Banding Together with Banks - Banking Challenges and Possibilities Post Pandemic Building a Fully Connected, Intelligent World - Huawei Enterprise
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Banding Together
with Banks
Banking Challenges and
Possibilities Post Pandemic
Building a Fully Connected, Intelligent World
| Editorial |
New Banking Reform amid
COVID-19 Pandemic
Jason Cao / President of Financial Services Business, Huawei Enterprise BG
T
he COVID-19 pandemic is a global were issued to 896 merchants. performing assets. In addition, the pandemic
black swan which has severely brings higher unemployment rates and
impacted the global economy. The The banking industry amid the pandemic more loan needs. Banks should improve risk
International Monetary Fund (IMF) predicts is undergoing a reform. Bye Bye Banks? control and shift from post-event models to
that sub-Saharan Africa's economic growth Depicts how Internet impacts banks. While in-event or even pre-event models.
rate will be 1.6% in 2020, reaching a record the Internet is flattening the world, it also
low. Countries and regions have taken strict provides multiple channels to meet people's Enhance online marketing capabilities. Large
prevention and mitigation measures to curb needs under "financial repression". Banks amounts of data collected by commercial
the spread of the virus, bringing about a need to quickly respond to future market banks will play a greater role through AI.
sudden global economic downturn. Coupled changes by taking the following measures: Based on the data, banks build 360-degree
with tightened global financial conditions, customer profiles and conduct precision
this has significantly affected the Southern The pandemic will accelerate the digital marketing according to user behavior and
African economy. transformation of the banking industry. preferences. This helps the banking industry
When traditional offline services are affected, attract and retain customers and deliver
Facing these severe impacts, banks will FinTech becomes prominent. The pandemic superior customer experience.
quickly shift from offline operations modes prevention and control efforts help move
such as branches and merchants to online offline services to online platforms. Financial Cut digital transformation costs. Economic
modes including mobile banking. In this new institutions have increased financial IT recovery takes time. Banks need to control
normal, emerging technologies are used to investment, strengthened online banking costs and expenses and improve profitability
upgrade business scenarios such as account service capabilities, and accelerated R&D and while accelerating digital transformation.
opening, approval, credit, and risk control. innovation to drive digital transformation. They are in urgent need of transforming
Meanwhile, at the macroeconomic level, Banks with active investment in digitalization their technical architecture into a distributed,
the banking industry is also undergoing have been highly competitive during the open, and automated one to promote
challenges from sharply declined economic pandemic and seized the opportunities of business model and service innovation.
activities, decreased deposits and loans, as this digital, mobile era.
well as higher unemployment rates and In the crisis, staying unchanged is more
non-performing loan ratios. Accelerate the functional transformation dangerous. Active action does not necessarily
of physical branches. Off-site transactions guarantee success, but negative response will
China has experienced a huge impact on its and services are gaining popularity and definitely bring chaos. The ongoing pandemic
GDP due to the pandemic. In Q1, China's promoting the integration of online and impacts not only economy but also living
GDP dropped by 6.8%. The impact spread offline channels. Banks should develop habits. We believe that digitalization will be
to every sector. Hotel & catering and retail smart branches through off-site technical rapidly and widely used in this process. Banks
sectors declined by 35.3% and 17.8% means such as facial recognition, to comply should proactively think and prepare for the
respectively. The financial services sector, with regulations in high-risk processing subsequent changes in life and customers,
however, achieved a 6% increase. Take China services. More importantly, digital solutions and make services more agile to address
Merchants Bank (CMB) as an example. will be widely applied and well managed in uncertainties of the future.
Despite its affected customer acquisition, services, laying a solid foundation for digital
deposit and loan scale, net interest income, operations and regulations.
intermediate business income, and asset
quality. CMB's online wealth management Strengthen risk control. Environment changes
business, financial market business, and risk put risk control under immense pressure.
avoidance services expanded, and its net The pandemic has affected sectors and
wealth management value remained stable. some enterprises are facing pressure or even
Within three weeks, CNY23.7 billion loans sustainability risks, which may raise non-
Banding Together
with Banks
Banking Challenges and
Possibilities Post Pandemic
Editorial
New Banking Reform amid COVID-19 Pandemic
Industry Trends P01
P01/ Digital Transformation Lessons of Financial Institutions under COVID-19
Pandemic
P05/ Chinese Banks' Response and Lessons under the COVID-19 Pandemic
P09/ RESPONDING TO Covid-19: What to Do Now and Next For Customer
Service and Advice Provision
P13/ How Mobile will Lead Banks out of CoVID-19
Industry News P17
P17/ The Banking Industry's Response Under COVID-19 Pandemic
P21/ The rise of Fin Techs
P23/ Maintaining Banking System Safety amid the COVID-19 Crisis
Solutions and Cases P25
P25/ Inclusive Financial Services Empowered by New Digital Technologies
P27/ New Digital CORE of Banks
P31/ 5G Smart Bank Branch Solution Architecture
P35/ Huawei Converged Data Lake Solution Accelerates Data-based Service Innovation in the
Banking Industry
P41/ Huawei All-Flash Storage Meets Piraeus Bank's Ever-Growing Demand for New IT Services
P45/ Huawei Helped Ghana's GCB Achieve Successful Implementation G-Money (Mobile Money)
Strategy
Industry Trends
Digital Transformation Lessons of Financial Institutions under COVID-19 Pandemic
Digital Transformation Lessons
of Financial Institutions under
COVID-19 Pandemic
Wu Shengfei / Director of Market Insight Department, Huawei Enterprise BG
Lin Zhiyao / Expert of Market Insight Department, Huawei Enterprise BG
01 Banding Together with Banks 2020/05
Banking Challenges and Possibilities Post Pandemic
I
n 2020, the COVID-19 pandemic quickly swept across services, offered remote consultation services with medical
the globe. Governments have taken a variety of institutions, and provided livelihood services by working
measures to deal with the new virus that endangers with government departments. The rapid rollout of these
public health and causes deaths: declaring national products and services has enabled banks to better adapt
emergencies, canceling large-scale public activities, and to new environments and scenarios, greatly reducing the
working from home as well as social distancing, home adverse impact of the pandemic.
