How is digitisation innovating banks’ front-end and back-end operations across APAC?

Digitisation is driving the future of banking across the Asia-Pacific (APAC) region. This growing trend provides tremendous potential for banks to improve their efficiency, optimise processes, and increase customer convenience with innovative solutions. This is carried out by pioneering a variety of products as well as cultivating a holistic end-to-end customer experience.

Both front-end and back-end banking are in the midst of being restructured to adapt to Asia’s digital future. Banks also plan to take a holistic approach to become digital, embrace agile innovation, and even collaborate with market leaders. This is in the hopes to emerge as a strong digital hub as a region and safeguard long-term growth in the financial sector.

We set out below key reasons why digitisation is the inevitable solution for banks to stay ahead of the competition:

What factors are pushing banks for digitisation?

  • The increasing need to enhance security

In Asia, many large banks still have security teams that perform a number of compliance and risk-management functions manually. According to EY’s report, few are able to respond in real time to threats – such that banks can only take reactive measures, rather than preventive. All this undermines the banks' reputations as regaining consumers’ trust in the bank following the damage of cyber-attacks is a costly and long term process.

  • Greater demand for data analytics

Big data is a growing phenomenon in Asia. With more digital tools available to collate data, the need for serious processing power is inevitable. Without the investment in data analytics, banks will not be able to leverage customer data and create greater value for their customers. What's needed is a unified command centre with a direct connection between the back and front-end of banks to ensure appropriate and timely service.

We take a look at how front-end and back-end transformation is currently taking place.

How can one experience digital transformation on the front-end?

  • Changing existing branch activity into digital channels

Brick and mortar banks have been the traditional customer engagement channels. However, with the rise of neobanks, there has been a clear shift in Asia towards digital channels for daily transactions. Traditional banks therefore need to shift from having a physical branch to interaction hubs that meet customer needs. This includes getting bespoke financial advice and improving sales of complex products such as investment packages. As such, we have seen an increasing number of digital touchpoints such as social media and interactive websites which connects the customer to the bank in real-time and 24/7. Banks eclectic mix of physical hubs and touchpoints also complement the process of providing the right information and consultation to customers.

  • Use of digital tools such as mobile phones to augment frontline servicing

Administrative forms are widely used on front-end, client-facing platforms. Most banks in Singapore for instance have adopted the use of iPad forms rather than paper forms, in addition to video conferences to access specialised information such as DBS. Such digital tools can enhance employee productivity by automating processes and also enhance the customer experience. DBS says tablet-based forms have helped them cut transaction times from 5 minutes down to 2 minutes, 30 seconds. That means the customer conducting the transaction is served more quickly, and the next customer in the queue spends less time waiting.

How can one experience digital transformation on the back-end?

  • Tailored services: Traditional banks work hard for their customers’ loyalty by offering a range of services that keeps them with the business. In comparison, fintech companies earn their customers’ trust through tailored customer service and referral-based client acquisition. Toptal reported that 90% of fintech companies have cited enhanced customer experience as their competitive advantage and this is an area that banks should also consider innovating.
  • Cheaper prices: With a leaner virtual operation, organisations can acquire more flexibility in cost-savings. This in turn allows fintech firms to attract customers with competitive pricing. Customer acquisition is an expensive process for banks. However, by embracing a digital approach to smoothen back-end processes, this could bring about long-term cost-savings with costs from information-intensive processes reduced.

 

How is back-end of banks embracing digital change?

It is relatively easier for banks to enhance their customer-facing, front-end operations with digital solutions. The tricky part of restructuring is in their back-office operations. Most banks’ legacy systems are complex and replacing them without impacting running operations is a challenging task. However, in spite of such challenges, we note below a few areas of operations that are still going ahead with digitalisation:

  • Back-office automation

Automation in the back-office encompasses automating processes such as digitising work flows, and automating or supporting decision-making. The use of automation and IT solutions aim to manage residual operations that must be carried out manually. An example is automating the software for resource planning as well.

  • Document management digitisation

Document management is crucial especially in a paper-heavy field like trade finance. As reported by BCG, 99% of all data interaction within trade finance is heavily reliant on paper. Back-office digitisation will simplify document storage, search and retrieval, and even enable banks to provide compliance-related information more easily to regulators. In doing so, banks can also gain the confidence of regulators through their commitment to transparency.

There is also a common misconception that investing in customer innovation will change the organisation. However, it is important to gain feedback from back-office teams to be able to establish successful organisational change.

What are the mind-set shifts that banks need to consider?

Banks have been investing in front-end services for a number of years to adopt a modern and digital operation. However, according to Dharmesh Mistry, Chief Digital Officer of Temenos – “without a strategy to realign the back-end with front-end operations, customers will soon notice shortcomings”. Shortcomings include miscommunication, accuracy of data, as well as increasing threats to privacy and security.

At Seamless Asia Conference 2019, Guilhem Vincens, Head of Change and Innovation at ABN AMRO Bank shared five mind-set shifts to enable organisations to turn into innovation powerhouses:

  • Cultivating the right environment for technology adoption
  • Identifying and managing risks that comes with technological innovation
  • Having a clear vision of essential problem solving from potential risks
  • Empathising, collaborating and experimenting with new projects to encourage innovation
  • Adopting and utilising new metrics to gauge successes – knowing what key performance indexes (KPIs) are important because not every business goal leads to increasing return of investments (ROI)

On the same note, Vincens also added that financial institutions need to move legacy systems to digital and cloud computing to keep up with technological changes. Core Banking System (CBS), which is the back-end processing of banking operations, will need to be responsive as banks continue to launch new products.

How digitalisation may impact you and your organisation?

Ultimately, digitalisation brings about innovative practices, smoothens processes and creates long term cost-savings. In essence, banks are driven towards a digitally-driven structure where they are learning to leverage on technological tools to meet market demands more efficiently.

With the increasing focus on digitalising banking operations across Asia – what strategic considerations do you see for yourself and businesses in Singapore?  If you would like to gain more insights on the payment sector in APAC, please fill out our contact form below to get in touch with us. Alternatively, please follow us on LinkedIn for more updates on the banking and finance industry.

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