Decoding the digital future for APAC banks

Decoding the digital future for APAC banksBe digitally redesigned, not digitally disrupted

EY viewpoint

T he digital future is here

1 . S ource: Constellation R esearch.

T he digital tidal w av e is disrup ting banking business m odels, p roducts, serv ices and c t r ri c acr A ia acific A A a l ata a t c l acr fi a cial t r ri i ital tra r ati i r fi i a i acc t ati custom er ex p ectations w hile dim inishing loy alty . I ncum bents are also being threatened by ex p anding industry boundaries and new innov ations from nim bler, non-conv entional com p etitors.

Digitaliz ation is im p acting alm ost ev ery facet of organiz ations, w ith 5 2 % of F ortune 5 0 0 com p anies hav ing gone bankrup t, been acq uired or ceasing to ex ist since 2 0 0 0 due to digital disrup tion. 1 S im ilarly , the p reference by custom ers to transact v ia AT M and online/ internet channels ov er branches or call centers is threatening the status q uo of tra iti al a i i l r i A A i r

i ital i itiati at fi a cial i tit ti ar c rr tl c t ar l a iedge m obile technology ; building agility using big data analy tics and the I nternet

i ar i cial ia t a it c t r a i r i fici c i r c t t cl ar t a l t

scratched the surface on the p otential im p act of disrup tiv e digital technologies:

Contents 1T he digital future is here

3B uilding a transform ativ e, digital road m ap

1 2Continuous innov ation

1 3 i ital i i t

1 4 c tact

Digitaliz atio n: W e h av e b arely j u st b egu n!

t ta t a r a technology to reach a critical m ass of 5 0 m users3 5

B y 2 0 2 0 — Assets under m anagem ent by robo- adv isers to increase 6 8 % p . a. to U S $ 2 . 2 T6 8 %B y 2 0 2 0 — 6 0 % of I T sp ending w ill be cloud- based 6 0 %

1 %W e are only at 1 % of the p otential connectiv ity w e w ill see in the nex t decade

S ource: A. T . K earney , 2 0 1 5

S ource: I DC, 2 0 1 5

rc i c r r a a r arri r

rc

S ource: Winning through customer experience, EY Global Consumer Banking Survey 2014; ~ 9 , 0 0 0 indiv iduals from nine APAC countries w ere surv ey ed.

Daily W eekly

O nline/internet

Daily W eekly

M o b ile

Daily W eekly

A T M sB ranc h or office

G lo b al 2 0 % 3 7 % 1 0 % 2 0 % 9 % 4 9 % 2 0 %4 % 9 %3 %

A P A C 1 5 % 3 7 % 1 0 % 2 2 % 7 % 4 6 % 3 % 1 9 % 2 % 1 0 %

Australia 2 6 % 5 0 % 9 % 2 0 % 5 2 % 1 1 %2 % 4 %

China 1 5 % 4 9 % 1 2 % 4 % 4 7 % 4 % 2 5 % 1 4 %

H ong K ong 2 1 % 9 % 2 9 % 8 % 5 8 % 2 2 % 2 % 1 9 %

I ndonesia 2 8 % 2 5 % 1 6 % 5 5 % 4 % 2 0 % 1 % 6 %

J ap an 1 5 % 1 % 4 % 1 % 2 6 % 1 % 7 % 1 %

M alay sia 1 6 % 8 % 1 8 % 6 % 5 5 % 1 8 % 1 % 5 %

S ingap ore 1 2 % 4 4 % 1 4 % 2 0 % 1 2 % 5 5 % 5 % 1 9 % 1 1 % 2 5 %

S outh K orea 1 4 % 4 9 % 8 % 2 4 % 5 % 4 9 % 2 % 1 % 1 0 %

V ietnam 1 9 % 1 5 % 2 1 % 1 1 % 4 % 1 8 % 1 0 %

C all c enter

W eeklyDaily W eeklyDaily

F igure 1 : A P A C bank ing customer pref erence f or digital options

Digital disrup tions w ill continue to im p act lay ers of the business fabric, from strategy and innov ation, all the w ay through to talent and change

a a t i r Ar a ready to m anage these dev elop m ents?

F igure 2 : Digital technologies impacting businesses

rc

Analy tics I nternet of T hings

Cloud

3 D p rinting R obotics Artificial

intelligence

Disruptive technologies impacting your business tomorrow

Disruptive technologies impacting your business today

Cy berM obile

S ocial

S trategy and innov ation

Custom er ex p erience

S up p ly chain and op erations

T echnology

R isk and cy bersecurity

F inance, legal and tax

Peop le and organiz ation

Digital enterprise An enterp rise that has the agility and innov ation DN A to ex p loit digital technologies and data across ev ery facet of its business, at the p ace of the new digital econom y , to gain adap tiv e adv antage.

