is at 92%. Clearly, the topic of branch versus digitalisation is an overriding theme in the region. This was one of the topics covered at the recent roundtable discussion organised by Asian Banking and


There is a perception that once you install a mobile banking system, your digital strategy is already covered. It’s not that. The strategy has to be all encompassing.

Finance in partnership with Fiserv, held at the Makati Shangri-La Hotel last 20th of October 2016. Entitled “The Digital Challenge: Adopting Seamless Customer Experience, Risk Management, and Digital Adoption into the Banking Ecosystem,” the event gathered around 15 bankers and industry experts who engaged in an insightful discussion on AML, digitalisation, security, and fraud. The digital phenomenon In the past few years, banks have been launching various initiatives in an effort to provide customers with a seamless experience — voice biometric authentication technologies, video banking, digital bank branches, and e-payment options, to name a few. But Rajiv Madane, director, products and strategy, core banking, risk and compliance, and payment networks at Fiserv, warned that whilst almost all banks want to embark on a digital

transformation, a bank’s digital strategy requires more than just installing a mobile banking system. “I’ve had conversations with at least seven banks from different countries in the region — Philippines, Thailand, Indonesia, Malaysia — and there is a perception that once you install a mobile banking system, your digital strategy is already covered. It’s not that. The strategy has to be all encompassing,” Madane said. He added that the most important starting point for the transformation strategy is the whole life cycle, and that all these life cycle stages require a different digital strategy. For instance, young customers are more likely to adopt digital whilst older ones aged 50 and above are more likely to stick to traditional banking. “So you need a little bit of your physical infrastructure as well because they are used to that. One of the things we are seeing is that, depending on your customer

event coverage: Fiserv roundtable segmentation, you have to provide the right access to banking services. For the young generation, provide them with digital options. For the middle generation, you can do both, and for the older generation, you still need the physical channel. You need what we call a “digical” strategy — digital and physical. You need to have digital for certain segments of your customers and physical for others. But the most important thing when you’re looking at digital transformation is how do you allow these two worlds to coexist? How can you provide the most optimum service level to your customers? That’s the market trend we are seeing,” said Madane. Digital transformation Indeed, the digital phenomenon has spurred demand for a dedicated digital team within the bank. In Hong Kong, one bank has leased two floors comprising 400 desks down in Causeway Bay — a most unusual location for a bank — for its entire digital team. So what are the other banks in the region doing to support their digital transformation? A Malaysian banker revealed that they have a dedicated team comprised of four to five people looking into digital transformation and that is separate from the IT team. One banker present at the roundtable said they just hired a new person as head of operations and head of digital banking, who would oversee a team handling the social media aspect of the bank’s products. Another banker revealed that they underwent an organisational change recently, part of which is having a new chief transformation officer, who takes care of an innovation team. But whilst all the bankers in the room expressed interest in expanding more into mobile and digital banking, one major holdup in the country is regulation. “Our basic problem is really the regulatory issues or requirements. Sometimes you want to go digital but the regulation requires you to have the customer’s physical signature.” Philippine banks are moving slowly in the digital space, wary that their movements might get ahead of the regulations that they are trying to propose to the Bangko Sentral ng Pilipinas (BSP).

As Philippine banks keep up with the digital wave and still cater to the demand to keep their physical space accessible, they are also faced with the reality that fraudsters are becoming more cunning and innovative in the way they work. Banks are also faced with the task of money laundering prevention amidst highly digitalised platforms. Robert Chan, principal consultant at Fiserv, said that there is a growing trend in converging fraud management together with antimoney laundering initiatives. Banks are now looking into monitoring the transactions, investigations, and reporting — resulting in optimised processes which have online real-time detections and preventions at the same time. “From a people perspective, AML and fraud are two separate units; however, on a monthly basis, for compliance and regulatory reasons, both those things will definitely go together to understand the two environments. One of the things we found was that it’s great that we have the historical viewpoints to be able to build the processes or procedures that may and could happen. From a detection standpoint, we also need to be in compliance, we need to ensure as well that our third parties are also included in that space because there’s also dependencies outside of the environment with VISA, Mastercard, Bancnet, if you have credit card fraud or ATM,” said a banker who is an expert on IT risk. Third-party management Banks cannot be complacent even with the overwhelming presence of third-party vendors who drop attractive soundbites and appear to offer the best solution for each of the challenges that banks encounter. For instance, a large Singaporean bank discovered that it employed a lessthan-competent third-party vendor which submitted stellar SLA reports monthly. Since the bank did not have the capacity to double-check the data, they could not identify why customer complaints skyrocketed amidst these good reports. “If you hand over everything to a third-party vendor, that may have a conflict in terms of keeping your

Wherever there is a transaction involved, there is fraud. Sometimes it’s detected, sometimes it goes undetected.

