Banking 4.0 and its possibilities
Published on 02 May 2019
KUALA LUMPUR – The Kingsley Strategic Institute for Asia Pacific organised the 2019 Malaysian Banking and Finance Summit with a theme focused on disruptions in banking. The summit saw the gathering of leaders of the banking industry, financial companies, and upcoming fintech companies, all of whom gave their views on the developments and impact of digitisation in banking.
Minister in the Prime Minister’s Department for Legal Affairs, YB Datuk Liew Vui Keong, presented the opening keynote address, highlighting the importance of good corporate practices which is crucial in sustaining the high level of trust and credibility with banks.
Panel sessions throughout the summit spoke of the vast potential of digital banking, especially towards the unbanked, the need for banks to adopt lifestyle models (similar to those already used by Alibaba, WeChat, and Amazon), and the possibilities of open banking.
Key points that emerged from the summit include:
- The role of banks may change as millennial account holders see little need to go to banks. Mobile banking and mobile wallets are also changing consumer behaviour.
- A rethink of the banking model in the new digital age should begin from first principles rather than to enhance current banking models.
- As Bank Negara begin approving licences for digital banks, it must learn and build upon the success of other ditigal banks and develop ways to allow Malaysian banks to cultivate this potential domestically and abroad.
- Digital banking provides a feasible means of reaching the unbanked population in remote areas. Better understanding and cooperation between digital banks and regulators is necessary to realise this potential.
- Due to the changing nature of work with the gig economy banks may face difficulties in assessing potential clients due to a lack of information from traditional sources of data. However, there are ways of obtaining information by tracking lifestyle and activities rather than using the traditional credit matrix. Such data can be obtained from unstructured data.
- While with a lack of data it is difficult for traditional banks with low risk appetite to accept the young and unbanked, yet these are unrealised opportunities for great investment potential as some of these individuals have been able to create successful businesses.
- While banks collect a lot of data, they have been unable to translate this data into meaningful information. In this area, banks can partner with fintechs to improve data quality using machine learning techniques, AI, big data, and other methods made possible by IR 4.0 to analyse unbanked individuals and determine if they can be made customers.
- Digital disruptions could lead to financial exclusion of individuals from certain segments of society who lack records
- Provision of infrastructure, particularly the provision of data connectivity, is necessary to encourage the unbanked to open accounts with fintechs or banks as they go digital.
- The concept of open banking will become more widely used. While in theory, information sharing between banks would enable banks to identify potential growth areas in the businesses of their clients, there are limiting factors in the bank’s internal processes preventing this which need to be overcome. At the same time. banks and regulators need to ensure personal data protection and security when such level of openness is solicited from consumers.
- The proposition offered by challenger banks are offering is the deconstruction of cost and elements of services that have traditionally been bundled together, and are provided instead as options. Incumbent banks can evolve by launching their own challenger banks, improving their digital service by moving beyond the standard mobile banking services and collaborating with challenger banks and fintech by connecting to their ecosystem via an open API.
- Banks should adopt “lifestyle-based models” tailored to enhance customer experience and carry out more activities beyond banking. Eg. ICBC’s e-commerce platform allows their customers to transact with each other and financed by the bank. These models are common with Amazon, Alibaba, and WeChat.
- Automation can be used to manage risk and reduce operational activities to allow existing resource to focus on more value-added tasks.
The 2019 Malaysian Banking and Finance Summit was proudly sponsored by Silverlake, Netbuilders, and Alliance Bank.