quarantine, and the halt of international flights. The
pandemic has significantly impacted the healthcare industry The traditional business architecture of financial institutions
and caused sudden shutdowns in transportation, catering, cannot adapt to the changing business environment or
tourism, and other industries. Over time, the pandemic has launch targeted businesses and products. To keep up,
lasting and far-reaching impacts on all sectors and global financial institutions need to design a flexible and open
economic development. business architecture, especially in terms of business
processes. For one thing, business processes should be
This black swan has also profoundly affected the financial fully broken down and refined to basic business actions
services industry. Governments cut benchmark interest to develop micro-service based business capabilities. For
rates, which in turn reduced banks' interest income. another, business architecture design should consider
Industry stopped production and overdue payments and new scenarios in the future. For unknown scenarios, the
defaults occurred, raising non-performing loan ratios and architecture can support quick combination and flexible
lowering asset quality. Quarantine measures made financial orchestration of business micro-services so that enterprises
institutions that relied heavily on physical branches stop can quickly develop new products by orchestrating basic
their business, and small- and medium-sized institutions business capabilities. In doing so, financial institutions can
may even declare bankruptcy. Financial institutions with meet business requirements in new scenarios by offering
strong digital capabilities, however, have quickly moved products and services, and ensure smooth operations in the
their services online and used online channels to carry out new environment.
marketing and serve customers, effectively mitigating the
adverse impact.
Select the Next-Generation IT Architecture
Medical experts believe that the best prevention measure to Address Rapid Business Changes
against the virus is enhancing one's own immunity. This is
true both for individuals and for financial institutions. To The IT architecture embodies a blueprint for building
cope with the ever-changing external environment filled an enterprise digital information system and a basis for
with uncertainties, enterprises should improve their own business strategy and business architecture implementation.
immunity. One effective means is making full use of next- To adapt to the ever-changing business environment, an IT
generation IT to advance digitalization. architecture that can respond efficiently, continuously, and
flexibly should be designed.
Cope with Environment Changes Using With the development of next-generation IT, distributed,
Flexible, Open Business Architecture + cloud-native, and micro-service architectures gradually
Scenario-Specific Orchestration replace the traditional centralized architecture and
become preferred choices of financial institutions. The new
New environments and challenges mean new opportunities architectures help them build flexible, agile, and efficient IT
and require new services and products. Emergencies such as platforms. In the rapidly changing external environment and
the COVID-19 pandemic pose serious challenges, throwing emerging business scenarios, the institutions can quickly
enterprises into new complex environments and policies, respond and launch new applications, products, businesses,
presenting new scenarios and opportunities. To mitigate the and services.
adverse impact of emergencies, seize new opportunities, and
win competition, enterprises need to react quickly to new During the pandemic, financial institutions that have
scenarios and launch new services and products. During the adopted the next-generation architectures have quickly
pandemic, commercial banks such as Agricultural Bank of launched financial services in accordance with pandemic
China designed and released financial products concerning control requirements, showing the value of new IT
pandemic prevention and control, launched online customer architectures. Industrial and Commercial Bank of China
Banding Together with Banks 2020/05 02
Industry Trends
Digital Transformation Lessons of Financial Institutions under COVID-19 Pandemic
(ICBC) provides 24/7 contactless financial services through Build teleworking capabilities for employees and
cloud computing and distributed technologies. Based on select a collaborative office platform suitable for
an open and integrated ecosystem, ICBC has launched the financial institutions.
emergency supply management system and personnel
health information registration management system for key The collaborative office platform supports multiple
institutions, enterprises, and communities such as pandemic communication modes including text, voice, video, and
prevention and control command centers at all levels, conference, to meet daily work requirements. Meanwhile,
health commissions, and medical institutions. the financial services sector has a large amount of key
financial information, making information security an
important element of teleworking. Therefore, a collaborative
Online Work: Internal Collaborative Office + office platform with high security is required to protect the
External Customer Marketing and Services security of financial data and enterprise operation data.
Working from home is an important means for enterprises Apart from communication between employees,
to maintain operations amid the pandemic. Financial teleworking also involves remote processing of various
institutions need to build online working capabilities: business processes. Process requirements related to risk
Collaborative office as well as customer marketing and control and regulatory compliance are critical to the
services. financial services industry. To enable actual online work,
03 Banding Together with Banks 2020/05
Banking Challenges and Possibilities Post Pandemic
business capabilities and processes need refused digital channels were forced to video, and now to live streaming. Financial
to be integrated with the collaborative learn how to transfer or remit money, institutions should analyze the advantages
office platform. Therefore, the platform pay utility bills, or even buy groceries and and disadvantages of marketing and
must be open and integrated to products online. They became new online service channels, and then integrate
seamlessly integrate financial business customers. To keep up with this trend, these channels to build an efficient digital
capabilities and processes, ensuring highly digital banks focused on online marketing system.
that employees can smoothly complete marketing and services, yielding good
business activities such as risk control, so results. One bank's wealth management
that the entire financial service process manager tried live streaming, which Increase Investment in FinTech
can be completed online. brought many new customers and deposits and Strengthen Capabilities
to the bank. Such as Big Data and AI
Develop online marketing and service For financial institutions, online marketing As stated in FinTech in Pandemic
capabilities for customers. and service capabilities are increasingly Prevention and Control by Xinhua
important. In China, with the development Finance, China Banking Association, and
Offline branches were closed and online of Internet technologies, online marketing other institutions stated, FinTech has
financial services became the only choice and service modes keep emerging, from played a critical role in uninterrupted
during the pandemic. The elderly who text messages and images to audio and services, online/offline linkage, product
innovation, and stable running of
financial infrastructure, greatly reducing
the pandemic impact on the business
continuity of financial institutions.