network versus doing their own work. There are certain pitfalls. What’s the check and balance? How do we get the benefit from the outsourcing? But, at the same time, banks must retain some control and visibility,” said Will Dale, regional director, cash & logistics at Fiserv. He adds that whilst banks may have various providers maintaining their ATM networks, they still need to be independent to the service providers at some level so they know exactly what’s going on. In an outsourcing world, it becomes more important for governments and separation of duties. Banks may outsource ATMs, they outsource the monitoring, but the ATMs cannot be with the same companies. It’s very important to pick the right security company, because banks have to admit that it is not their competence to stay ahead of threats and malware. It’s very important to pick a security company that has that vision and hold them accountable to that separate from the other outsourced companies. Aside from third-party vendors, banks are also exposed to thirdparty fraud sites. According to a bank’s e-commerce head, banks are now exposed daily to third-party phishing sites which masquerade as the bank’s website and steal customer information from clients who cannot tell the difference between the real website and the fake one. Despite efforts to contain these websites, fraudsters can easily create a new phishing site within seconds. “It’s really third-party sites that is my biggest concern because you can secure your own ecosystem as much as possible, but the Trojan horse would really be the third-party sites,” he added. As banks manage fraud and push for digital transformations, Fiserv’s Madane highlighted the importance of an enterprise fraud management strategy where fraud is looked at from a macro perspective. “In the bank, there’s all kinds of fraud. Wherever there is a transaction involved, there is fraud. Sometimes it’s detected, sometimes it goes undetected. Monitor, detect, and report. How do you do damage control? It’s gonna be a complete strategy across the enterprise,” Madane said. ASIAN BANKING AND FINANCE | MARCH 2017 29



Why Asian bankers are thinking differently about risk


ccording to a recent global survey of how banks approach risk management, Asian bank executives are thinking differently about future risk priorities than their global peers. This divergence reflects the region’s less interventionist regulatory environment and more robust digital landscape. The global survey has been conducted annually since 2008, tracking the changes in risk management after the global financial crisis. Since then, not surprisingly, banks have materially strengthened their risk management approach. From the board level down, banks have made significant investments in risk, compliance, and controls. Headcount in control functions has increased considerably, as has the seniority and scope of risk and compliance functions. However, last year’s survey also found that whilst important progress has been made, the work ahead remains substantial. In fact, it suggests that banks may only be halfway through a 15-year journey to develop robust risk management to meet the needs of the current era. In particular, it identified the ability to manage non-financial risks — particularly conduct, financial crime, and cybersecurity risks — more effectively as one of the biggest future challenges. The survey found that many banks are working to evolve new risk management approaches in this area, including making the first line of defence more clearly accountable for non-financial risk. Diverge from the global trend As this work progresses, the survey found that, in the Asia-Pacific region, the priorities of bank boards and chief risk officers (CROs) are notably different from those in the West. Western boards and CROs are mostly focussed on the risks involved in implementing new regulatory rules and responding to supervisory expectations. Specifically, focus on a wide range of conduct areas has increased — money laundering (increased to 72% from 52% in 2015) and sanctions (increased to 52% from 30% in 2015) have moved significantly up the agenda. In contrast, cybersecurity was at the top of the risk list for bank boards in the region. It’s a similar story for the region’s CROs who rate cybersecurity risk second after credit risk. Regulatory issues, meanwhile, were further down the list of the areas receiving their greatest focus. It’s an interesting mindset difference reflecting two distinct regional factors. First, although Asia-Pacific’s banks are hugely impacted by regulatory requirements, the effect has not been of the magnitude seen in the West. In the UK and US, in particular, banks have been beset by highly public misconduct scandals. From 2007 to 2015, the banks have paid over US$122b in fines, equal to 7.1% of their aggregated revenue. Many banks have exited markets, products, and geographies, reduced the availability of certain products and services, or limited the complexity of products they offer. Around the region, regulators have generally proved to be less politically driven to reign in the banks and more inclined to facilitate


JUDY VAS Asia-Pacific Regulatory Leader for Financial Services EY

market development. A more balanced approach, where regulators hold senior management accountable for running their banks well, the regulatory imperative is to lay a sound foundation for an orderly financial market. Second, in Asia, the consumer appetite for digital interactions and the high penetration of mobile devices are driving banks to adopt new technological innovations. At the same time, criminals are also becoming digital experts, leading to well-publicised incidents of cyber theft and the rise of shadowy malware capabilities. Asia-Pacific regulators are also focussing on cyber as a critical threat. However, the survey found that, when it comes to cybersecurity, the region’s banks aren’t waiting to be regulated. They are already taking a broad approach to addressing cyber risks: Adding more resources — Banks are designating more roles to address cybersecurity in second-line risk and compliance groups. They have increased dedicated headcount (75%), appointed designated specific cyber roles (55%), and created a “chief information security officer”-type position (32%). Taking an enterprise-wide approach — Regulators want banks to view cybersecurity as an enterprise risk, not simply an IT issue, and many banks are already ahead in this regard, incorporating their cyber risks and compliance frameworks. Together, this constitutes an emerging three-lines-of-defense approach to cybersecurity. But these moves are just the start of the necessary response to cyber threats. As Asia-Pacific’s regulators escalate the timetable for implementing cyber controls and regulations, banks will need to demonstrate to local regulators that their cybersecurity programmes go beyond global programmes. Local banks need to be accountable for and able to deal with cyber threats to their local operation. In this regard, individual banks must turn to technological solutions to analyse big data to identify and potentially prevent cyber attacks. Data analytics can also be deployed to manage conduct risk. Some banks are already using data analytics to take multiple data points pre- and post-sales to identify sales misconduct.In the future, banks will be ill-equipped to effectively manage risks without the use of technology, data analytics, and artificial intelligence.