2Decoding the digital future for APAC banks

Digital technologies are dy nam ic, w ith new trends em erging q uickly , reshap ing c titi a l rri i tr ari il it c ti at fi a cial i tit ti ar ti at t tra r i itall t ar fi i c ti challenging. As a result, few APAC banks — esp ecially those in em erging m arkets in Asia — hav e successfully infused digital throughout their organiz ations to lev erage it r c titi a a ta a rit ar l t l i t ir i ital

r ra a a t t r ali i ifica t al r t ir i t t

T h is E Y v iew po int o f f ers ac tio n plans to tac k le to d ay ’ s d igital w o rld .

B uilding a transform ativ e, digital road m ap

I s my corporate strategy fit for a digital world?

3 Decoding the digital future for APAC banks

T o transition from being digitally disrup ted — to being digitally redesigned.

Assem ble a cross- functional, digital leadership team

i ital tra r ati ill t ri l i itiati ar sup p orted by a com m itted and p roactiv e ex ecutiv e suite to create a culture of agile innov ation. Com m ittees should conv ene regularly to generate ideas, p rioritiz e, design and then sw iftly ex ecute digital dev elop m ents.

all i t a i ital i i a iti t i l a r i t a t t r l a c i i ital fic r r c i i ati fic r a at r t i t r i ov ersight of digital technologies and create a big- p icture v iew of how to integrate these into business and custom er strategies to driv e change across the organiz ation. T his ex ecutiv e should be sup p orted by custom er- facing business leaders w ho understand the ev olv ing digital landscap e; I T architects to op tim iz e the architecture; data gurus w ho can m ake sense of enterp rise- w ide data; technology strategists; an ex ternal p artner ecosy stem to lend additional technical ex p ertise; and a social scientist to analy z e changing custom er behav ior. H av ing cross- functional ex ecutiv e digital com m ittees draw n from m ultip le dom ains is critical to c fir i i i ar t la c i i ital r ct i i lati

Design digital strategies to the core “ M e- too” digital initiativ es are all too com m on in APAC, w ith sev eral banks only concentrating their digital efforts w ithin

cific ar a r a l r tail a c dev elop ing m obile ap p lications to p rocess transactions. S uch p oint digitaliz ation is relativ ely q uick and easy to ex ecute com p ared to a holistic digital transform ation that inv olv es effort to redesign p roduct and serv ice offerings, align p ricing and channel strategies, rethink hiring/ training/ dep loy m ent strategies for frontline em p loy ees. U nfortunately , siloed digitaliz ation w ithout a robust, w ell thought through digital strategy often increases technology sp ending relativ e to actual enhancem ents.

I nstead, banks need to adop t a digital m indset and be digital by design. Digital p rocesses m ust be end- to- end so custom ers hav e access to the sam e, seam less q uality ex p erience, w hether t a t ir a t r i ital r i c a l

i a i i l i itali i i ti i p roduct offerings and regim es to crafting brand new business p rop ositions and user ex p eriences for the digital custom er base.

Deep er digitaliz ation req uires using enhanced op erating m odels and standard ap p lication architecture, connecting com p onents to tap into I oT to obtain com p rehensiv e and real- tim e data on op erations and assets, creating an entrep reneurial culture sup p ortiv e of innov ation, and em p ow ering em p loy ees w ith relev ant tools and skill sets to m anage digital transform ations. Across em erging Asia, banks m ust also address a talent shortage for digital skills, alongside change m anagem ent challenges w ith digital transform ations.

G uidelines for bank ex ecutiv es

R ise o f th e C DO and C I N O in A P A C

• K etan S am ani alt a a t A A

• Dam ien C u m m ings G lobal H ead of Digital M arketing, S tandard Chartered

• A nj u P atw ard h an l al ta ar art r

• N eal C ro ss a


F orm ulate the business case for digitalDigital p rogram s req uire a three- p ronged ap p roach:

1 . Digitally - enabling ex isting custom er touch p oints — a basic i r ir t t t c r ri i ctati

and facilitate technology is aligned w ith com p arable p eers.

2 . a ci critical i ital i i i ti r ct a serv ices, custom er ex p eriences, op erations and w orkforce — v ia selectiv e inv estm ents in analy tics, social m edia, m obility , cloud and I oT technologies to boost the lifetim e v alue of custom ers.

B ey ond generating increm ental rev enue from custom er-centric ap p roaches or augm enting ex isting offerings in # 1 and # 2 , going one step further and lev eraging digital technologies to create new rev enue stream s — through new businesses or p rov ide a collaborativ e ecosy stem to dev elop ideas and incubate new p roducts and serv ices.

c ti c l i it a ia tic t t c ar a determ ine their current digital m aturity as leaders, established

la r r a i l t l i i ital ca a iliti T hen they can set a m edium - term goal for clim bing the curv e. H ow q uickly banks can transition to digital frontrunners dep ends on their institutional cap ability and readiness to adop t digital technologies, com p etitiv e p ositioning and local m arket m aturity .