After the pandemic, financial institutions
should continue to increase investment
in FinTech, promote the integration of
technologies (big data, AI, and IoT) with
businesses, and improve the resistance
to unknown risks. In terms of big data,
financial institutions have high-quality data
assets, offering them a competitive edge
by analyzing massive data and mining data
value. In terms of AI, the combination of
core AI technologies (machine learning,
knowledge graph, natural language
processing, and computer vision). Financial
service phases will facilitate product
innovation, process reengineering, service
upgrade, and enhance the financial services
industry's capabilities in marketing, risk
control, and customer services.
The COVID-19 pandemic contains major
changes unseen in a century. It has
brought both risks and new directions to
financial institutions. The hard-earned
lesson is that financial institutions should
continue optimizing their architecture,
capabilities, and technologies to improve
responsiveness.
Banding Together with Banks 2020/05 04
Industry Trends
Chinese Banks' Response and Lessons under the COVID-19 Pandemic
Chinese Banks' Response and Lessons
under the COVID-19 Pandemic
CHEN KUN TE / Chief Digital Transformation Officer of Financial Services Business, Huawei Enterprise BG
S
ince the end of 2019 a pandemic Impacts of COVID-19 Pandemic maturing. However, we have not fully
has swept across the globe. The understood COVID-19 and recovering the
latest public data shows that COVID-19 is strongly infectious and has economy in an anti-pandemic environment
the pandemic has more than 3 million a long incubation period. With pandemic has become a new normal that may last
confirmed cases with over 200,000 deaths development and global efforts, we have until 2021.
and causes substantial losses to the global a deeper understanding and take more
economy. The outbreak is an unexpected targeted measures. Taking China as Lockdown and social distancing have
stress test on the banking industry. an example, lockdown and quarantine greatly affected offline economies.
measures were used to slow down the virus According to Chinese economic data in
As the first country hit by the pandemic, spreading in the outbreak stage and nucleic Q1, GDP declined by 6.8%, tourism and
China has summarized multiple lessons. acid tests were conducted in the production catering even dropped by 35.3%, and
The pandemic may not be ended in the resumption stage to find asymptomatic trade, construction, and transportation all
short term. We need to have a deeper carriers and analyze public immunity. decreased by 10% to 20%. On the contrary,
understanding of it and prepare for the Pandemic detection, confirmation, with a solid foundation, Chinese online
future. prevention, and control measures are economy (such as fresh food business,
05 Banding Together with Banks 2020/05Banking Challenges and Possibilities Post Pandemic
wealth management, and payments) an example. Its online wealth management »» Online customer operations: Chinese
has contributed to a 13.2% increase in business has increased explosively. It issued banks usually have digital channels to
the IT industry. More importantly, online online loans of CNY23.7 billion to 896 maintain closer contact with customers
consumption habits and ecosystem have merchants within three weeks through a during the pandemic. Online convenient
been developed. The middle-aged and contactless procedure. Furthermore, CMB services such as wealth management
elderly become new customers of online optimized the customer journey of visiting promotion and service handling enable
platforms. branches through their app. Its app meets banks to promote their online platforms
most customer requirements and simplifies and cultivate customers' habits, laying a
With step-by-step exploration, as of late their process of visiting branches, improving foundation for cost-effective, lightweight
April, most provinces and cities in China branches' service capabilities while lowering operations in the future.
have resumed production. Greatly affected service costs.
sectors such as industry, transportation, »» Asset portfolio management: The
catering, and real estate are quickly Based on banks' experience and lessons, combination of economic cycle and
recovering their production capacity. The it is clear that in China, digital maturity pandemic effects has posed great
government's consumption stimulation, directly determines whether a bank can challenges to banks' asset portfolios.
fiscal, and monetary policies are smoothly cope with the pandemic and Regulators and banks have continuously
accelerating economic recovery. quickly respond to new changes. performed stress tests on assets,
industries, and products, predicted
China's digital capabilities have played a »» Digital infrastructure capabilities: The IT future directions, and agilely adjusted
critical role in this process. In Hangzhou, team can quickly expand infrastructure business portfolios.
the local government issued consumption resource capabilities to support working
coupons worth more than CNY2 billion to from home and cope with online »» Digital business transformation: Banks
residents through Alipay (an app of the business surges during the pandemic. In with a good digital foundation are
Internet giant Alibaba), directly driving addition, it can support stress tests and planning digital business transformation.
a 3.5-fold increase in online and offline service rollout during work recovery. The digital trend of individual
consumption. Using this digital platform, and corporate customers enables
the government can preset the distribution »» Working from home capabilities: information interconnection. Leading
area, people, industry, and scale, and track Working from home is popular in banks are using emerging technologies
coupon redemption, consumption growth, China. The pandemic has raised higher such as cloud computing, big data, AI,
and industry recovery to optimize the next- requirements on teleworking support 5G, and IoT to reshape their business
round distribution strategy. and security hardening. As the working operation models and build an
mode changes, security and internal ecosystem that integrates internal and
controls need to be enhanced through external resources to make businesses
Measures and Reflections of multiple technical means such as more agile and simpler.