F O R M O R E D E TA I L S , C O N TA C T J U L I E A N N E N U N E Z J U L I E @ C H A R LT O N M E D I A M A I L . C O M +65 3158 1386 EXT 220




AWA R D S D I N N E R 1 2 /J U LY/ 2 0 1 7 S H A N G R I - L A H OT E L SINGAPORE



EIICHIRO YANAGAWA Robo-advisors: Booming in Japan

EIICHIRO YANAGAWA Senior Analyst Celent


his post addresses trends in Fintech, with a focus on Roboadvisors and the unique attributes of Japan’s financial market. “Fintech” is a term coined to define an evolution in finance and technology. It is coloured with meaning and shades of nuance that vary with context and the stance of the players concerned. If bureaucracy and legacy systems until now have shackled the financial industry, fintech is the key to casting off these shackles and putting financial institutions on freer footing. Conversely, fintech firms do not necessarily find themselves in advantageous business positions given a general, comparative lack of regulatory experience and business track records. Global financial institution fintech strategies Global financial institution fintech trends can be summarised in three points: Capital investment, which is about striking a balance between business-strategy-related investment and capital investment (financial investment); Accelerators, or ecosystem initiatives and mentorships that forge mutually complementary relationships; and Innovation labs such as blockchain, cybersecurity, cyberattacks, and artificial intelligence. Building on the above, there are five central themes that will significantly affect the future of financial services: RegTech (harnessing technology for use by regulators or for complying with regulations); real-time transactions (pushing low-latency environments in post-transaction environments); distributed systems (blockchain technology effectively distributing data to participants, offering new and more transparent approaches); cognitive systems (machine learning is a critical component when it comes to using, analysing, and acquiring knowledge about all manner of structured and unstructured data); and cybersecurity (as these areas continue to evolve, increasingly strong security and cyberattack prevention will be essential to maintaining trust). Japanese trends in 2015-2016 Fintech hit Japan hard in 2015, and three salient trends have accompanied its arrival: A visible spike in investment, labs, contests, and accelerator programs funded by leading players in the financial industry; major vendors seeking to organise in ways to capture customers and startups; and proactive government support. The trends above have injected energy into and focussed attention on five areas: finance and financial support, investing and business support, crowdfunding, payments, and crypto-currency. The shared backdrop to each of these developments comprises digital advancements and the existence of a new generation of entrepreneurs with no patience for inconvenience. These segments all face the dual challenges of demonstrating the validity of their 32 ASIAN BANKING AND FINANCE | MARCH 2017

applications, such as robo-advisors or payments, and investing in future platforms, such as blockchain and the Internet of things (IoT). Robo-advisors are an emerging and salient theme with significant implications considering their outlook. On the demand side, observers expect that robo-advisors will play a supporting role, particularly in retail-investor asset management involving the plan-do-check-act (PDCA) cycle — which in this context refers to setting fund management goals, selecting and purchasing products or services, post-purchase review “checks”, and ongoing action. In addition, on the supply side, expectations are high that robo-advisors will yield benefits in business-to-business (B2B) transactions via support tools geared toward professionals in the asset management arena. Moreover, observers have even loftier expectations that robo-advisors can help enable the asset management market to evolve into a sounder and more cyclically sustainable market. Robo-advisors will have immense impact on the essential functions of asset management, namely: clearing and settling payments; pooling or dividing resources; the transfer of economic resources over time and across distances; managing risk; providing information; ways to handle incentive problems that interfere with efficient business transactions; and infrastructure and regulation. Observers expect that robo-advisors in Japan’s market will work to supplement investment literacy on the demand side, heighten accuracy and transparency related to information about asset management products and services (including price, quality, and risk), and supply technology that will help solve the incentive problem on the supply side — and having a value chain dominated by a few firms.

What will affect the future of financial services?


Retail Banking Forum

MNL | BKK |JKT | SG | KL | HK Asian Banking & Finance is proud event to welcome you to the for the banking and finance industry. The Retail Banking Forum is happening from February to July 2017. The trailblazing event will gather over 200 banking and finance leaders across Southeast Asia to discuss pertinent issues and what’s hot in the industry. The event will take place in Manila on February 15, Bangkok on March 15, Jakarta on April 5, Singapore on April 26, Kuala Lumpur on May 16, and Hongkong on July 26.

Presented by:

Supported by:

For speaking opportunities: If you are interested in participating either as a delegate or panelist, do contact our event organiser Nikki at

For sponsorship opportunities: If you are a vendor or partner to the healthcare industry and wish to sponsor/speak, please contact Rochelle at

To learn more, visit or contact us at +65 3158 1386.

Asian Banking & Finance (January - March 2017)