Graeme Beardsell, Managing Director, Asia Pacific & Japan, Akamai Technologies
The biggest banks of today are not determined by their physical presence, they sit conveniently and comfortably in your hands via your smartphone. Mobile has become the largest banking channel by volume of transactions, with South-east Asia as a key propeller of growth. On top of the region’s high smartphone penetration, its lack of access to physical financial infrastructure has encouraged more to turn to their mobiles for financial services. This is why technology giants such as Google and Samsung are delivering highly focused financial service applications (apps) like Samsung Pay and Google Wallet to ensure financial inclusion in all engagements.
Largely driven by startups, Financial Technology (FinTech) is an alternative business model that leverages innovative use of software and technology to deliver financial services that traditional banks struggle to process swiftly and efficiently. From peer-to-peer (P2P) payments to wealth management, FinTech is causing a massive upheaval in the financial services market. FinTech organizations do not need to worry about costly legacy IT infrastructure, or regulatory constraints applied to conventional banks. Yet, they are able to deliver more agile processes and services while fulfilling customer expectations with greater customer orientation. What’s more, with almost all processes automated, there is further business impact through cost efficiency and productivity.
Evidently, FinTech has the potential to erode the value of conventional banks. The question is – how can both financial giants and new market entrants gain from the rise of digital in the financial services sector to stay relevant?
Redefining the Bank-Customer Relationship
The growth in mobility and connectivity is driving a shift in consumer behavior in Asia, in which users expect convenience and personalization. They want customized products and services delivered to them anytime, anywhere, in a fast, reliable and secure manner.
Governments and incumbents alike are also realizing the value and importance of digital transformation and the need to develop new capabilities to meet their changing customer needs. Established banks, including Development Bank of Singapore Limited (DBS) and The Hong Kong and Shanghai Banking Corporation (HSBC), are establishing FinTech accelerator programs to turn FinTech start-up disruptive forces into key enablers for digital transformation. Relevant authority bodies such as the Monetary Authority of Singapore (MAS) is also mapping out a regulatory environment to enable financial institutions and non-financial players to experiment with FinTech solutions, while lowering the compliance burden.
More importantly, organizations need to understand that much of FinTech disruption occurs on the Internet, with mobile, cloud, big data analytics and social media serving as key technology drivers. With FinTech business operations heavily reliant on the Internet, as compared to traditional financial services, organizations will need to break through two barriers – security and performance, in order to reap the full benefits of the FinTech revolution.
Empowering the Customer with Choice and Speed
Imagine the customer’s frustration when an investment transaction done manually at a physical bank takes more than a week to be completed. As customers become more comfortable with digital banking, they seek seamless interaction with financial institutions across a variety of channels – physical bank branches, smartphones, tablets and desktops. Yet, banking customers in Asia Pacific frequently list limited digital financial offerings and unsatisfactory services as major sources of frustration.
With the customer at the core of the business strategy, large financial institutions are redesigning the end-to-end buying journey. Banks now need to focus on re-mastering and digitizing end-to-end processes using technology to deliver the experience customers want in today’s digital banking world – compelling customer proposition with quality service. Headquartered in Singapore, DBS is making a huge investment in digital technologies, setting aside more than 90 percent of expenditure for middle and back office processes. By deploying user-friendly mobile and online apps, complemented with self-evaluation tools, financial institutions can then efficiently enhance digital financial offerings.
Slow loading pages are also a definite no-no in today’s digital era. A website/mobile app that lags or is complicated would not inspire confidence in a user, and it can also erode brand credibility. Nearly half of web users expect a site to load in two seconds or less. Literally, in a matter of seconds, a website’s downtime or slow loading speed can cause organizations to lose customers, impacting overall profitability. Organizations should therefore ensure the website/mobile app stays online, available and responsive at all times.
Leveraging Akamai’s globally distributed platform, Standard Chartered bank was able to provide significantly better website performance than hosting sites regionally. By automatically selecting the fastest route between Standard Chartered data center and its users based on real-time Internet conditions, the bank delivered web pages five times faster on average, globally. In addition, Standard Chartered deployed Akamai’s Web Performance Solution to speed up secure online transactions for its Straight2Bank corporate banking app and saw customers in Asia enjoying a 25 percent performance improvement on average.
The Need to be ‘Secure-by-Design’
Cyber-crime is a reality in today's hyper-connected world and disruptive events that could take a business offline are inevitable. In the first quarter of 2016, Web application attacks increased by at least 25 percent as compared to Q4 2015, with financial services being the third most targeted industry.
As a result of data being shared and processed by multiple third parties, managing sensitive financial information comes with very real security and privacy implications. There are an increasing number of touchpoints FinTech companies need to secure on their online infrastructure. Security has to be approached from a core business function perspective and be ‘secure-by-design’ from the very beginning. By mapping out the entire data flow lifecycle, organizations will be able to obtain a holistic and thorough understanding of the inherent technical risks and threats.
Next, they need to deploy the necessary and robust security controls to detect, prevent and respond against cyber threats across the online infrastructure. Only then, organizations can effectively shore up their security environment and build trust about using technology in order to succeed in digital transformation.
Despite some countries still lacking access to traditional means of banking, Asia Pacific, with more than one billion mobile users, is attracting global investments in FinTech ventures. It is the second largest region for FinTech investment after the U.S., outpacing Europe. However, true FinTech services entails more than just the provision of financial services through online and mobile channels.
As FinTech increases its footprint in the financial space, organizations need to embrace and take advantage of the transformative and disruptive power of digital technologies on their existing business models, or risk being left behind. To overcome the challenges of the FinTech disruption, organizations need to create new value propositions such as dynamic products and services, as well as a more sophisticated, digitally enabled sales force without compromising on the customer experience.