How do CIOs help their organisation ensure compliance, security, and innovation?
For the past few years have been moving towards digital banking, in Australia the major four banks have been scaling towards app and mobile products for customers. These banks have been moving towards a digital model as customers look to alternative financial institutions like, neo-banks.
According to comparison website Mozo, a 2019 survey found one in four banking customers have either already switched, or are seriously considering switching to a neobank, it appears that they might be on the money.
In Singapore the COVID-19 outbreak has prompted Singaporeans to embrace more digital services when taking charge of their finances. This is a shift that the majority believe will stick post-pandemic, a survey by personal finance website SingSaver found.
Conducted in June 2020, the survey analysed 1,000 responses detailing Singaporeans’ biggest challenges with personal finance, changing financial habits and attitudes.
The inevitable use of digital services during the pandemic has allowed Singaporeans the time to become more at ease with technology. The survey found 70 per cent of respondents across Singapore have used online banking “frequently” since the outbreak of the pandemic, with 65 per cent stating they are “somewhat” or “very” comfortable using these digital tools.
In APAC digital banking is set to be widely adopted with over three in five customers (63 per cent) willing to make the switch to neobanks and challenger banks in the next five years, according to the Fintech and Digital Banking 2025 report by Backbase and IDC.
Riddhi Dutta regional director of Asia at Backbase told CIO Tech Asia, APAC CIOs and CISOs need to be aware of the main challenges hindering banks from fully unlocking their digital potential.
“These challenges include legacy views of the value chain, legacy in-house architectures, being slow to innovate and leverage customer insights due to data silos,” he said. “CIOs and CISOs need to overcome these main obstacles to achieve success in becoming digital-first.”
Traditional incumbent banks tend to hold legacy views where they want to own the entire value chain instead of taking advantage of potential ecosystem play.
“We found that 80 per cent of the top 250 banks still prefer to own the entire value chain of banking, with third party-contributed business at a mere two per cent,” he said. “Having said that, incumbents have not been able to match up to the speed of implementations by the fintechs.”
Myles Bertrand managing director APAC at Mambu – a SaaS banking platform believes CIOs of both fintechs and traditional banks have a once-in-a-lifetime opportunity to make a tremendously positive impact on the lives of their customers through digital innovation, which will ultimately improve financial inclusion and access to financial services for everyone.
He told CIO Tech Asia many fintechs have found the transition to remote work quite simple due to existing tech and processes in place, some legacy banks have struggled.
“The pressure on the banking system is growing and the pace of change is unprecedented,” he said. “CIOs need to work fast to get their systems and processes in a position where they’re ready to rapidly evolve their operations and offer the right products to the right customers at speed. The financial market may be unrecognisable in six or twelve months, and banks need to get ready to respond to the changing market and customer demands.”
Dutta said incumbents may increasingly lose ground if they don’t move away from legacy views to refocus their resources at innovating and enhancing the overall experience for customers.
“Incumbent banks tend to be held back by traditional products, processes, and outdated technology architectures that form the foundation of their back-end environments,” he said. “Meanwhile, more than 35 neobanks or new digital challengers across APAC are built on agile innovative best practices — way ahead of incumbents in terms of flexibility, self-service capabilities, customer needs, and personalisation.”
According to Dutta these incumbent banks tend to be structured in silos — which are called “internal silos” which exist within the various department in the bank as “channel islands”.
“These internal silos affect the entire customer life cycle management,” he said. “For example, new customer onboarding, self-servicing/advisory/support unit is separate from the product development/provision and apart from the digital marketing division.”
Ned Lowe chief technology officer at Singapore-based Singlife, agrees with the view that traditional financial institutions are hampered by silos.
“In conversations that I’ve had with traditional organisations they’ve said, if only we didn’t have this tag; if only we didn’t have xyz technology, then we would be able to do things as quickly as you can,” he said. “My response to them is the reason why the tech is more flexible and more agile is because the culture is more flexible and agile.
The culture comes first, and the tech comes second, not the other way around. If people really want to embrace new ways of doing things, but they must embrace a different mindset, be more agile and interactive in the way that they approach things and be more acceptable of certain types of risks.”
Lowe told CIO Tech Asia typically, financial institutions build these silos around products.
“It’s called Conway’s Law, that the, the systems that you build reflects the hierarchies of the business that created them,” he said. If you have a siloed business, you’re going to have siloed technology and that makes it difficult to present a holistic solution.”
Lowe believes the newer players have taken a leaf out of “consumer businesses” and made their technology very consumer focused and then structured the hierarchy around back whichever allows you to search for tech around.
Dutta believes that banks should instead make this customer journey into a horizontal offering by standardising all four operations into a single platform.
“Although traditional banks may have an edge in terms of its established customer base, trust and reputation, strong network and distribution channels, they need to move away from a focus on owning customers and instead move towards solving problems and simplifying experience for its customers,” he said.
“The bank’s digitalisation strategy must align both internally in terms of organisational culture, internal processes on the back-end and externally in terms of front-end customer experience and user interface.”
Dutta believes CIOs must accelerate the pace of change, define a clear roadmap with tactical tools and best practices to make informed decisions in an agile manner.
“Traditional banks may find that the bar is now much higher with increasing customer expectations and the shift towards digitalisation that has ramped up in the last few months due to the impact of coronavirus forcing consumers to turn to online and digital,” he said. The bank as an organisation needs to assess their current state of digitalisation and chart a realistic roadmap for digital transformation.”
He said financial institutions need to understand that the transformation to a digitally capable banking is about generating new sources of revenue, as they provide more channels and seamless integration for customers to transact and do more with their applications in their financial lives.
“The banks of the future will be built on a platform that is able to provide a single orchestration and aggregation layer, bringing together all the elements of a successful digital planking platform,” he said. “To do this, banks need to invest in an agile and responsive architecture, solution landscape and capabilities that can reconfigure systems, operations and processes to adopt new services and tap into new operating model.”
Owning the data
Agility and open banking can bring regulatory issues for financial institutions, this is true for traditional banks as well as a fintech.
Adrian Johnson VP and managing director at Hitachi Vantara ANZ told CIO Tech Asia, most organisations have a broader data management challenge, and it’s not “big data” but rather how do they manage data effectively so that it is not only compliant but valuable and useful.
“If you treat data management as a compliance problem or an open banking problem or if you deal with it in support of one specific, innovative project,” he said. “Then you are developing point policies or responses to a specific problem without fixing underlying issues or enabling data usage and value across the business.”
According to Johnson the CIO / IT department, and indeed the business’ decision makers, need to put in place a data management framework complete with policies, tools, and automation to support that framework.
“Once you get control of the data you have, the right framework is in place to control all new data that is created or collected, using the same policies, tools, and automation,” he said. “Data management becomes systemic across the business, rather than needing to be managed after the fact, or the responsibility of a specific team.”
Johnson said good-quality, clean, compliant data that has been indexed, classified and governed can be used to:
- Improve the customer experience.
- Generate insights for competitive advantage.
- Assist the organisation to apply change more quickly, both to correct when something has gone wrong and to expand and scale when a success has been realised.
- Inform and enable innovation.
“Data growth is here to stay,” said Johnson. “It is now a fact of life. Regardless of how much data you have, the principles of managing it are the same. You need the right tools and policy framework in place. And modern data management must include automation to deal with the sheer volumes involved. Then you can focus on the quality of data, determining what data is valuable, and making it usable and available.”