Commentary

The COVID-19 pandemic forced Singapore banks to change tack in order to meet social distancing and work from home requirements. However, it didn’t stop financial crime. Since the pandemic, there has been a significant increase in COVID-related fraud, with criminals engaging in telephone fraud, phishing scams, and even developing fake websites for personal protective equipment (PPE) – only recently a Singapore man was arrested for suspected involvement in money-laundering offences linked to a Covid-19-related scam.

In the transitional period from the unprecedented emergency to the new normal, the Japanese and APAC financial institutions have stepped up their countermeasures.

In the last decade, Asia’s banking sector has not only led the world in global banking profit pools, assets and market capitalism but also in building new business models centred on digital innovations. Whilst the future of Asia banking is bright, most traditional banks, especially the mid and small-tier banks, are poorly equipped to seize the opportunities to keep pace and transform for the digital age. On the other hand, the ongoing health crisis is making customers go online for their banking needs while they #stayhomestaysafe, stretching the capabilities of digital services beyond its limits. While digital banking would have been a convenient option in the past, it has now become a vital lifeline. As customers’ demand for digital access and control to their finances intensifies, it has brought into question the industry readiness towards digital banking.

The internet economy for ASEAN is expected to grow to US$300 billion in 2025 with e-Commerce becoming its biggest sector as published in the Google and Temasek’s 2019 e-Conomy report. Consumers have adopted digital for day-to-day lifestyle and financial needs and we see that in Singapore, over 88% of Singaporeans are online and 57% have either made a purchase or paid a bill through online platforms*, according to We Are Social’s Digital 2020 Singapore report. This trend is set to accelerate especially with 5G technology implementation and consumers having greater access to a variety of digital products and services.

Corporate banking is at a critical juncture of accelerated change

The COVID crisis has resulted in an unprecedented disruption to the economic activity, and will lead to major changes in operations of most industries, including banks. Given below are some views on how banks will need to adjust to the new reality once situation stabilises and economic activity starts resuming normal operations. While this note has been made keeping India in mind, most conclusions will be valid for other emerging economies as well.

Open banking is emerging as a key trend and the next ‘wave’ of digital transformation in global financial markets. At its core, it is focused on data sharing, which is enabled through application programming interfaces (APIs) which make it possible for two different systems to ‘share’ information with each other. Simply put, this means that consumers will have greater control over their financial data and who to share it with. An example of this in practice would be a mobile banking application that enables users to see all of their financial information and spending habits (across different bank accounts) on one interface.

Instant payments are being implemented around the world, promoted by governments to support financial inclusion and the digitisation of economies.

Delivering a step-change in value.

New technologies are accelerating the modernization of investment strategies and decision-making in capital markets.

Whilst the Chinese market is big enough to allow for two major e-payments players, Indonesia needs to unify efforts from otherwise competing tech companies.

Approximately 2.5 billion people globally lack access to financial services and are forced to rely on inconvenient and often risky means to manage their money. These people are classified as ‘unbanked’. There is a high concentration of unbanked citizens in developing economies across South East Asia, Africa and Latin America. Let’s focus on Indonesia.

Bank management teams have faced many challenges in the decade post the global financial crisis. After stabilising balance sheets in its immediate aftermath, there was a need to build capital as the Bank of International Settlements’ (BIS) regime was tightened. More recently banks have had to conceptualise the threats and opportunities posed by fintechs, and more latterly by ‘big tech’ companies and invest to meet the challenge. In addition, within South East Asia, banks have had to deal with the GDP slowdown post 2013, and the impact this has had on loan growth and credit quality.

Economic inclusion can seem like a faraway goal for many, if not most, countries around the world. Achieving it would mean being able to lift people out of poverty, create equality between genders and socio-economic backgrounds, and build socially inclusive futures for our children.

Buoyed by trends such as ongoing digitalisation, the use of big data, and the rise in seamless mobile internet connectivity, Southeast Asia’s financial services sector is transforming. With 360 million internet users across the region, accounting for approximately two-thirds of its population, 90 percent access the internet via their mobile phones. The increased emphasis on the digital experience has largely catalysed change across the global financial sector, giving rise to the digital banking phenomenon. As one of the region’s leading financial hubs, Singapore has a key role to play in this new regime.

Collaboration holds the key to unlock the pathways for traditional bank incumbents and technology entrants in the disrupted world of financial services, where disruptive companies can offer compelling alternatives to the huge customer base of unbanked and underserved across Southeast Asia.