Co-creation and customers lie at the heart of digital banking

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Article by Suresh Neelakantan, Senior Director, Value Chain Innovation Laboratory, NEC Asia Pacific 

Digital banking is gaining popularity at an explosive pace. Banks and financial institutions are increasingly looking to expand their digital capabilities. Over the last decade, many services that warranted a bank visit, such as money transfers and loan applications, have already moved online. The onset of the pandemic has further accelerated the drive for digital solutions.

Just this year in Singapore, we’ve seen the launch of several ‘digibanks’ – Southeast Asian super-app Grab and Asia’s leading telco Singtel’s GXS Bank, and global bank Standard Chartered and Singapore grocery retailer Fairprice’s Trust Bank to name just two of the many new entrants. The proliferation of smartphones, the massive untapped potential of the underbanked and small-medium enterprises, and rising consumer demand for instant service across Asia have all contributed to the rise of the digibank. The consequence of these rapid changes is that traditional banks are scrambling to keep up.

Challenges faced by incumbents

Many traditional banks continue to struggle with legacy systems that are laborious and restrictive, or those that still have tedious administrative processes, often resulting from arcane and differing banking regulations across jurisdictions. This results in banks that are slow to respond to rapidly changing market needs and too slow to cater to the demands of today’s customers. Legacy banks, however, storied their past, who cannot innovate fast enough will be usurped by more innovative, nimbler companies seeking to cater to Asia’s fast-growing cadre of digital-first customers.

There is also the omnipotent threat posed by cybercrime. The advent of technology in banking has expanded the landscape for criminal entities. In fact, four out of five Asia-Pacific banks say the introduction of real-time payment platforms has resulted in increased fraud losses. You only need to glance at the ongoing maelstrom brewing in the cryptocurrency space, blighted by a spate of hacks and allegations of fraud to have an inkling as to how wrong the marriage between finance and technology can turn out to be. Clearly, a varied set of challenges awaits this banking and financial services landscape — and simply going digital isn’t the answer. In this rabbit warren of problems, specialist help comes as a major boon.

The value of co-creation

It’s worth thinking about why a ride-hailing, food, and grocery delivery platform with nascent fintech ambitions partnered with a telco to launch a digibank in Singapore. Digibank offerings in other jurisdictions are much less complicated – the likes of Ping An Insurance have also backed a digibank in Hong Kong. The answer lies in co-creation.

For Ping An, a well-established insurer in China, it was an opportunity to showcase the full extent of its proprietary technology. The advanced analytics it built when migrating to the cloud, and risk management models already exhibited in its insurance offerings could be extended to a retail banking audience, with a further opportunity to introduce them to their insurance and healthcare ecosystem. In the case of Grab and Singtel, it was an opportunity to leverage each entity’s respective forays into payments, Grab’s wealth of data from its various customer-facing transactions, and Singtel’s vast customer base.

These synergies can offer all parties shared value. Fintech platforms and superapps – have access to best-in-class technologies and battle-hardened talent who solve customer problems for a living. Banks and telcos bring to the table deep pockets, established reputations, vast customer databases, and regulatory know-how. This combination makes digibanks a unique proposition in a crowded marketplace. Coupled with the ability and agility to deliver solutions rapidly and at scale, then the appeal to businesses becomes obvious. The key to all this, however, is the customer.

Putting the customer first

Going digital has been a constant check on the to-do list of many industries — including the banking and finance sector — and that has only been accelerated since the onset of the pandemic. In a recent study by Google, Bain, and Temasek, the uptake of digital financial services grew across the board in Southeast Asia. This was primarily because of enduring offline-to-online behavior shifts post-pandemic. Customers have flocked to these services and will be sticking with them for a long time to come.

There’s no doubt that digital services will play an increasingly prominent role in our daily lives. It is only natural that banks take advantage of this trend, but customers today have greater expectations and more choices than ever. To stay competitive and ahead of nimble fintech, traditional banks and financial institutions must not only prioritize the modernization of products and services but also work to complement the lifestyles of their customers.

Modern banks must change the ways they interact with their customers and their evolving needs. They need to adopt a people-first approach to digital transformation by focusing on the end-user experience, as well as human connections. A human-centric approach helps banks develop better experiences by delivering personalized digital experiences that are beneficial to the customers’ journeys across all digital and physical channels. Human connection and experiences are the heart of this model, strengthening the bond with customers.

Banks can achieve this through a variety of means. A focus on retention and long-term loyalty is a good starting point. Investing in proper customer management resources and ensuring that at every touchpoint, appropriate technology is combined with human interaction to pave the way for an elevated customer experience is a natural next step.

Organizations with digibank aspirations should start the customer journey with the customer’s needs first, rather than putting product design at the start. Taking a page out of the fintech playbook, modern banks can turn to open banking and work with third parties to exchange functionality, applications, and data to build a refined suite of solutions to deliver a better customer experience. Case in point – current digibank offerings include no requirements for minimum balances, no annual fees, competitive interest rates, creative, fixed-deposit-type accounts with higher payouts, and opportunities to get discounts with their partners, such as with GXS and Trust Bank in Singapore.

The journey ahead

On the cusp of the digital banking revolution, simply going digital will not suffice. Banks and financial institutions must pay heed to security, usability, and convenience in their pursuit of greater digitization. Given the recent spate of financial fraud and scams and an undercurrent of discontent among older and less tech-savvy customers about access to these digital financial services, banks should have their ears to the ground and not leave a stone unturned in their bids to capture the minds and wallets of their customers.

With the right strategy, financial institutions can build a high-performing, secure, and experience-first design that benefits both the customer and the organization, all while minimizing costs and security risks. Teaming up with the right partner can go a long way toward ensuring some of those needs are met. The right partner will be a business that is committed to utilizing its technological prowess to realize future-oriented innovation without being constrained by archaic concepts and rigid frameworks, whilst collaborating with customers to develop solutions tailored to the industry-specific issues they face.

This type of co-creation can create new ecosystems and business models in digital banking. To realize this, it is important to mutually distribute and utilize data. Such a commitment can help create social value to solve various social issues and achieve a more bountiful and brighter future. At the end of the day, one thing is for certain: the biggest winner will be the customer.

The view in this article is that of the author and do not reflect the views of Tech Wire Asia. 

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