I nstitutions cannot digitaliz e for the sake of digitaliz ing — not r c t it i cti c a c t r r lati i

m anagem ent, transaction m anagem ent, and risk m anagem ent a c lia c t i itali a t r i itiati

l li r a a at r t r i t t

I nstead, create the digital strategy , then design the right p roducts, serv ices or ex p eriences to enhance p erform ance based on these asp irations. T o reduce risk, incubate digital solutions through p rototy p ing, and test and v alidate initiativ es through sm all- scale ex p erim entation before activ ating them on a com m ercial scale. Post- im p lem entation, continue w ith m onitoring and use feedback m echanism s to driv e continual im p rov em ent.

T hink like a v enture cap italist, not a num ber cruncherDigital initiativ es can take y ears to reach the bottom line, ar li l t lfill tric a t r t al calc lati a t l ail t r c i fici t

i r t fic t c i t c l i t r t a ex ecutiv es need to understand that w hile digital req uires technology , it is not an I T strategy — and thus needs to be ev aluated differently . T his m eans borrow ing from the v enture ca itali t la a l i r t tra iti al technology initiativ es to m ake bets in a p ortfolio of sm aller, but p rom ising digital inv estm ents to build an innov ation p ip eline.

S ince digital transform ations do not ty p ically generate im m ediate q uarterly earnings, change m anagem ent funding should not c r i a al A llar ar r t cti

c r ct r ar t r r r a a t a to ring- fence v enture funds, talent and corp orate resources for inv estm ents in innov ativ e technologies and p ursuit of digital strategies.

Adop t agile innov ation: ex ecute sw iftly , tolerate errors and ap p ly learnings tow ard future initiativ esB eing a digital p ioneer is risky business, but institutions that la c ri a a t ir r ai a a i fir t r a a ta c i r rt The future of banking in emerging markets: Leading through innovation for ex am p les of

a i i itiati il raci a ic r t c l ical ac r c t r t a tra iti all c r ati c lt r t that p ostp one innov ation risk falling far behind frontrunners and becom ing irrelev ant.

As dy nam ic digital trends em erge to reshap e com p etition and blur industry boundaries, banks no longer hav e lux ury to sp end tim e on designing and dev elop ing an offering w ith all the bells and w histles before launching it w ith a big bang. T hey need to shift from w aterfall technology builds sp anning m ultip le y ears to a a il c cl t at i c ta tl t t a r fi t i a banks can be sw ift to m arket, inv olv e end custom ers in v alidation and feedback, m ake iterations for increm ental functionalities that a al a c ti all r fi ri acc r i t l i sentim ents and com p etition.

I n a dev elop m ent env ironm ent based on trial and error, ex ecutiv es m ust giv e innov ation team s the freedom to fail. W hile assem bling m ultidiscip linary team s w ould help dev elop a p ortfolio m indset and raise success rates, these team m em bers them selv es need to be ex trem ely agile and ready to accum ulate learnings that can be ap p lied to the nex t innov ation. As they incubate, test and v alidate initiativ es on a trial- basis, they need to learn fast and hav e q uick ex it strategies for failed digital initiativ es. Consider bets that did

t r a al a l ri t t i a t r t at ill i l m eaningful im p rov em ents to p roducts and serv ices.

G uidelines f or bank ex ecutives


I nc u b atio n and c o llab o ratio n ac ro ss m atu re A P A C c o u ntries

I n Australia, the B ig F our banks hav e launched innov ation labs in sand- box env ironm ents or created v enture units.

A t l ta li a i t r ati al a l technology and digital business ex p erts to adv ise on strategic ap p lication of new em erging technologies, but engaged tech- giant I B M to underp in its sup er-regional Asian strategy and serv e as co- inv estors in an innov ation lab that w ould house dev elop ers, driv e innov ativ e ideas and run hackathon ev ents. t al art r it t c l i c at r r

tt r act r t rt a l fi a cial serv ices start- up s in Australia.

