Transforming Disruption Into an FSI Advantage
- By Winston Thomas
- April 09, 2020
Disruption is changing the financial services industry (FSI) landscape.
Regulators and industrywide efforts are lowering the barriers by promoting data sharing and offering virtual banking licenses. Meanwhile, platforms and emerging technologies are making it easier for startups and non-FSI players to enter the industry.
Incumbents are responding. Armed with innovation, platforms and technological advances, they are carving a fresh path to success.
In a CDOTrends panel, organized in partnership with Telstra, we asked three industry leaders their thoughts. They include Alfian Sharifuddin, managing director and head of technology and operations at DBS Hong Kong & China; Gabriel Chan, the head of IT at Gaw Capital; Tony Melloy of Telstra International. Below are their insights.
Accept disruption
The panelists agreed that disruptions are becoming a fact of life. Part of the reason is the availability of Open APIs. These are making data flows easier between banks and other third-party players.
They advised that FSI players, especially banks, need to stop looking at this as a loss of control or revenues. Instead, they should use this opportunity to update or rethink their business value proposition and build links with other players.
Digital-led disruption also allows FSI players to tackle old problems using fresh approaches.
For example, panelists noted that Open APIs allow banks to take part or build ecosystems that include other service providers. It streamlines the Know Your Client (KYC) process as the information can be shared among ecosystem players and allows, for example, banks to lend faster.
Digital solves old problems
Often people see the digital and IT infrastructure that it runs on as the same. But in places like Indonesia and India, they can be separate as the physical infrastructure may not be ready or is underdeveloped.
Panelists noted that understanding the difference can allow banks, like DBS, to launch digital banks in India without opening a lot of physical branches. But it also changes the way customers engage with their FSI providers, which the latter have to be ready for.
Biometrics data can be a boon for digital innovation and services. For example, DBS capitalized on the biometrics database managed by the India government based on the ID card to perform online KYC from wherever the client is. This approach allowed the bank to grow its customer base from zero to three million customers within two years with a minimum number of physical branches.
In-source development
FSI players have always focused on IT development. As custodians of huge data, they are well placed to maximize the use of this data to their own advantage.
However, in the past, many outsourced their infrastructure needs. This made them locked into vendor pricing models and hindered their agility. It also reduced their ability to roll out AI and other companywide initiatives quickly.
Today, FSI players are shifting their IT stack in-house with many looking to in-source their innovation. It creates new business models and modes of engagement. It also shifts vendor relationships into partnerships.
For example, Ping An’s OneConnect offers tools and APIs for FSIs to interconnect, create ecosystems and change their value proposition. Meanwhile, DBS is taking its own route by building its own platform and value proposition and working with other third-party players.
Whatever the preferred approach, panelists advised FSI players to take control of their entire IT stack and build internal competencies. The knowledge will be crucial as they figure out which emerging technologies and digital transformation routes they want to explore.
Organizational change comes first
FSI players need to be ready for large-scale organizational change. Panelists noted that this is crucial for becoming agile and responsive to today’s connected customers and ecosystem needs.
One reason is to remove interdepartmental barriers and silos. These make it difficult to share knowledge and opportunities across the organization.
So, banks like DBS, partnered with vendors to share skills and knowledge. They also ensured the IT teams that worked closely with different business units.
The move not only shifted IT to think in business terms but allowed business units to explore the different opportunities that emerging technologies, like AI and blockchain, can provide.
Address networking and ethics concerns
While FSI players are going digital, they need to study their current infrastructure and see whether it fits their digital needs. The simple truth is that most are not wired up for high volumes of data sharing needed for data-hungry applications like AI. Video conferences and remote working needs are also adding additional stress to these infrastructures.
Panelists pointed out that new cloud-native applications and cloud strategies hinge on efficient networking. They agreed that finding the right networking partner is key as they scale out across the region.
Meanwhile, panelists highlighted the need to put in place a strong data ethics framework. As FSI players share and use more data to reinforce their value propositions, they need the right policies to enforce its proper usage. Else, they are taking a high risk on their reputation and future revenues.
Photo credit: iStockphoto/JoeyCheung
Winston Thomas
Winston Thomas is the editor-in-chief of CDOTrends. He likes to piece together the weird and wondering tech puzzle for readers and identify groundbreaking business models led by tech while waiting for the singularity.