Hello fintechs, goodbye digital passive banks

Boy looking at a handheld device

By Ricky Kapur, General Manager, Enterprise and Partner Group, Microsoft Asia Pacific

Ricky KapurBanks today run the risk of being obsolete. With fintech companies like GrabPay disrupting conventional banking models, traditional banks that only digitalize legacy infrastructure are not innovative. They are digital passive.

Remember how Uber disrupted the transportation industry when they first launched? Their customers loved it. The taxi and automotive dealers, not so much because they relied on conventional business models and they faced significant economic losses over a relatively short period of time. They were digitally passive.

Similarly, traditional banks are now competing with non-traditional players and fintech companies that offer mobile payment services to customers – and competitors like these aren’t even in the banking industry! The fintech companies have an edge wherein they focus on insights driven business operations and customer engagements. And worryingly for digitally passive banks, 87% of FinTech firms in Southeast Asia are planning to expand their footprint beyond their current markets, according to the ASEAN FinTech Census 2018 study by EY.

Research simulating the impact of artificial intelligence on the world economy by the McKinsey Global Institute found  early adopters gain greater benefits over the years at the expense of companies with limited to no adoption. It was only a while ago that taxi companies were doing fine, but now struggle to close the digital gap while fintech companies prosper for their digital readiness.

In our recent study with IDC on the economic impact of digital transformation, FSI companies that have adopted digital transformation are already seeing 13% to 20% improvements in profit margins, improved customer advocacy, and faster customer acquisition rates. Companies also expect an additional 70% improvement in customer acquisition by 2020.

Financial organizations that invest in A-B-C – or algorithms, big data analytics and cloud computing – as core technologies for digital transformation, understand how these can enable fast, reliable and trusted transactions.

In Myanmar, AYA Bank partnered with Microsoft and moved to the cloud to improve productivity and customer service in the thousands of transactions it deals with daily for its 1.4 million customers nationwide.

In the Philippines, UnionBank partnered with Microsoft to run blockchain trials on Azure to modernize its legacy infrastructure, and enable secure transactions. Using blockchain provides better customer service by improving efficiencies for the settlement process and establishes authenticity and tamper-proofs record systems to counter cybersecurity threats.

Algorithms, big data and the cloud are enabling banks to turn massive amounts of data into insights and knowledge to improve existing services, and to create new services. To unlock this potential, banks need to develop a comprehensive data management strategy with a technology partner that is focused on data and trust.

With the right tools and platforms, banks will be digital ready by having a secure and productive digital workplace, optimized operations and risk management in compliance with country regulations, and be able to transform products with real-time predictive digital processes – turning change into opportunity.

So, are you ready to stop being digitally passive?


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