Karachi:“Digital banks need to look beyond the digital customer experience to utilize data in a unified way, focusing on addressing risk and regulation barriers to growth.” This was identified in a research report by Oracle titled “Beyond Digital – Data-Driven Strategies to Grow, Scale and Profit”
The report uncovers important areas for digital banks to consider as they compete to gain market share. The report examines the evolving landscape for both digital and traditional banks in three key Asian markets: Hong Kong, Singapore and Malaysia.
The modern disruption of traditional banking is due to the growth of tech giants entering the financial services space, the emergence of alternative banks and new open banking regulations. Also key is the issuance of virtual banking licenses, where in APAC, Singapore, Hong Kong and Malaysia are leading the charge.
“Traditional banks are facing increasing competition in service innovation, which reinforces the need to redesign conventional banking models. Virtual banks may be nimble compared to the incumbents. Still, they face three immediate challenges: they need to demonstrate to regulators their ability to comply, they need to monetize data, and they need to turn compliance into a competitive advantage,” said Venky Srinivasan, group vice president, JAPAC and Middle East, Oracle Financial Services.
To ensure long-term profitability, banks should use data-driven tools to reshape their business models and achieve hyper-personalization. The move to a unified data foundation to manage, monetize, and mobilize data, along with the use of open APIs, can boost customer value by increasing choice.
Progressive regulation like Open Banking and issuance of virtual banking licenses will be a key driver for a new wave of digital-only banks and building trust through safe, secure practices for regulatory compliance will be essential.
Digital banking propositions globally have done a great job of the on-boarding process. They now must prove themselves across the customer lifecycle with complex products such as SME banking, mortgages, investments and finance management – where satisfaction drops significantly.
The report also details how banks can transform into data-driven organizations that meet regulatory and customer demands and considers their implications for banking best practices.
The report spotlights several areas where banks can focus on delivering a better experience for customers across the financial lifecycle, including the underserved segment of SMEs, the use of data to turn compliance into a competitive advantage, and fighting financial crime.
With traditional banking, individual banks can open a digital account on the same day. But for SMEs, despite the demand for rapid funding, they face regulatory hurdles and delays unlike their individual counterparts. According to the report, the average ‘Time to Decision’ for SME onboarding within traditional banks ranges anywhere between five days to one month. ‘Time to Cash’ can take between 25-55 days. Banks must focus on how to reduce turn-around times and deliver a seamless experience. By harnessing valuable data insights, using analytics and APIs, banks can quicken and automate processes to improve SME lending experiences.
With data at their fingertips both digital and traditional banks need to leverage data insights using agile technology stacks to optimize capital allocation and mitigate risks. This applies to virtual banks with a growth trajectory to ensure that risk and profitability are aligned strategically. Data-driven tools enable the mastery of data, which is needed across all levels and departments to get a real-time picture of the bank’s business.