China's Banking Industry authentication mode combinations,
device security scanning, digital
Apart from transit and production, the watermark, online behavior detection, Suggestions and Thinking
banking industry is a severely impacted and information access detection.
sector. Customers could not visit branches, The pandemic is evolving and changing,
placing a huge impact on individual »» Limited branch services: Only partial and our understanding of it is advancing.
customer acquisition, net interest income, branches are open with limited functions Its lasting and far-reaching impacts on
and intermediate business income. available. Staff work in shifts. To cope the economy and finance motivate us to
Shutdown and slow recovery of factories with this situation, banks use digital consider the next moves to cope with the
have affected banking asset quality and platforms such as apps to transform the crisis and seize opportunities.
corporate business growth both directly customer journey of visiting branches.
and indirectly. Customers can make reservations and »» Continuous stress tests with AI and
fill in forms online. They then scan QR machine learning: The pandemic has
Leading digital banks, however, have seized codes to complete applications in a radically changed the economy and
this opportunity to develop online wealth contactless manner. Account managers employment. Banks need to review
management and loan services through can stay in touch with customers in apps asset portfolios by conducting multiple
apps. Take China Merchants Bank (CMB) as even after customers leave the branch. stress tests. With big data, AI, and
Banding Together with Banks 2020/05 06Industry Trends
Chinese Banks' Response and Lessons under the COVID-19 Pandemic
machine learning, massive internal and external data »» Business agility: The traditional mode consists
from the market and industry is quickly collected of requirement submission, scheduling, resource
and then analyzed from multiple dimensions such as coordination, and rollout verification, and becomes
portfolio, product, industry, and region to facilitate asset clumsy in the online trend. Now with the user-centered
portfolio adjustment. mobile platform and scalable technical architecture,
service departments can quickly develop and test
»» Reconstructing branch services through customer applications, promptly obtain market and customer
journey: The pandemic promotes the popularity of feedback, and then push applications to end users.
contactless services. Banks use the digital platform to
redefine the customer journey of visiting branches. This »» Robust hybrid cloud architecture: With the development
improves customer experience and banks' operational of agile services, a robust hybrid cloud architecture is
efficiency. adopted without compromising existing investments.
Mobile and experimental services are deployed on the
»» Online digital wealth management: Customers can public cloud for flexible expansion and risk isolation, and
obtain the latest information and products at any time, then migrated to the private cloud after maturity.
talk with customer managers, and purchase product
portfolios with one click in apps. This maximizes the »» Prefabricated modular data center: The solution greatly
efficiency of customers' fragmented time, and ensures shortens the construction time of a data center from years.
investment compliance and timeliness.
»» Online coupons: Banks change the app design concept
so that non-bank customers can easily obtain coupons
from bank apps. A simple user registration process and
branch journey helps convert more users into customers.
»» Mobile office: Mobile office is a new trend and also
affects the bank office mode. With a mobile app, bank
employees can conveniently allocate and track tasks,
maintain communication, and work anywhere. In
addition, the agile platform helps quickly expand the
capabilities required by branches and third parties.
»» Digital corporate loan process: The pandemic drives
digital corporate banking and generates scattered data
from different sources. In response, banks need to collect
and process data as soon as possible through (reusable)
tools and adopt templates to accelerate the corporate
loan process.
»» Customer acquisition: The online trend make target
customers more sensitive to online products, processes,
and experience. Banks can increase the market share
of digital channels by offering rich digital services and
products, and optimize the customer experience process.
»» Customer services: By cooperating with Internet giants,
banks can obtain and serve customers in the short
term. However, these giants are evolving and will not
always be friends of banks. Therefore banks also need to
gradually build their own digital ecosystem platforms for
direct marketing and higher customer loyalty.
07 Banding Together with Banks 2020/05Banking Challenges and Possibilities Post Pandemic
GPS and 5G tools facilitate management For another, these technologies can internal control.
and O&M through mobile phones. be introduced into daily operations,
customer services, and post-loan »» Smart branches: With IoT, smart camera,
»» Cyber security and internal control: management, enabling better business and AI capabilities, the system monitors
As mobility and teleworking become operations through digital means. branches, automatically identifies
popular, an important challenge customers, detects security and internal
emerges: cyber security and internal »» Innovative technical applications: During control risks, and immediately pushes
control management. In this case, banks the pandemic, an application based on issues to related personnel for handling
need to upgrade cyber security and Bluetooth and encryption technologies via mobile tools.
review the internal control system based is developed to track close contacts
on business features. of COVID-19 cases, attracting wide The ongoing pandemic impacts not only
attention and inspiring banks. Banks can economy but also living habits. We believe
»» 5G and IoT: For one thing, new also use the latest tracking technologies that digitalization will be rapidly and
technologies (5G and IoT) are new to establish relationships between widely used in this process. Banks should
trends and worth the attention of customers, employees, and important proactively think and prepare for the
Banks. In particular, the differences data without infringing customer and subsequent changes in life and customers,
between them and traditional business employee privacy. This helps improve and make services more agile to address
call for innovation and better services. customer services, risk control, and uncertainties of the future.
Banding Together with Banks 2020/05 08Industry Trends
RESPONDING TO Covid-19: What to Do Now and Next For Customer Service and Advice Provision
RESPONDING TO Covid-19:
What to Do Now and Next For
Customer Service and Advice Provision
Source: Accenture, please visit
https://bankingblog.accenture.com/wp-content/uploads/2020/05/Accenture-COVID-19-Banking-Full-Report.pdf
to read the full text.