A ta li A a i arl r A a a icat i ati c

the rap id ex p erim entation and com m ercialisation c t r l i ati A i a l t a a t

to rap idly changing digital adv ancem ents and run inv estm ents and p artnership s w ith F inT ech data analy tic, m obile and p ay m ent businesses, w hile also conducting q uarterly p itch sessions for tart t r t t ir i a c tl A

sp onsored start- up hub F ishburners in ex change for w eekly p itches from its 2 0 0 - p lus entrep reneurs. T hese arrangem ents, along w ith its A$ 5 0 m illion

illi A t r ill A form m ore strategic p artnership s to deliv er better

r ct a r ic r c t r a l of recent innov ation is NAB Prosper, w hich p rov ides p ersonaliz ed and tailored sup erannuation adv ice to custom ers. Prosper w ill ex p and to cov er debt, cash

i t t a tat la i i A i al a i a i ifica t a i

inv estm ent in its m obile p latform to continually im p rov e the custom er ex p erience, w ith 7 0 % of daily internet banking logins now com ing v ia a m obile dev ice. W estp ac m eanw hile established R einv enture G roup , a V C fund to inv est in F inT echs offering disrup tiv e technologies around data aggregation and p ay m ent sy stem s such as p eer- to-

r l r ci t

A A a i art r i r ra include DB S from S ingap ore, and CI M B and

R H B from M alay sia that are p rov iding ex p ertise, ex p osure op p ortunities, and op en Ap p lication

r ra i t r ac A r arl ta F inT ech start- up s to lev erage their institutional serv ices and a netw ork of industry p rofessionals to design new p roducts through S tartup bootcam p F inT ech S ingap ore. DB S 1 also ran 1 5 hackathons in 2 0 1 5 , resulting in 1 , 0 0 0 ex p erim ents inv olv ing collaboration betw een start- up s and senior l a r i arat l i a r 2 also announced a 1 0 0 - day accelerator p rogram in a

i t t r it c t t call The FinLab a tici at r t a

i c tart i i it t at fi r t ittl t a l ct t p rogram com m ences in M ay 2 0 1 6 , w ith the bank

r i i ac it i seed m oney in return for a 6 % eq uity stake.

I nternational p lay ers, w ith their relativ ely deep er c t ar ll i it iti r t r

ar iti t r a t a l al t r innov ation labs, including one in S ingap ore. T his

a trat ic art r i it i c fir inv olv ed in com m erce and p ay m ents, security and enterp rise I T , and big data analy tic, w ith t ai ri i t t c i tr i l p roduct dev elop m ent techniq ues to its giant p arent com p any . F or ex am p le, Project Sheen, a Citi Priv ate B ank initiativ e is dev elop ing a transp arent p latform that p rov ides global clients w ith a single online p oint of contact for their p riv ate banker and a cloud storage sy stem to securely store critical docum entation.

Citi V entures is also collaborating w ith start- up accelerator Play T ech Center to launch F inT ech accelerators in the U S , G erm any , S p ain, B raz il and S ingap ore. I n APAC, it introduced Citi M obile Challenge in 2 0 1 5 to foster digital and m obile innov ation in banking. T his is an accelerator that com bines a v irtual hackathon w ith a w orldw ide

t r i c rt iti l al r and clients to discov er solutions across m ore than 1 0 0 m arkets.

t a t c il i a i ati r rc trait i c r

r i i r t r r it ta i tart fi a ia r ar



Augm ent digital cap abilities: inside- out, outside- in1 . I nsid e- o u t ( b u ild internal c apab ilities)

I n APAC, banks ty p ically focus on internally - driv en, organic initiativ es to digitiz e traditional p roducts and solutions to enhance the custom er ex p erience. S om e are try ing to boost internal cap abilities v ia sp ecialist hires or seconding staff into the innov ation team . T his inside- out ap p roach can be challenging as not only does building new ideas in- house req uire strong innov ation cap abilities to riv al the best of the F inT echs, the i c t t c l fic c l al r c rta l w ith a slow er technology p ace.

S hould that be the case, banks could consider a bim odal I T a r ac i i l a c r tra iti al fic t ai tai B AU activ ities critical to the technological backbone of the

r a i ati rati al i i a tr r rial innov ation team w ith a different m ix of p eop le, p rocesses and p erhap s ev en op erating on a different p latform from ex isting technologies, focusing ex clusiv ely on driv ing innov ativ e ideas a ri i t fi a ciall ia l t r iti

2 . O u tsid e- in ( inv est in ex ternal ex pertise)

i al a artic larl i c tri li ia ili i a ia it t ir a c t fi a cial r ic trati a lar a r r lati ar i cr a i l crossing- sw ords w ith F inT echs. T hese nations are p erfect breeding grounds w ith sev eral w hite sp aces for non- banks to p enetrate.

i t at t tra iti ali t ar i fici tl a a c t c t t fi a cial A a i r a ic i t t ar

p erhap s the w isest routes to augm ent digital cap abilities outside-in. S w ift- footed institutions are inv esting in p rom ising start- up s — v ia incubations, collaborations/ sp onsorship s/ p artnership s, or outright F inT ech acq uisitions — and effectiv ely integrating them to p rov ide cutting- edge digital serv ices.

