Anyone in banking knows how crucial digitization will be for the finance industry, but specific numbers have been closely-guarded. A major Asia bank has disclosed the financial impact of digitization to finews.asia.
Swiss banking has been a reluctant adopter to digitization: unlike many Nordic or Asia banks, the digital transformation of business processes and models is still at an early stage for most firms in Switzerland.
In the Asian market, Singapore banks DBS and the Overseas-China Banking Corporation, or OCBC, have spearheaded the industry's digital shift. finews.asia met Aditya Gupta (pictured above), head of E-Business at OCBC, at the bank's quarterly results in Singapore recently.
Sustainable Fillip
Gupta had just emerged from a meeting with OCBC Chief Executive Samuel Tsien (pictured below), in which he detailed the fruits of digitization for investors. The digital chief was visibly pleased: digitizing services is providing a sustainable boost to OCBC's business, was the message in a nutshell.
«Profitability of a digital client is 2.1 times higher than of non-digital customers», Gupta tells finews.asia as a conversation-starter.
This is a metric that would make any financial journalist take note: it supports the mantra of countless digital prophets who have predicted that increasing digitization will lower costs while revenue per client will climb, as online clients tend to be more active clients.
Digital Sales Channels Hot
Gupta has a litany of further numbers to recite: retail banking's cost-income ration is 9 percentage points lower than 5 years ago. Digital revenue has increased 7 times in the same period. Nine of ten general insurance products are sold digitally.
The former Standard Chartered executive has driven OCBC's digital shift since joining the Singapore-based bank three years ago. In 2015, OCBC was the first bank in Singapore to introduce biometric identification for mobile users, and the first last year to accept Blockchain technology for money transfers.
Artificial Intelligence Meets Mortgages
Mobile clients can enable payments and transfers through voice-recognition technology on their smartphone. In mortgage lending, an artificial intelligence chatbot recently began advising OCBC clients.
Most recently, the bank with business in China, Singapore, Malaysia and Indonesia started a robo-advisor pilot project with its wealth management clients.
CEO Tsien has spent roughly $700 million in the last four years in new information technology systems, digitizing offerings and apps – and not least, in meeting rising regulatory requirements.
No Ferraris When Client Prefers Toyota
Nevertheless the bank has learned not to flood its clients with new apps and offerings, instead following the maxim that digital means being nimble and distinguishing yourself from the competition. In addition, clients want digital services that connect seamlessly through all distribution channels, the Singaporean bank has learned.
Gupta bases his views on research and data from pilot projects, but the finding is nearly always: digital offerings should be frictionless, simple, personal and proactive.
He summarizes this philosophy as, «do not offer a Ferrari when the customer wants a Toyota.»
Democratizing Wealth Management
The Indian native follows this approach in retail banking as well: clients have been able to invest through an app since last year, and OCBC maintains an open product architecture with thousands of outside products in its offering. The «digital» client only sees several dozen, relatively standard funds: the OneWealth app actually is merely the Toyota, not a luxury sports car with all the trimmings.
The idea is that if a client is overwhelmed by a complicated product offering, he or she is likely to check out. OCBC pursues the goal of democratizing wealth management, and reaching new client segments through digital channels, Gupta says.
Target Client Respond to «Digital»
This also seems to be taking hold, as the numbers disclosed by OCBC reveal: the bank is already selling half of unit trusts through digital channels, including its app. One-third of OCBC's take-up is from clients who haven't drawn any wealth management services before.
With three-quarters of these clients from the sought-after millennial, young families and affluent client segments, OCBC is a veritable case study for digitization's power in banking.