W
e’re all in this together, by now most banks Education and Training
are in full business continuity mode, and
you're addressing the immediate challenges of Many people, like the elderly, don’t use apps or online
protecting your staff from infection while providing much banking because they are intimidated by the technology.
needed services to your customers. Now is the time to educate and support customers who
have the capability to interact remotely. For those who
Banks can obviously not be by standers as this crisis haven’t yet used digital channels, but have provided a
develops. We all need to be active participants and do cellphone number or email address, reach out and offer
whatever we can to help consumers and businesses training on basic transaction banking. Also, use it as an
weather the storm. opportunity to connect and talk to these clients, many
of whom are the most vulnerable in the community.
While a challenging situation, this is also an opportunity To scale up this interaction, branch and call center staff
for banks to show that they understand their customers’ will themselves need to be trained, but this can be done
plight and are committed to supporting them through the quickly at a basic level. This is one of those areas where the
crisis. The upside of these difficult circumstances is that perfect shouldn’t be the enemy of the good. Identify who
they can be used to build stronger, enduring, trust-based is avoiding online or digital banking and start by helping
relationships with customers. them master basic transactions like checking a balance.
Also, think about adding lots of inline assistance to apps
One of the primarily impacts in key areas of retail and and online banking to help customers navigate to less-used
commercial banking is Customer Service and Advice features that they may now need to access.
Provision, The major impact of this pandemic will be rapid
and potentially sustained changes in customers’ servicing
preferences. Most banks will keep branches open as a vital Minimize Physical Infection Risks
service. However, customers are being told to minimize in-
person interactions and stay home, so many will look to For those customers who still need to visit a branch,
manage their financial life through apps, online banking, consider special arrangements to isolate elderly and
and greater reliance on their bank’s contact center. How vulnerable customers so they can transact separately at a
should banks react to this pivot? safe distance. While the “mobile banks” that once served
09 Banding Together with Banks 2020/05Banking Challenges and Possibilities Post Pandemic
rural areas have gone out of fashion, An aggressive disinfecting campaign would planning their future as their family
any bank that still has the mina garage also help to reassure customers that ATMs situation changes (here are two useful
somewhere should consider reinstating are clean and safe to use. Where cardless links to FinTech partner who have thought
them to serve communities like those in ATM transactions are an option, this should about how to personalize customer
sheltered living facilities, where it would be be encouraged, and proactive training communication: Person tics and Fly bits).
appreciated if the bank could come to the provided to consumers and staff to make it The banking industry was already facing
customer. Most regulators have provided more feasible. Banks should also consider an advice shortfall that will be greatly
relief for banks to close physical locations waiving ATM fees to allow customers amplified by this crisis. Investment in chat
as necessary. We would suggest they access to cash if they are struggling without bot capabilities may look like the best
continue to view the option to transact income. Where a bank has a cash and way to provide advice at scale, but given
in-person as highly valuable for some coin pick-up service for small businesses, the nature of this crisis, banks should
customers and therefore should avoid it should be expanded– with the option to prioritize live interactions wherever they
whole sale closures if possible, although switch to an on-demand Uber like service can – including using common consumer
staffing levels can obviously be lower such as that used until recently by Idea apps like Facetime and WhatsApp video
than normal. For customers who do want Bank in Poland. Banks should also consider to enable real conversations. This is a time
to do something in-person, a deflection raising remote deposit limits in order to when customers need reassurance and
strategy could be a dedicated call center allow businesses and consumers to deposit someone to speak to, not an impersonal
that focuses on transactions by mail and larger-value checks remotely. alert that tells them their upcoming utility
provides prepaid express service. While we bill is about to put them over the financial
expect a lot of payments volume to migrate edge (although cash flow management
to digital and online, we also expect the Personalize Advice to Consumers and information will be critical as personal
usual consumer response to increased risk: and corporate liquidity tightens). This is
to stockpile cash. Banks therefore need to Retail customers will drive a surge in one reason why we believe wholesale
ensure that ATMs remain stocked– there demand for help and advice on both branch closure programs may be counter-
is enough panic without a cash shortage. short term cash management and re- productive – there may be many customers
Banding Together with Banks 2020/05 10Industry Trends
RESPONDING TO Covid-19: What to Do Now and Next For Customer Service and Advice Provision
who need to sit down and talk about their situation (subject
to safe social distancing), and finding a locked branch door
may send a message that the bank is not there to support
them in their time of need. It may also be an argument for
turning off your IVR system and just making sure there are
enough live people to answer the phones. Even if they don’t
have all the answers, they can provide reassurance, log the
issues, and create a personal connection.
Virtual SME RMs
Most commercial relationship managers can ramp up their
interaction with customers using all the collaboration tools
available to the bank. But they can also help clients figure
out how they can use those tools themselves to stay in
touch with their own customers. Social distancing need
not exclude intensive conversations, even if they are not
in-person. For commercial banking, these conversations
need to be informed by sector-specific insights on how to
survive COVID-19 plus a 12-month recession. This type
of advisory support could change the client’s relationship
with the bank and secure trusted-advisor status. While the
best RMs will do this naturally, the typical commercial RM
will need training and technology support to switch to a
predominantly virtual model.
Accelerate Digital Sales and Service
Restrictions on physical contact require banks to quickly
compile an inventory of the processes that require in-
person interaction, and a plan to move them online as
soon as possible. Can e-signature or digital ID processes be
quickly deployed? Where is the bank still forcing a level of
in-person interaction that may not be appropriate for the
next few months? What transactions can be moved onto
conversational platforms like Alexa or WhatsApp? More
broadly, what does your 2020 digital migration roadmap
for sales and service look like, and can those initiatives be
accelerated to deploy capabilities rapidly without incurring
undue cyber or AML/KYC risks? That being said, criminals
have already mobilized to exploit weaknesses and target
vulnerable customers with scams, so while banks are trying
to provide more flexible customer access they also need to
be ramping up their cyber-security and anti-fraud teams.
The risks and rewards need to be balanced, but we think
there are effective tools that allow you to expand digital
access safely and quickly.