F ind the eq uilibrium betw een sustaining p hy sical p resence and digital outreach S h rink th e b ranc h presenc e …

it l t a A ia r t t r Global Consumer Banking Survey from F igure 1 m aking a w eekly v isit t t ir ra c ti at A A a r ci t ir bricks- and- m ortar outlets. H ow ev er, w ith a shrinking p hy sical outreach, rem aining branches need to be op tim iz ed to raise ov erall effectiv eness of the netw ork.

i ill i l r c fi ri ra c i t a architecture, w here:

• ar a i ra c l cat i i tra fic ri com m ercial areas and functioning as p roduct show room s and v enues w here custom ers receiv e ex p ert adv ice and help w ith com p lex transactions.

• S p okes are satellite outlets surrounding hub branches to p rov ide routine transactions for sim p ler p roducts. T hese offer lim ited functionalities and op erate w ith few er onsite staff. T hey m ay be totally autom ated self- serv ice kiosks w ith v ideo call centers to rem otely connect custom ers w ith adv isory staff in a

a i ra c

W ith the cost- to- serv e at branches being m aterially m ore i ifica t i i li c a l r r i a ti

t r i t ir l l i ti l cal it a fici t it i t c i ital ati c t r r a i

branches to be situated. T hey then need to inv est in branch re- engineering w ith a siz eable p ortion going into technology i ra c ta l t art A a i t ll r ac i t

facilitate a seam less om ni- channel self- serv ice ex p erience. i i al r ir t trai ciali t a i l alifi

fi a cial a i r r c r tl t

… b u t d igitaliz e o u tlets w ith c au tio n

W ith m any m arket innov ators ov erhauling their traditional branch m odels, it is easy to go ov erboard and close full- serv ice branches too q uickly in fav or of m ore cost- effectiv e digital technologies. U nderstanding custom er dy nam ics is critical to striking the right

ala c t a i a li r c t r t be ready to be routed to w ebsites and m obile ap p s, or AT M s and self- serv e autom ated kiosks; otherw ise, they could be discouraged from initiating m ore com p lex , higher- v alue engagem ents.

rr tl i c i ar i fi a ci r r tir t and inv estm ent p lanning are best conducted in- p erson w ithin a p hy sical outlet. B ranches also rem ain crucial for p roduct branding, a t ca a a c it c it t ci p hy sical channels and forcing less tech- sav v y consum ers onto digital p latform s could m arginaliz e this dem ograp hic, driv ing them to com p etitors w ith a larger branch p resence. I t is indeed a delicate ta t t r i t ti al rati i t li c a l that best addresses div erse custom er and banking req uirem ents, p lus enable a cohesiv e and seam less integration betw een the p hy sical and digital netw orks.


T h e rise and rise o f F inT ec h s

A t fi a cial la ca l i itali ati ex p oses banks to new com p etitors and alt r ati fi a cial c t c ri i of telecom m unication giants, online p ay m ent sy stem s, internet p ow erhouses, and other innov ativ e F inT echs. T his new generation of start- up s w as estim ated to hav e attracted

illi i i t t i A ia la t ar c i ar t t i l i

a t il a il all t a w ealth m anagem ent.

T hese non- banks p ose a rising threat giv en their agility and low er risk adv ersity , com p etitiv e ov erheads and com p elling offers. T hey also hav e an innate ability to integrate tech cap abilities w ith sleek design elem ents to offer niche banking p roducts that custom ers fav or — a trait sorely lacking in traditional p rov iders.

Although F inT ech adop tion m ight still be nascent, com p ounded grow th could soon see F inT echs generate m eaningful m arket share. I n China for instance, F inT echs are m aking a r i i r a i t t c r fi a c industry . I n the p ay m ents arena, Chinese P2 P l a a fi a ci lat r a i cr a it tra acti l ti Currently , the largest global F inT ech v alued at

illi i arl a i r a i itself for a listing later this y ear.

M eanw hile, the X iaom i- backed J im ubox p latform has originated m ore than R M B 1 1 billion

illi i l a t it launch and Decem ber 2 0 1 5 . I t started off tar ti t r r l a ar t

r l i a illi ar c ri a i l a t r c tl

ev olv ing into a m ulti- asset and m ulti- p roduct w ealth m anagem ent p latform distributing funds

a a i a l a i a t a a t fir t r i lat r c a

c t a Ali a a A t i a cial a c i a c a li i tart

offering w ealth m anagem ent p roducts. T hese p roducts include m oney m arket funds, insurance annuities and m utual funds — serv ing to further r i a i c t a ar t ar

fund distribution from the 4 0 % lev els in 2 0 1 5 .

