Data to drive future banks
Fintech startups are shaking up industry practices. How can established financial companies remain relevant?
Rapidly advancing technology is transforming the financial sector, with more innovative and convenient banking applications now delivering services to customers anywhere, at any time. As the race to digitise banking and exceed customer expectations intensifies, data could be the difference for organisations to pull ahead.
Asia-Pacific is particularly fertile ground for financial technology. In China, Tencent established the first private digital-only bank, WeBank. Promoted via the company’s WeChat app to its 800 million users, WeBank disbursed over 800 million yuan in the first six months of operation by connecting individual clients and small enterprises with banks and financial institutions.
In Vietnam, Timo — which stands for Time & Money — partnered with a local bank to provide the country’s first digital banking service that enables customers to manage their money, bills and even top up mobile phone cards from a single platform, instead of queuing at banks or logging on to different internet banking systems.
These new banking services have one thing in common: they are built around harnessing the power of big data. Slowly but surely, the financial sector is realising the immense potential data has for their businesses.
Singapore’s DBS set up Digibank, a mobile-only bank that operates branchless, paperless and signatureless services in Indonesia and India. Designed for simplicity and efficiency, Digibank offers 24-hour customer service via an artificial-intelligence-driven virtual assistant.
At the recent Google Cloud Next Conference in San Francisco, Darryl West, the chief information officer of HSBC, said that apart from its US$2.4 trillion in assets, the core asset of the bank is its database. He reported enormous growth in the size of HSBC’s data assets as customers adopted digital transaction channels enthusiastically. By smartly collecting data on customer interactions, HSBC is working with fintech firms to apply the insights gained from data analysis to running a more efficient business and creating more engaging customer experiences.
Intelligence brings opportunities: When it comes to harnessing the power of data, many organisations turn to cloud computing. The latest Cloud in Banking in Asia Pacific report by the global consultancy IDC predicts that the next two years will be a tipping point for cloud uptake among the region’s banks. Customer demand for anytime, anywhere services is forcing financial institutions to effectively utilise data insights to offer customised products and services in real time.
For example, just as Uber automatically suggests your next destination when you open the app, a bank could offer an interestfree loan to cover a large bill at the time the customer receives the bill. Based on previous borrowing patterns, a back-end algorithm can then calculate an appropriate interest rate and evaluate the user’s credit risk before transferring the loan amount instantly.
Data is also driving the automation of work procedures and training of machine learning algorithms, as artificial intelligence and advanced analytics have the potential to transform how banks will function in the future. Already, the likes of DBS, UOB and OCBC have made multichannel experiences possible by offering both online and mobile banking services on a single platform. This is reinforced via the integration of social networks, with the objective of understanding consumer needs and wants.
However, integration and cross-pollination of data can prove problematic if banks build their practices, such as creditrisk, operational and compliance analytics independently, meaning they do not communicate with each other. More often than not, these silos examine similar data sets to extricate revenue opportunities and identify risks. With the setup of data systems and technologies that enable cross-banking analytics and address institution-wide challenges, new and more efficient customer services can emerge.
However, it’s not a smooth ride for the sector when it comes to big data adoption. With only some institutions prioritising the need for data and analytics, banks and financial institutions need to take the following steps to reap significant benefits:
Know where your data is and how it moves across the private or public cloud and different geographical regions. Tools such as OnCommand Insight make this easier.
Adopt uniform processes and interface for all your company’s data to reduce operational risk and confusion.
Detect performance anomalies before they lead to service disruption or outages and ensure compliance with regulatory mandates and internal IT governance rules. SnapLock Data Compliance can help in this regard.
Data-centred banking that understands patterns, predicts outcomes and improves processes for digitally dependent customers and organisations is the future. Financial institutions today have to prioritise digital transformation and create datacentred systems that will provide solutions for banking services that make lives easier and businesses better.
Weera Areeratanasak is the managing director for MIT & CLM (Malaysia, Indonesia, Thailand, Cambodia, Laos and Myanmar), with NetApp, a provider of data insight, access and control systems for hybrid cloud environments.