As a matter of urgency, banks need to review and prioritize
11 Banding Together with Banks 2020/05Banking Challenges and Possibilities Post Pandemic
project expenditures and assess what can be slowed/ Make sure ATMs are well stocked with cash and regularly
stopped and what can be redirected to initiatives with disinfected or provided is posable gloves in each location.
impact, such as improving digital servicing capabilities or Highlight and encourage card less transaction capabilities.
building a loan modification workflow for call centers. Our
experience is that virtual call centers can be stood up in
days to better utilize staff who may be working at home – Payments
and you may need those staff members to scale up basic
customer advice. »» Raise the limits on contactless payments.
Anyway, the most important is action right now, the follow »» Remove any fees associated with digital payments.
check list is a suggestion for banks where to start form
three areas. »» Distribute prepaid cards to cash-dependent customers
to allow them to transact online.
Transaction Banking and Customer Service. »» Consider raising cash back and rewards to incent
consumers to support vulnerable businesses like local
»» Provide online, telephone, video and in-person training restaurants.
on how to use digital and online tools and transaction
options. Proactively reach out to those who have the »» Model daily changes in payments volumes as an input
capacity to use these channels but haven’t so far. Keep it to credit risk analysis.
to the basics, but get customers enabled.
»» Consider turning off your IVR sand standing up massive Advice Provision and New Sales
phone banks to ensure that every one gets to talk to a
live human being and have a point of connection. Even »» Prioritize in-person conversations (phone or video) over
if your agents can’t solve the problem, they can log, chat bots and impersonal interactions. In times of crisis,
reassure and follow up. people need to talk and explain what is happening to
them; they don’t appreciate being treated as a number.
»» Highlight and guide customers to online and digital At-scale virtual call centers can be set up in a matter of
capabilities that are underutilized. Use “tip of the day”- days to provide basic advice.
type campaign sand make them funny and engaging if
possible. »» Provide advisors with personalized scripts and guidance
that reacts to individuals’ circumstances, and arm them
»» Reduce branch capacity, but provide special with the full range of options.
arrangements for vulnerable groups to transact and
ensure that everyone who needs to access a branch can »» Provide commercial RMs with sector-specific resources
do so. that show an understanding of how the crisis will impact
each type of business. This should include sharing best
»» Utilize any “mobile banking” capabilities you have to practices with them on how other clients like them are
take banking services to communities that can’t leave handling the crisis. Banks can facilitate information
home with appropriate health protections in place. sharing between affected businesses.
»» Create dedicated call center capacity for customers who »» Accelerate digital sales programs and be willing to
would normally transact in-person and use mail and experiment with pure digital processes within acceptable
courier services to exchange documents as needed. risk limits.
»» Repurpose cash and coin pickup services to serve a »» Change all your incentive plans so that no one thinks
broader set of banking needs to prevent customers your number one priority is to sell.
having to go to branches, and introduce “kerb-side”
pickup protocols.
Banding Together with Banks 2020/05 12Industry Trends
How Mobile will Lead Banks out of CoVID-19
How Mobile will Lead Banks out
of CoVID-19
Brett King / International Bestselling Author
W
hen Cosimo Medici founded the
Medici Bank in 1397, little did he
know that it would change the way
DIGITAL
commerce was conducted globally for centuries 2017+
to come. For the next 550 years banking hardly
changed at all. But when the Stanford Research
PRODUCT 207-2017
Institute, under contract from Bank of America, BANK 4.0
built the first mainframe computer designed for ORIENTED
DISTRIBUTION
bank bookkeeping and check processing, it was
1380-2007 BANK 3.0
the start of a decade’s long transformation of
banking and financial services around both core EXPERINECE
technology and customer practices. 1397-1980 DRIVEN
BANK 2.0
In my recent book Bank 4.0, I showed how
these changes are accelerating and how both BANK 1.0
digitization of industries at large, along with
technology-first providers continuously attacking
friction are leading to a transformation of the PHYSICAL FRICTION
entire banking sector globally. Starting with the
introduction of self-service and Internet Banking
capabilities in the 1980s and 90s, through to
the use of AI, Augmented Reality and voice
technologies that we’re seeing the early stages
of today. Figure 1 - Bank 1.0 to Bank 4.0 Transformation Drivers
13 Banding Together with Banks 2020/05Banking Challenges and Possibilities Post Pandemic
In 2014 I predicted that by 2025 branches in western When it comes to financial inclusion, Kenya has done more
economies would be around 70% of their pre-digital peak. to improve the lot of its populace in the last 10 years, than
That estimate seemed aggressive back in 2014, but today the US has done in the last 50 years. Indeed, Kenya today
with the impact of the CoVID-19 virus, it looks increasingly has a higher rate of financial inclusion than the United
likely. More important than that, by 2025 most people with States – a mind-blowing and clearly inconvenient statistic.
a basic value store of digital money (like a mobile wallet In the US the Federal Reserve reports that approximately 20
or super app), will have never seen the inside of a bank percent of US Households are unbanked or underbanked,
branch. That’s because the next 2 billion people we bank whereas 97% of the Kenyan adult population has access to
won’t ever have visited one. a mobile money service that acts as a basic bank account
or value store. Despite a decrease of 12% in branch
In 2005 if you lived in Kenya there was a 70 percent chance numbers since 2008, the United States remains one of the
you didn’t have a bank account, nor could you store money highest branch density economies of the world. How can
safely and likely your savings were non-existent. Today, it be that the country with the second highest per capita
if you’re an adult living in Kenya there’s a 98 percent density of bank branches in the world still has one fifth of
likelihood that you have used a mobile money account their households underbanked? The answer is identity and
(stored in your phone SIM), and that you can transfer lack of mobile adoption.