S ep arately , I ndian e- com m erce shop p ing w ebsite a t al ia il c rc r it r t a illi il all t

r c i a a t a lic r ia banking regulator in 2 0 1 5 . I t w ill begin offering debit cards, sav ings accounts, online banking and transfers and aim s to hav e an am bitious 5 0 0 m illion users by 2 0 2 0 .

Desp ite such instances of runaw ay success, rather than com p eting directly , w e see F inT echs and banks co- ex isting sy m biotically to create stronger fi a cial t i c ar a r at r rc

r a t tr l i at a i ct r i i into their cultures, w hile banks p rov ide F inT echs w ith im m ediate access to ex isting custom er bases and distribution infrastructure.

> 3 0 % B y 2 0 2 0 , more than 3 0 % of bank ing revenues will be at risk of disintermediation


ta li a c t r fir t i tra iti all fi a cial r ct a r ic a i

to suit a conv entional custom er p rogressing on a linear life p ath, w ith banks assum ing that they know w hat their custom ers w ant.

rt at l c t r ar t fi i t t r of their banking relationship s, w ith low er loy alty y et higher ex p ectations benchm arked against e- com m erce behem oths

c a A a A l l a li a t alt r ati c a A l a a al Ali a a a a l

A r i a a c ti al r

T hey ex p ect a conv enient, engaging, hy p er- p ersonaliz ed ex p erience that features truly innov ativ e, digital ap p lications

r i t r a l l i t rat lti c a l c t w ell, such digital interactions can create “ m om ents of truth” that conv ert im p artial custom ers into adv ocates.

cr at t ri c a a c t r fir t iset, w ith custom ers brought into the fold to understand their

cific r ir t a r t t i ati al i t acr t ir li c cl ic a t at r r i r ati i t a r r c t Global Consumer Banking Survey 2016 that includes a series of q uestions to

t r i r t i ital a i a r r c t i ill a aila l ct r a it r t

i r ati cific t i a i a r ala ia a ia

T hereafter, initiativ es to consider include im p lem enting com p lem entary online, m obile and interactiv e tools w ith intuitiv e i t r ac t at i lifi a a t a acilitat p roduct sales; training call center serv ice rep resentativ es to ac i fir t call i r l ti a r ali i ac i ir t licit c t r i t ll i a tra acti a a l i t r t r c r t t r c ti i r t on the frontline.

B anks w ill also need to inv est in sop histicated integrated om ni- channel custom er relationship m anagem ent sy stem s to aggregate and retriev e custom er data from all touch p oints. T his w ill create a holistic cross- channel tap estry of indiv idual custom er inform ation for enhanced real- tim e analy tics, integrated decision-m aking and custom er segm entation to sup p ort p ersonaliz ed p roducts and serv ices.


APAC banks already reconfiguring b ranc h es f o r d igital

A a a ra art t r it i it ra c footp rint, w here custom ers can choose from a range of self- serv ice intelligent m achines and other technology .

A A illi illi Banking on Australia r ra ic a t fi ar t ill t

bank inv est heav ily in custom er- facing technology such as v ideo conferencing kits at rem ote branches for custom ers to access sp ecialist adv ice.

c c t ra c a at r c a i a i ital i irt al a i ta t it artificial i t lli c

v ideoconference lounges and daz z ling m erchandiz ing disp lay s designed to entice custom ers to linger.

T hrough its Easy brand, R H B in M alay sia is serv ing the m ass m arket w ith one- m an kiosks that can create new accounts, disburse loans or issue cards on the sp ot, aided by a

a l r t at t ir ctl t it c r t

iti a i il i t a i rl r i A l t r a tili i t a i fir it a ri a i Smart Banking branches globally .

fir t r t t r t t i i a r follow ed by locations in J ap an and H ong K ong. T hese outlets, w hich hav e interactiv e touch p anels, v ideo-conferencing cap abilities and full- serv ice banking from iPhones and iPads, attract up to three tim es m ore clientele than traditional branches. T hese branch- of- the-future transform ations hav e not gone unnoticed, w ith

arl all iti r tail tra acti i A ia ar conducted v ia non- branch channels. T he institution w as al ac l a A ia t i ital a r by Global Finance a a i cli c i t r i a ar for B est Corp orate/ I nstitutional Digital B ank and B est Consum er Digital B ank.


W hile digital transform ation offers boundless p ossibilities for grow th and v alue creation, it also generates new risks. B eing digitally redesigned m eans ex ecutiv es should also be m indful of the need to:

M anage the p eop le dim ension Digital transform ations need to ex tend bey ond I T p rocesses and p roducts, to focus on the skills, m indset and cultural v alues. F or instance, banks hav e to train and transition staff from transactional to adv isory roles, and enhanced interp ersonal skills at the frontline

iti Al acc r i t t Global banking outlook 2016: Transforming talent. The banker of the future, the new generation of m illennia em p loy ees hired for their digital ex p ertise brings w ith them new ex p ectations. T his dem ograp hic group w ill account for 7 2 % of the global w orkforce by 2 0 2 5 and banks w ill hav e to adap t to accom m odate these em p loy ees.

