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Accelerate the digital banking evolution and move ahead of the curve

By Brendan Carney

The roadmap to success for many organizations has been defined by digital transformation. However, since the Covid-19 crisis started, organizations across many industries had to accelerate and redefine their plans to keep pace with the dramatic changes in the business landscape.

In a recent KPMG report, a global survey of 780 leaders across 12 sectors showed that 67% of leaders had accelerated their digital transformation strategy due to Covid-19, and 63% had increased their digital transformation budget. 

The pandemic not only converted many non-digital natives to digital users, it also spurred existing digital users to deepen their engagement with e-commerce, mobile banking, and super apps or “lifestyle platforms”. 

The strategic imperative for banks now is to evolve faster than ever digitally while generating a deeper understanding of how customers bank today. In banking, the digital revolution is not coming, it is already here. At Citibank Singapore each day, for every customer who visits one of our physical locations, we see 250 customers visit our mobile app. And less than 1% of our financial transactions take place in branches today. The dominant channel for customer interaction today is mobile banking, period. 

Leveraging data to hyper-personalize the mobile banking experience for our customers, offering services and solutions in an intuitive, contextual, and secure manner, is a key ongoing challenge for all banks. Understanding how customer behaviour will continue to evolve, and how to create exceptional and relevant banking experiences for the next stage of digital evolution, is the challenge that we are still coming to grips with. 

Future of banking
So, what is the future of banking? One proposition is that embedded finance is the future. McKinsey defines it as “banking-like services offered by non-banks”. Simply put, embedded finance is the increasing trend where non-banks, say telcos or e-commerce companies, provide financial services (payments, lending and insurance) to their customers through apps with which they already actively engage. 

Fintechs and big techs through their superapps are creating “sticky” platforms that hold customers’ time and attention and have the power to integrate products that benefit its community as well as its core business. The big question here is that of trust: it’s one thing to fund a small amount of money to a digital wallet for convenience, but it’s quite another to hand over your life savings to an unproven digital player with no track record. But certainly embedded finance will continue to play an increasing role in banking customers’ lives, and banks will need to adapt. 

Pillars and enablers 
One option banks have is developing Banking-as-a-Service (BaaS) business lines. This means either white labelling or co-branding financial products that can be bundled for nonbanks to embed and distribute in their apps. 

In response to embedded finance, some banks may choose to continue leveraging on fintechs that have reached a ubiquitous status in the lives of consumers to offer more financial products and services. The potential value that embedded finance could bring to consumers looks promising. 

To stay ahead of the curve, financial institutions must look deeper into the behaviour of the new digital customer, and adapt quickly to cater to their needs. According to McKinsey, highly personalized customer experiences drive up both customer loyalty and the top line. In their May 2021 report on “Building an AI Bank of the Future”, it showed that Artificial Intelligence (AI) and analytics could provide up to $1 trillion dollars in added value a year for banks.

Through data analysis/analytics and AI technologies, banks get a deeper understanding of the customer by uncovering customer interests, needs as well as their pain-points on top of transactional or trading analytics. These insights will help the bank improve its product offerings, sales/marketing initiatives, client acquisition and retention strategies, customer engagement and overall decision-making processes. Furthermore, AI can help banks meet increasing customer expectations through intelligent servicing and propositions which can be embedded into their partners’ ecosystems.

Customer behaviour has consistently shown us that integration into ecosystems or platforms continues to be one of the enablers to riding the next digital wave. Increasingly, business models defined by silos and those enhanced by network effects –the exponential benefits from new users or members in a platform model - will separate losers from winners. 

The pervasive use of Application Programming Interfaces or APIs, which allows various applications to communicate with each other, is another enabler of change. Banks with developer portals, tap on the greater developer community to consume their APIs and improve on products and services. But the ecosystem play doesn’t end there. A robust API strategy coupled with open microservices architecture will help banks evolve into more agile organizations that are able to respond to customers’ pain points with speed and simplicity. 

In line with this, delivering best-in-class products and services through partnership ecosystems and a mobile-first strategy became an integral part of Citibank Singapore’s digital transformation effort. Many years ago, the bank pioneered card partnerships with SMRT, Lazada and M1, and today, we continue to curate meaningful experiences for customers particularly in the payments, lending and investments space. With the Citi Mobile® App, we ensure that offers are tailored to the individual’s needs based on their product holdings and profiles; providing customized information on investments, AUM top up, insurance, cards or payments by instalment. Currently, about 75% of our customers engage with us on the mobile app and our overall digital net promoter score increased by close to 10% compared to the previous year. 

Staying ahead of the curve 
For banks to win in a new world that is being shaped by consumers who want financial services to be simpler, smarter, and more personal, they need to operate at the speed of their customers’ increasingly digital lives. 

Finding the right balance between different growth enablers such as hyper personalized experiences guided by contextual data analysis, a client-focused digital strategy, embedded finance, and partnerships that add value to existing ecosystems will help banks maintain their competitive edge. It will play a big part in any transformation story and allow banks to scale exponentially to serve a new generation of customers. 

By Brendan Carney, CEO of Citibank Singapore and Global Consumer Banking ASEAN Cluster Head.

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