money instantly to any other adult in Kenya. Today, data
shows that Kenyans trust their phone more than they trust One of the primary causes of financial exclusion today
cash in terms of safety and utility, with people sewing sim isn’t simply access to banking, but access to the identity
cards into their clothes or hiding them in their shoes so they documents that are required for opening a bank account.
can more safely carry their money with them. This is all Since 9/11 in the United States, documentary requirements
possible because of a mobile money service called M-Pesa, to open a bank account have become stricter, in line with
created by the telecommunications operator Safaricom. the Patriot Act and the Customer Identification Program
Today at least 40 percent of Kenya’s GDP runs across the (CIP) enshrined in US banking law and regulations.
rails of their mobile money service called M-Pesa 1. However, more than half of the US population doesn’t have
a passport (42% as of 2018 3), and only 76 percent of the
population has driver’s license. Even if you can get to a
bank branch, between 20-25% of the US adult population
would not qualify to get a bank account.
We’re currently sitting at about twenty- In India up until 2014 less than 30 percent of the
two million customers out of a total mobile population had a bank account. The Reserve Bank of India
had tried increasing branch access, in fact, they put in place
customer base of about twenty-six million.
regulations that meant growing banks in India who wanted
Now, if you take the population of Kenya as to deploy new branches had to put 1 in 4 of their new
being forty-five million, half of whom are branches in rural areas not currently served by a bank.
adults, you can see we're capturing pretty
As of 2018 more than 1.2 billion Indian nationals have
much every adult in the country. We are been enrolled in the Aadhaar identity card program. That’s
we are transmitting the equivalent of forty a whopping 88% of the Indian population. The effect of
identity reform in India is that the number of those included
percent of the country's G.D.P. through the
in the financial system has skyrocketed. The segment of the
system and at peak we're doing about six population most excluded in the old banking system, lower
hundred transactions per second, which is income households and women, have seen 100% year-on-
year growth every year since the Aadhaar card initiative was
faster and more voluminous than any other
launched. As of 2015 more than 358 million Indian women
banking system. (61%) now have bank accounts, up from 281 million
(48%) in 2014. This is the biggest single jump for ‘banked’
women among eight South Asian and African countries. At
Bob Collymore,
the same time PayTM, the largest mobile money service
CEO of Safaricom/M-Pesa in 2016 2 or mobile wallet app, in India has exploded. Back in 2016
Banding Together with Banks 2020/05 14Industry Trends
How Mobile will Lead Banks out of CoVID-19
PayTM aimed to have 250 million users by 2020, but they that’s right, China’s mobile payments transaction exceed
are already more than double that. Branch activity has the entire world’s transactions on credit and debit cards.
continued to decline in India.
The most successful savings product in history, Ant
The benefits of financial mobilization are numerous. In Financial’s Yu’e Bao, and the most successful challenger
Kenya where approximately 48.76% percent of GDP flows bank in the world, WeBank, have both emerged on top
through m-Pesa 4, Kenyans are reported to be saving up of this mobile ecosystem. With over 34% market share of
to 26 percent more today than when they only used cash. China’s smartphone market, and the leading 5G technology
60 percent of Kenyan’s trust m-Pesa more than cash today on the planet, the mobile ecosystem of China rivals that of
as a result. Crime is down, savings are up, but the more any other nation today.
interesting effects are in response to poverty, credit access
and employment. Access to mobile money lifted 2% of By 2030, it is anticipated that more than 90 percent of the
Kenyan Households (194,000 families) out of extreme world’s population will have access to the internet through
poverty, 185,000 women out of subsistence farming into a smart phone. Smart phones are increasingly cheaper
business, and increased access to basic credit facilities and cheaper to manufacture and deploy. Today brand-
for starting a business or dealing with emergencies 5, as new basic smartphones can be found on the streets of
examples. India, South Africa and Nigeria for under US$50. By 2030
it is expected that such devices will be available essentially
In China the use of facial recognition technology along for free with basic subscription services for access to the
with mobile payments capability has transformed the Internet. It’s expected that tech giants like Facebook,
economy in just 6 short years. Despite the difficulties of Google, Tencent, Alibaba and Amazon may move to give
the #CoVID-19 pandemic, China’s citizens have remained away smartphone access to individuals who subscribe to
productive financially because of a very strong mobile basic services through their infrastructure. By 2050 access
financial services capability built on top of Ant Financial’s to basic internet infrastructure will be all but ubiquitous
AliPay and Tencent’s WeChat Pay. In 2019 mobile payments across the planet, meaning everyone will participate in the
in China exceed $31 Trillion, almost 30% higher than the digital economy. Cash won’t be illegal, you just won’t find
estimated $23 Trillion in plastic card payments globally. Yes, anywhere to use it.
2019 Chinese Mobile Payment Market Scale
$31.88 Trillion
$8.43 Trillion
$26.84 Trillion
$7.43 Trillion
Q4 Full Year
2018 2019
Note: Representation not to scale
15 Banding Together with Banks 2020/05Banking Challenges and Possibilities Post Pandemic
Will branches still exist? Yes, but you won’t
need them to do banking, in fact, banking 1
Source: The Economist – A new East Africa campaign, July 9th, 2015
will be smart, real-time and embedded in
your life. To think that banking will still be 2
Source: BreakingBanks FinTech Radio Show
done dominantly in branches instead of
3
on our smartphones, would be ludicrous. Source: Census Data and VOA/Forbes (see https://www.forbes.com/sites/
That isn’t even the situation today. Mobile niallmccarthy/2018/01/11/the-share-of-americans-holding-a-passport-has-
banking transactions outnumber branch increased-dramatically-in-recent-years-infographic/#a7050043c167)
interactions by 10,000:1 globally today. But
4
the path to global financial inclusion, was Source: Payments Cards & Mobile, Jan 25, 2019 - https://www.
never going to be through a branch. The paymentscardsandmobile.com/mobile-money-transactions-half-of-kenyas-gdp/
smartphone has halved financial exclusion 5
Source: MDPI Research, “M-PESA and Financial Inclusion in Kenya: Of Paying
in just 10 years. It took banking 500
Comes Saving?”, Hove & Dubus, 22 Jan 2019.
years to reach the same level of financial
inclusion that the smartphone achieved in
a decade.