I ncentiv iz e change m anagem ent p rogram s t i i fic lt r tr r rial i ati t i i t t ri i a risk- adv erse banking env ironm ent. T o foster an innate culture of innov ation, em p loy ees need to be encouraged to q uestion t tat i t r t ri t a ail w ithin lim its, and be m otiv ated by corp orate- w ide recognition or m onetary incentiv es to com e up w ith new ideas. W hile these m ay ap p ear to go against traditional p erform ance m anagem ent indicators, p erhap s they are ongoing cultural changes and inv estm ents w orth ex p loring. Already , B CA in I ndonesia, and M ay bank and R H B in M alay sia hav e introduced aw ard schem es for ideas, w ith contributors being recogniz ed w ith aw ards and cash rew ards.

a i at t c l it c a i regulatory env ironm ents and ap p roaches tow ards digitalCross- border regulations are a challenge in APAC w ith the

t r r lat r la ca a i tit ti r i al grow th am bitions. As op erations sp an across m ultip le regulators a ri icti a fi t l a i t al it crborder issues sp anning from tax ev asion, to m oney laundering, data p rotection, inform ation disclosure, and m arketing and sales rules.

M anage negativ e feedback and custom er com p laints on social m edia

t at iral ac a itt r ca a a r r tati al ra ificati ti at t at il a

a l t r ri cial t r l t ar already looking for alternativ es, indicating second thoughts on their

ficac i r ct c all i a a i t ir cial r c w ith issues around loss of control ov er content, risk of corp orate inform ation security leakages, lack of tangible m onetiz ation of i t t a i fic lt i i t rati cial t r it t r distribution channels.

F urther areas of focus: m itigating new dim ensions of digital risk

1 0Decoding the digital future for APAC banks

ti i a r i r l ac lat rW hile technological solutions are key digital enablers, an associated challenge w ith digital transform ation is the arduous task of balancing legacy w ith innov ativ e technologies. T his is a p erv asiv e issue in APAC, w here a num ber of banks are still

r i ar l ra t i ra tr ct r r l constraining business agility . T o becom e truly digital, custom er-centric banks, I T rep latform ing is req uired, though ap p roaches ca i r il a i t t r a r r a l t ir core and single- v iew sy stem s, m ost w ould stage their transition v ia m odular up grades and rep lacem ents.

r t i tr ci c l a r i t c a t i t a tra iti al a i i ra tr ct r fic t

• R econstruct core I T p latform s for one- and- done business p rocessing

• Address inform ation storage and cap acity p lanning w hile m anaging data gov ernance issues

• fi t ata t c l a arc it ct r t a l l unify data for a single- v iew of custom ers from any channel

• U p grade organiz ational and technical p latform s aw ay from cific r ct c a l r ra ic aliti t a c

around custom er segm ents

• Prov ide custom ers w ith p ersonaliz ed and integrated serv ices and offerings

r a l iti a lti illi llar r ra Project Rainbow created a com m on global I T p latform for its retail

a i a all iti t c tri i i it a c r i r i c t r t li r a ubiq uitous ex p erience, any w here and any tim e.

a c r c rit ra r i t the digital agendaW ith technology risks rising in tandem w ith digitaliz ation and i ati a t l at i ital ri t another I T issue. ” S ecurity and gov ernance risk for digital assets p erv ade the entire banking organiz ation and should be v iew ed as a core business issue alongside credit, op erational and

ar t ri rt at l i ifica t c r c rit c all ar t ri Global Information Security Survey 2015 indicated that 5 4 % of organiz ations do not currently hav e a role or dep artm ent in their I nform ation S ecurity function focusing on em erging technology and its im p act. F ortunately , resp ondents saw the urgency to inv est in this area, w ith 2 8 % p lanning to sp end m ore to redesign their inform ation security sy stem s —

r l r t i

B anks need to em bed security as p art of the initial digital design p hase. T his entails taking p roactiv e step s to m onitor and strengthen v arious asp ects of security to p rotect against a w ide range of cy ber risks, threats and v ulnerabilities. I t includes identify ing business use cases and dev elop ing threat m odels and associated controls to m anage theft of intellectual p rop erty

r fi a cial i r ati il a i ital c rit ri it regulators im p lem enting strict p riv acy req uirem ents gov erning how custom er data is collected, transm itted, m anip ulated and stored, banks hav e to dem onstrate their cy bersecurity controls are r t t r t ct t c rit i t rit a c fi tialit of client data and funds, w hile concurrently ensuring that custom er p riv acy safeguards do not im p ede digital innov ation.

