How the Digital Revolution Is Transforming Banking and Financial Services in Asia
OneConnect is a Business Reporter client.
Asia has become the hotspot of digital innovation in the global financial and banking sector. From back-end services to front-end interfaces, and from seamless payments to credit experiences, Asian banks and financial service providers are harnessing the power of artificial intelligence (AI) and digital banking technologies to stay on top of their game.
The global Covid-19 pandemic has accelerated the pace of digitalization in Asia, as more central banks embrace digital banking to drive higher financial inclusion in their countries.
According to Bain and Company, banking penetration is only about 50% in Southeast Asia. This underbanked and underserved market comprises micro-enterprises, SMEs and rural populations and is poised to become the growth engine for digital financial services in the region.
OneConnect, a global fintech company that has been helping banks in the region to digitalize, sees a key trend in the market: Digitalization is transforming the region’s financial services industry and can drive greater financial inclusion.
In Southeast Asia, Singapore leads the way, with the award of four digital bank licenses (two full banks and two wholesale banks) announced by the Monetary Authority of Singapore (MAS) last December. Following in these footsteps, Malaysia and the Philippines have recently approved licensing frameworks and up to five licenses for digital banks.
Covid-19 has also brought about what Tan Bin Ru, CEO, Southeast Asia, OneConnect, describes as a “hyper-acceleration of digital adoption” among banks and financial service providers and a shift toward digital banking. But she stresses that digital banking goes beyond providing free apps or cheaper services to drive customer adoption. Customer experience is the key differentiator that will determine the success of a digital banking service.
“End users are expecting new products that meet their lifestyle—products they have never seen before. A lot of banks have mobile apps that are not exactly friendly, and customers don’t feel served by the bank,” says Tan.
While banks and financial service providers recognize the importance of providing good digital services, this is easier said than done. “Many banks have tried to do things on their own, only to realize that it takes a long time to build up that internal expertise,” notes Tan.
Finding the right talent and the suitable solution is time-consuming, and organizational hurdles such as lack of management support can lead to further delays in digitalization.
Since its founding in 2015, OneConnect has supported the digital transformation journey of financial institutions across nearly 20 countries and territories. The company offers a range of market-ready, modular and customizable digital banking solutions, from digital lending to cloud-based core banking systems.
Above all, the fintech firm understands the challenges associated with digital banking intimately, as it runs a full digital bank, Ping An OneConnect Bank (PAOB), in Hong Kong. It is also an associate of Ping An Insurance (Group) Company of China, a Fortune Global 500 company with 33 years of experience in the financial industry.
“I think it is important to understand the pain points of a bank. We pride ourselves in bringing a lot of domain knowledge to this area. Half of our people are bankers, and we work with the banks to understand their journey,” says Tan.
For clients, working with a one-stop strategic technology partner like OneConnect instead of scouring for multiple vendors has not only saved them time, but also enabled them to create new products and expand into new markets, while still running their core business.
In 2019, OneConnect and UBX Philippines Corporation (UBX), the wholly owned fintech subsidiary of Union Bank of the Philippines (UnionBank), launched SeekCap, the country’s first lending platform that helps underserved micro, small and medium-size enterprises (MSMEs) manage cash flow and grow their business. A leading e-commerce platform in the region is onboarded as the channel partner, allowing their sellers (merchants) easier access to financing, with multiple credit options across several lenders.
SeekCap took just nine months to complete. Within the first three months of its launch, the platform saw a 300% increase in loan applications. About 90% of its customers are new to the bank and onboarded digitally through the platform. By tapping OneConnect’s expertise in artificial intelligence (AI), SeekCap is able to offer same-day loan approval and disburse loans within three working days while providing more accurate risk assessment.
While the use of AI has become commonplace in digital banking, Tan observes that AI “is still an evolving technology.” Hence, continuous research and development (R&D) is needed to enhance the AI modules in any digital banking solution.
OneConnect’s strong focus on high-quality research and development (R&D) investments, amounting to more than RMB3.8 billion from 2017–2020, has enabled it to expand both its portfolio of products and client embeddedness.
“In the wake of the Covid-19 pandemic, it is important that your solutions remain agile, and R&D continues to be pumped in to mature the solution that you are implementing,” says Tan.
Besides the ability to invest in continuous R&D to upgrade solutions, what else should financial institutions look for in a fintech partner to support their digital banking plans?
Tan’s advice is to choose a partner with good domain knowledge to support their business. OneConnect, for instance, focuses on technology and finance and serves mainly the BFSI (banking, financial services and insurance) sector.
The ideal fintech partner should also be able to offer a breadth of solutions that it can grow and scale with the company’s digital transformation journey.
—Industry view from OneConnect
To find out more please visit ocft.com.sg.
This article originally appeared on Business Reporter. Image credit: iStock id827843530
