Digital banking expert Xuna Shao shares her observations on the impact the COVID-19 outbreak has had on the banking industry, and how digital bank applicants can best position themselves for success.
Following Hong Kong's lead, Singapore is set to disrupt its banking system with the introduction of five digital banking licenses later this year. At the same time, the Covid-19 situation is accelerating the speed of digital adoption in what has traditionally been a face-to-face business.
The events of the past few months have only reaffirmed the importance of digitalization and operational flexibility, Xuna Shao, manager at financial services consultancy Synpulse, told finews.asia in an interview.
Shao previously spent several years in Hong Kong at KPMG Advisory, where she had the opportunity to work with several virtual banks there, and supported them in terms of license application and associated matters. She later moved to work in house with Ant Financial, one of the eight virtual bank applicants in Hong Kong. She now helps digital bank license applicants in Singapore prepare for the upcoming regime.
Xuna Shao, how is the COVID-19 outbreak affecting the banking industry?
We’ve definitely observed the short-term impact of this pandemic is a change in customer servicing preferences, which will impact the traditional banking business negatively. It takes 21 days to form a habit, and our confinement at home is already reaching two months. For banks, whether traditional or digital, to stay in the game, it’s very important for them to accelerate their technology upgrades and digital offerings, especially focusing on front-end or client-facing channels.
«It’s very important for banks to accelerate their technology upgrades and digital offerings»
The impact the outbreak has had on companies that have already shored up their digital capabilities is a lot more minimal compared to the ones who didn’t prepare for such emergency situations. For many years, traditional players have been ramping up their digital transformation. They knew that competition was coming and have been preparing accordingly. For example, DBS launched its digibank in 2016, and UOB and OCBC have digitalized their applications process and consumer banking products. They're in a good position as they already have a strong customer base and their success going forward depends on how they will capitalize on this.
How do you see the COVID-19 outbreak affecting digital bank applicants?
The Monetary Authority of Singapore (MAS) has already reacted to the outbreak by postponing its decision to the second half of the year, so the digital bank applicants can focus their resources and attention towards managing the immediate impact of the pandemic on their business.
I think the delay with the announcement is certainly good news as it buys time for the applicants to really think through their strategies and be better prepared for when opportunity knocks. Given the potential lasting economic impact this pandemic, these applicants will really need to take into consideration in their business strategy the appetite of their customers for different banking products like loans, credit cards, etc. and ramp up the necessary infrastructure.
What are the core areas to focus on when building a digital bank?
There are three critical factors for success: the first is understanding your target segment. Once the bank knows this, it can then tailor its offerings around this demographic. For example, ZongAn bank in Hong Kong has focused on youth and millennials. The look and feel of its mobile app, and the color scheme it has adopted, and gamification it has introduced are all tailored specifically to this customer segment.
«If a bank is able to offer a truly configurable core banking system, it will be able to create a differentiated offering»
Differentiating your offering is also important to do right from the start. If a bank is able to offer a truly configurable core banking system, it will be able to create a differentiated offering tailored to individual customers. Using this approach, banks can empower customers to create their own products around what is best for them.
Finally, client onboarding is often the first touchpoint a bank has with a customer, and it sets the tone for the entire banking relationship. If you are able to develop a seamless digital experience that resolves a customer’s needs the first time around without needing them to resort to a phone call or visit a branch, that will help to retain and grow the customer relationship.
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