M eanw hile, w ith increased outsourcing they also need adeq uate ov ersight of third p arties, including regular due diligence checks of cy bersecurity controls at ex ternal v endors to ensure that c tract al li ati t at fi c rit r ir t ar em bedded. T his is ev en m ore relev ant for collaborations w ith em erging v endors and F inT echs, as these organiz ations could be op erating on less stringent risk m odels, w ith the p otential to create a “ back door” for attackers to gain access to the bank. Care is req uired as rep ercussions from ev en a sm all digital breach c l r i c r c fi c i i ital r ic l a i to substantial rep utational dam age.

F urther areas of f ocus: mitigating new dimensions of digital risk

1 1 Decoding the digital future for APAC banks

Continuous innov ation

As digital transform ation gathers p ace across APAC, it is disrup ting v alue chains and transcending the traditional w ay s of conducting banking. W hile regional institutions cannot realistically ex p ect to be new digital p ow erhouses ov ernight, they do need to reinv ent them selv es as stronger digital entities.

acilitat a c r rat trat fit r t a i ital rl a t ta a holistic ap p roach to digital, em brace agile innov ation, and collaborate w ith select F inT ech leaders in digital technologies and serv ices. Adop ting a digital m indset

c ti i cr t r ct it i a cifi ti ra at r transform ational initiativ es should adap t to ev olv ing m arket nuances and deliv er continuous innov ation into ev ery day op erations w ithout disrup ting organiz ations.

B ank s that successf ully f use digital into their DN A are redesigned f or the digital f uture.

1 2Decoding the digital future for APAC banks

a l r r c t licati i cl

EY FinTech Adoption Index

W e surv ey ed m ore than 1 0 , 0 0 0 digitally activ e p eop le in Australia, Canada, H ong K ong, S ingap ore, U K and U S to better understand the ov erall rate of F inT ech adop tion, w hich users are adop ting w hich p roducts and the outlook for future usage.

E Y ’ s digital insights

Journal of Financial Perspectives — FinTech edition

R eleased tw ice a y ear, this edition is dedicated to F inT ech — a top ic t at i ra i i ifica t att ti Articles focus on issues such as consum er adop tion and behav ior, fi a cial i cl i l c c ai a it ap p lications, and regulating F inT ech.

Digital Australia: State of the Nation 2015–16

T his rep ort deliv ers insights built on a surv ey of 1 5 0 0 Australians; interv iew s w ith m ore than 1 4 0 op inion leaders, in- dep th interv iew s w ith senior digital strategy leaders and learnings from in- dep th group discussions w ith consum ers.

Digital innovation? Cyber secure? Digital security: a Financial Services perspective

T his p ap er focuses on an essential elem ent req uired to p rotect and com p ly :

l i a cti a fici t cy bersecurity strategy to p rotect and sup p ort y our digital inv estm ents.

FinTech: Are banks responding appropriately?

r l i t i c bandw agon — or ev en building a successful F inT ech com p any — w ill not cr at a cc l fi a cial i tit ti W e suggest a different innov ation ap p roach to help banks get a better return on their F inT ech inv estm ent.

Emerging technology trends: The road to the bank of the future

B anks seeking to understand how they should transform and inv est in p rogram m es of w ork to activ ate new cap abilities need to consider technology i ati a tr At a a v iew of w hat m ay shap e this future.

Banking in Asia-Pacific: Size matters and digital drives competition

T here are p lenty of op p ortunities for a i A ia acific i r ill

be those w ho p lay to their strengths and harness digital technology .

ar r

Managing change and risk in the age of digital transformation

Digital transform ation is gathering ac acr A A i r ti al

chains and transcending the traditional w ay s of conducting banking. T his rep ort ex p lores w ay s to m anage change and risk.

1 3 Decoding the digital future for APAC banks

E Y contacts

J an B ellensG lobal B anking & Cap ital M arkets

r i ar t a A A a r a art r

S ingap orel ail a ll c

L i- M ay C h ew , C F AAPAC B anking & Cap ital M arketsAssociate Director S ingap ore

l ail li a c c

A S E A NI an W eb ster F inancial S erv ices Custom er & Digital A i r A A a r a art r S ingap ore

l ail a t r c

G reate r C hinaJ am es L lo y dA A i c a r H ong K ong T el: + 8 5 2 2 8 4 6 9 8 8 8

ail a ll c

O ceaniaA nita K im b erH ead of Perform ance I m p rov em ent

A i r art r AustraliaT el: + 6 1 2 9 2 4 8 5 4 1 4

ail a ita i r a c

S outh K oreaY o u ng- S u k K im

A i r art r S outh K orea

l ail i r c

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Decoding the digital future for APAC banks