Digital-First Financial Services: Turning The Tide On Disruption – Key Takeaways

AIBP Focus is a series of discussions held online which brings together a focus group of ASEAN stakeholders to discuss topics related to enterprise technology adoption in the region.

Opening the discussion, Irza Suprapto, CFA, Chief Executive Officer, Industry Platform, shared his views on the evolving financial services landscape. Just a decade ago, financial institutions made up 96% of the total market value of the Top 500 global banks, payments and fintech firms. Now, conventional banks account for a little over 70% of the total market value, with fintech firms like Ant Group and PayPal making up 11% and growing. Globally, none of the top 10 enterprises (by market capitalisation) are in the financial sector, whereas in Southeast Asia, 6 out of the 10 largest enterprises (by market capitalisation) are financial institutions.

In Southeast Asia incumbent banks and financial services firms are adopting major strategies such as banking the unbanked, shifting traditional banking to digital, banking/insurance-as-a-service, and super-app strategies.

With fintech and insurtech players muscling in, coupled with millennials’ lack of affinity to existing banking and insurance brands, what does it all mean to the traditional business model of financial institutions? How can incumbents fight back and stay a step ahead of the competition while staying in line with the increased regulatory oversight of regulatory watchdogs?

From AIBP’s 2021/22 ASEAN Enterprise Innovation Survey, 27% of respondents in the financial service industry indicated that digital transformation in their organisation is focused on new business opportunities, innovation, and product enhancements, while 21% indicated that efforts are focused on customer centricity and personalisation. (You may view more survey results in our 2021/22 ASEAN Enterprise Innovation Market Overview here)

In our AIBP Focus discussion on Digital-First Financial Services: Turning The Tide On Disruption, co-hosted with Oracle and Deloitte, panelists from Takaful Brunei, Tonik Bank, and Rizal Commercial Banking Corporation (RCBC) came together to discuss and share their perspectives on transforming beyond traditional business models and reviewing the ROI of technology investments.

Transforming Beyond Traditional Business Models: Collaborate and Compete

As the Senior Vice President and Segment Head for Corporate Cash Management at Rizal Commercial Banking Corporation (RCBC)’s Global Transaction Banking Group, Eric Buenaflor shared that in 2019, 72% of what his business unit processed for their corporate clients were payments by cheques. Subsequently, RCBC’s shift in business model, saw digital payments increased by more than 300% when compared to traditional manual cheque payments. By the end of 2021, payments by cheques only made up 20%. Effectively, they have successfully reduced costs and increased net profits for the bank for the same amount of deposits that his business unit processes. 

Cornelius Yee, Chief Financial Officer, Takaful Brunei, agreed with Eric on the business model shift and shared that their cheque issuance has decreased from a 70-30 split two years ago to a 95-5 split right now. Cheque issuance is now a rare occurrence for them, with the majority of their transactions taking place online. Consumers are also apprehensive about visiting their stores, which may explain the rise in online transactions, including the purchase of insurance online. Cornelius is also looking at the B2C insurance model, skipping the intermediaries – distributors/middlemen – who were pivotal in traditional insurance models.

Arivuvel Ramu, Group Chief Technology Officer, Tonik Bank, the Philippines’ first neobank to secure a digital bank licence from the Bangko Sentral ng Pilipinas (BSP), added that today’s youth are looking for digital solutions that revolve around quick onboarding, fast opening of bank accounts/issuing cards, and providing cash when they need it as an unsecured loan or buy now pay later (BNPL) via revolving credit line. To meet the needs of these segments, financial institutions must focus on personalised digital seamless experiences as well as new digital products such as BNPL and digital crypto currency products. However, instead of implementing a bigbang rollout, Ramu suggested that a quick go-to-market with minimum viable product (MVP) approach focusing on low hanging fruits should be considered to capture the market.

Reviewing ROI of Tech Investments: What Disruption Means to ASEAN Financial Institutions

Cornelius added that insurance companies thrive on data. For Takaful Brunei, being the largest locally incorporated takaful operator in the country, maintaining the edge over other insurers is key for them. Other considerations include how they can do so, and what are the types of technologies that can support their journey. 

Moving to the cloud is often referred to as a transformational journey, and many businesses migrate in stages in order to be strategic about demonstrating the value of this investment. However, as a result of recent global disruption, more businesses are turning to data for insights and clarity, hastening this transformation. And, according to Parthasarathy A V, Executive Director and Oracle Practice Leader, Deloitte Consulting Southeast Asia, the cloud is critical to their success because it reduces enterprises’ time to value far more than an on-premise setup. Partha agreed with Ramu and stated that enterprises can consider the MVP approach, and it is critical for enterprises to focus on what this transformation means for the business rather than trying to maintain the systems and hardwares.

Survival Kit for the Digital-First Future: Data Driven, Differentiation, Speed to Innovate

In response to a question from the audience about how to distinguish between good and bad data, Asif Saleem, Senior Director, Banking Innovation Advisor, JAPAC, Oracle, stated that there is no such thing as good and bad data. Understanding the intended outcome and having a clear goal on what the enterprise wants to achieve and what type of results are prioritised is critical in extracting value from the data.

Aligning people, processes and technologies are key in any digital transformation initiative. Rudi Winklhofer, Executive Director and FSI Technology Leader, Deloitte Consulting Southeast Asia, emphasised that in this new age of work, having the right people and establishing the right mindset is imperative.

When we look at long-term trends, the ageing population in today’s world means that insurance, like any other industry, is vulnerable to the perils of losing customers faster than gaining new ones. In fact, insurers face this issue more than other industries because there is a higher proportion of older customers driving pay-outs and not enough young customers purchasing insurance. Developing strong relationships with customers when they are in their twenties will help to build trust, especially if this is accompanied by excellent customer service. Building trust with young customers is critical for cross-selling and upselling other products, as well as fostering advocacy, which is something that Cornelius and Takaful Brunei are striving for.

Concluding the insightful discussion earlier, all of the featured panelists agree that banking and insurance will not revert to the way it was. The continued rise of digital banks/ insurers and fintech players, will keep incumbents under pressure to deliver innovative solutions to the market.

A video replay can be found here.

With that, we look forward to continuing our discussions on how technology can drive innovation for the financial services and other sectors. 

Feel free to reach out to us ([email protected]) if there are topics in digitalisation you would like to hear more of!


21 April 2022