RETAIL BANKING | Staff Reporter, Singapore

Singapore banks urged to make physical branches as convenient as their digital offerings

Ensuring customer loyalty and improving cybersecurity are also top priorities.

Digital is here; keep up or close shop. That was the overarching theme across the Singapore leg of the 2017 Retail Banking Forum. Held at The Pan Pacific Singapore, the forum highlighted the challenges faced by traditional banks in the face of inevitable digialisation, as well as best practices to follow as Singaporean financial institutions transition their services into cyberspace.

The adoption of digital, non-bank services such as fintech isn’t only appealing to an ever mobile and connected population. It’s also particularly disruptive for financial institutions, especially for a country that is highly banked such as Singapore. Varun Mittal, ASEAN fintech leader from Ernst & Young Solutions LLP, explained the situation as “...both an opportunity and a threat. It’s an opportunity in that new services can be provided; a threat because it’s an attractive pie for a lot of the fintech to come and get their share.”

How should banks start fighting back?
Mittal suggests that financial institutions should market themselves as the be all and end all of a customer’s financial needs. “The new world model is ‘I’m everything to you for your money. I have all the financial service needs in your life’,” said Mittal. Services such as mobile payments, remittances, and fundraising are just some of the possible areas where banks can extend their offerings.

However, adding services is just one part of the equation. The digital transformation and the automation of traditional financial products require integrating best-in-class technologies. Clients are demanding more convenient and efficient solutions, and a solid digital backbone is required to deliver their needs. “The six main areas we see that are part of this revolution include robotic process automation, robo advisors, artificial intelligence, chatbots, application programming interfaces, and blockchains,” Mittal enumerated.

Rajiv Madane, director of products and strategy at Fiserv, also emphasised the customer’s need for seamless banking interactions in the digital space. “The easier you make it for the customer, the more technology you have to put behind the scenes as to make it very user-friendly.”

Even though tech-savvy services should be developed, Madane also pointed out the need to make branch transactions equally convenient. “There are still lots of customers who visit the branch. We want to make that journey easy as well.” It’s this “digical”—portmanteau of digital and physical—model that he believes will be the norm in Singapore. With the coexistence of two worlds, banks can make sure that they have all bases covered, with segments serving traditional clients, mobile millennial, and everyone in between.

Mittal shares the same sentiment, saying that due to the different nature of customers and customer requirements, all the digical avenues have to be covered lest you lose a client. “It has to be case by case basis,” he said. He further explained that the needs of your regular and top clients are different, and the human factor is something that can’t be replaced by ones and zeroes. “If someone has lost their card or someone has suffered fraud and they are losing money, you cannot have a robot talking to you. You need more empathy there,” Mittal added.

Another growth driver
Customer loyalty is also called into question given how easy it is to switch service providers in the digital space. “Customer loyalty is one of the fundamental drivers of profitable growth,” said Avishek Nandy, principal at Bain and Company. “The complexity that has been created by digital is changing the rules of the game. Banks must take a considered approach to branch and channel optimisation.”

Ideally, banks would want most, if not all, of their clients to have a net promoter score (NPS) of at least nine as they are most likely to patronise a business. Not only are they unlikely to take their money elsewhere, they’re also key drivers of brand, customer service, and customer experience promotion. It’s particularly important to create a loyalty-producing service ecosystem as Nandy explained that “...one in three retail customers are likely to switch. And if we don’t address the hidden defects and issues, it’s going to be a challenge for banks.”

Like Madane and Mittal, Nandy reiterated the need for banks to foster their digital and physical presence. “If you just look at customers who are interacting primarily through digital only versus those interacting across different channels, people in the latter group tend to have higher NPS. It’s not just digital that can drive customer advocacy. You need to think how you are offering the digital and physical together because that will make the difference.”

The digical strategy
Though the market in Singapore is seemingly dictating a blend of digital and physical services from financial institutions, neighbouring emerging markets are keen on leapfrogging the infrastructure divide straight into digital. Madane notes that in his talks with financial institutions in such countries, “They are trying to have as many app-based services for their customers—accounts, products, services—and not invest too much in opening new branches. They will have branches, yes, but they’re saying our priority is digital first.”

Like transitioning from physical to digital, those jumping straight into the latter will bear the burden of eKYC. After all, identity theft and phishing will further grow rampant in such an environment. Ultimately though, the task of laying the foundation for a fully digital and secure identification system falls on the government. Again, Singapore will be leading the way in this department. The Monetary Authority of Singapore is set to adopt an eKYC system where customer information such as data and biometrics are stored on a centralised, government-sponsored server. All banks have to do then is to cross-check customer credentials with the aforementioned server to either automatically verify or manually check the customer’s identity.

Through the clamour of the digital race, banks should keep in mind that all these shouldn’t be done in careless haste. “In that environment you’ve got a lot of risk and exposure related to man in the middle hacks, compromised digital channels, and breaches,” reminded Bradley Prentice, APAC director of business development, payments, and banking of Irdeto. He warned that even though problems may not stem directly from banks, vulnerabilities in their partner organisations will likewise open them up to threats.

Another key factor that banks should focus on is the alignments, or rather the misalignments between their cybersecurity plans and their actual cybersecurity implementation. David Allott, APAC cyberdefense director of McAfee, revealed that “...there’s a big disconnect between people from the top of the organisation who believe that they are fully deploying a cybersecurity strategy and the folks at the frontline who are actually deploying it.”

Thankfully, banks are seeing the holes in their shields and are set to invest over 19 million dollars in security—a figure that has been steadily increasing throughout the years. Prentice is optimistic that as long as banks have a robust digital road map, they can better direct their funds towards addressing weaknesses.
But threats from the outside are one thing; internal deficits are equally, if not more, devastating. San Zaw, head of solution consulting in Asia of TIBCO Software, said, “I think the biggest challenge in the area of security investment is internal threats because they understand all the nuanced rules and guidelines.”

Joseph Gan, co-founder and COO of V-Key, meanwhile noted that internal problems can be addressed with simple checks and balances. He said, “There’s an increasing awareness, especially in Singapore.” He continues that “second factor identification for internal-product access management is just one of the few ways to limit fraud from within the organization.”

“The attacks are getting more sophisticated. As banks, we need to make sure that we stay one step ahead of the game,” concluded Stanley Phua, APAC regional sales director for CyberInt. “One of the great things moving ahead is digitisation and along with digitisation, security should be part of the agenda.

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