The banking and financial services industry in Southeast Asia is undergoing a radical step change in digital transformation. Virtual banks and hungrier, nimbler fintechs are also snapping at their heels, disrupting the old ways of banking.
According to Aradhna Sharma, Southeast Asia digital and data solutions director at ADVANCE.AI artificial intelligence (AI) technology has the potential to reimagine the future of bank-customer relationships in Southeast Asia.
With more than 12 years’ experience in digital transformation, eKYC, compliance, risk and digital identity solutions within the banking, fintech, financial services, insurance and retail sectors, Aradhna shares how banks should urgently rethink and reshape the entire customer banking experience.
The Philippines ranks first in the world for internet usage at a staggering 11 hours a day, followed by Malaysia (6th), Indonesia (8th), Thailand (9th) and Singapore (11th).
Covid19 has only accentuated the growth in time spent online. Faced with lockdowns, food deliveries, e-commerce, entertainment, e-payments and basic online banking activities have been rapidly adopted by the general population.
Ninety-four per cent of consumers that were ‘forced’ to use online services because of lockdowns now say they will continue to go digital. Moving forward, they will demand a frictionless digital experience as they shop, eat, work, pay, play and bank.
What does this mean for the future of banking in Southeast Asia?
In this new digital era, customers will demand value, convenience and speed. Instead of queuing at a bank branch or being put on hold by a call centre, they want to bank anywhere, anytime. They also expect access to personalised financing products that suit their life stages.
And consumers are hungry and ready for a smart digital banking experience – four in five are willing to disclose personal financial data in return for better interest rates or lower fees from banks.
In emerging markets such as Indonesia, Thailand and the Philippines, a huge untapped pool of unbanked and underbanked consumers and businesses are eagerly anticipating newfound access to digital banking services.
Many of these potential customers hail from Tier 2 and 3 cities with inconvenient access to a physical bank branch. They will look towards banks who can onboard them and offer personalised micro-financing services.
Virtual banks are here
Amid this backdrop, incumbent financial institutions need to fundamentally redesign the customer experience around the lifestyles of mobile-first consumers. They also need to rethink their customer acquisition strategy and assess how they can make banking smarter, speedier and more seamless. By doing so, they will be at every touchpoint of their customers’ daily lives, resulting in customer stickiness
The urgency to transform digitally is also driven by the rise of virtual banks who are quick to meet evolving consumption habits. Operating without physical branches, virtual banks enable 24/7 banking and move fast to acquire new customers no matter where they are. Unbanked customers will entirely leapfrog the old ways of heading down to a bank branch to start their banking journey.
And virtual banks are already here: the central bank in Singapore has already issued four virtual bank licences, Malaysia plans to issue up to five licences by Q1 2022 while Indonesia and the Philippines are closely following suit. Such licences are key to establish customer trust and ensure a progressive but stable regulatory framework, such as by ensuring strict capital requirements and risk management/ detection safeguards.
Artificial intelligence will power the future of banking
At ADVANCE.AI, we believe artificial intelligence (AI) will define the future of bank-customer relationships. On the payments front, many banks across the region have already started using biometric authentication such as facial/fingerprint recognition to facilitate online money transfers. AI will power more frictionless options to come, such as invisible and voice-enabled payments.
AI-powered eKYC and anti-fraud technology will also enable customers to open a bank account via a smartphone in a matter of minutes, anytime, anywhere. Customers simply have to take a selfie or short video of themselves and facial recognition technology will verify their identities for a seamless onboarding journey.
In addition, optical character recognition (OCR) technology will automate document identity verification of identity cards, driving licences, tax or bank statements to facilitate customer onboarding. Finally, AI will enable banks to determine credit scoring beyond traditional data – tapping on alternative data pools such as a customer’s smartphone type, data package and e-commerce payment history to determine creditworthiness and drive financial inclusion among both customers and businesses.
AI will also combat and prevent rising online fraud, lowering reputational and financial risk for financial institutions. It will also automate many repetitive, manual processes, increasing cost and resource efficiency. Banks need to know that AI is no longer an emerging technology but an essential one critical to staying relevant in this age of digital transformation.
They will have to urgently assess how AI can unlock new opportunities in Southeast Asia, especially when nimbler virtual banks and fintechs are snapping at their heels. This is the key challenge they face: How do I capture the hearts and minds of digital consumers in the region, and who can do it better?