The future of banking is already here, and
it’s in your pocket.
Banding Together with Banks 2020/05 16Industry News
The Banking Industry's Response Under COVID-19 Pandemic
The Banking Industry's Response
Under COVID-19 Pandemic
Serve Somebody
Conducting their normal operations is But the loss of revenue due to the various
one of many challenges businesses are lockdowns and stay-at-home orders
facing at present. Fortunately, firms like issued in many countries is even more of
U.K.-based challenger bank NorthOne are an acute problem. While governments
providing free banking services to SMEs haggle over publicly-sourced solutions for
and restaurants during the crisis. small businesses, a group of U.K. FinTechs
in the lending business – Trade Ledger,
“Small business owners across the country Wisefunding, and NorthRow – have teamed
are having incredibly hard conversations up to offer a turnkey origination and
right now around the kitchen table and underwriting platform to enable banks and
desperately trying to figure out how they lenders to digitally fund SMEs.
can keep the lights on through this crisis,”
NorthOne co-founder and CEO Eytan Source: https://finovate.com/
Bensoussan said. “The last thing they fintech-joins-the-fight-against-the-
need to worry about is finding a branch or coronavirus/
paying bank fees.”
17 Banding Together with Banks 2020/05Banking Challenges and Possibilities Post Pandemic
How FinTechs Fulfill Financial manufacturing industry, SMEs, and private
Security Obligations During the enterprises are under financial pressure
Pandemic brought by the pandemic. FinTechs should
review and verify platform information
Transaction security and data security stay more strictly to avoid financial frauds
on the agenda of FinTech. In the pandemic, committed by releasing malicious or false
online requirements become more urgent, information.
transaction security and data security must
be ensured to avoid risk exposure and Additionally, FinTechs should adopt
financial security incidents. security measures such as access
control and encryption to prevent data
FinTechs should strengthen the review of leakage, loss, and unauthorized use.
A shift to a cashless economy information released on their platforms They should strengthen management of
and the maintenance of platform security user authentication and access control
Physical money currently acts as a vector
to prevent fraud through the Internet and processes and allow users to access data or
for the virus’ spread whereas technology
telecommunications facilities. Regulators systems only after passing authentication.
makes payments possible and safe.
state that a large number of financial Employees' access to sensitive information
Governments and start-ups across Africa
services have been processed online during and their database operation permission
are implementing measures to shift
the pandemic. As a result, FinTechs need are restricted to prevent financial data from
payment transactions toward mobile money
to review more services and face higher being used by unauthorized users and
and away from cash, as recommended
pressure. Apart from protecting customers' disturb the social order.
by the World Health Organization. A case
personal financial information, FinTechs
in point is Kenya, the pioneer of mobile
also need to strengthen identification
money, where the payments industry has
of information released on financial Source: http://www.financialnews.com.
collaborated to ensure that digital payments
platforms to avoid social panic caused cn/kj/202002/t20200208_177328.html
can be made across the board, especially
by false information and ensure high
by the most vulnerable. For a three-month
financial security. Meanwhile, consumers,
period, digital transactions below 1,000
Kenya Shillings ($10) will be free.
Ghana too has instituted measures to drive
digital payments and combat the virus.
The Central Bank of Ghana has directed
mobile money providers to waive fees on
transactions of 100 Ghana Cedis ($18)
or less and has allowed for the opening
of mobile money accounts using existing
subscriber registrations with mobile
operators. South African FinTech start-ups
are encouraging the use of contact-less
payments through point-of-sale devices.
Source: https://www.cnbcafrica.com/
africa-press-office/2020/04/14/
covid-19-pandemic-bolsters-case-
for-technology-based-economic-
resilience-by-stefan-nalletamby/
Banding Together with Banks 2020/05 18Industry News
The Banking Industry's Response Under COVID-19 Pandemic
International Banks a differentiating experience for customers. Chinese Banks
It conducted three digital transformation
Accelerated digital transformation of strategies in different regions of Europe First, promote comprehensive digital
traditional banks: For example, JPMorgan in 2014. Its digital initiatives include agile transformation. Many banks take smart
Chase & Co. has started to build a digital organizational restructuring and making or intelligent banking as their digital
bank since it launched mobile banking in full use of FinTech and open innovation strategic objectives. China Construction
2012. With the mantra "mobile first, digital to improve its digital capabilities. After Bank (CCB) regards FinTech as one of its
everything", it has implemented a series digital transformation, ING's customer three strategies, develops collaborative,
of measures including delivering leading experience has been greatly improved. Its evolutionary smart finance internally,
digital experience, deploying ecosystems, retail banking ranked No. 1 in terms of and expands an open and shared smart
innovating digital products, and developing the net promoter score (NPS) in multiple ecosystem externally. China Merchants
technical organizations and capabilities. countries. The revenue and profit increased Bank (CMB) has proposed a phased
JPMorgan Chase invests nearly US$10 by 14% and 21% respectively. Celent, strategy of "towards operating mode 3.0",
billion in digital transformation each year. a US consulting firm, predicts that the aiming to realize digital transformation of
About 25% of its 220,000 employees have US banking industry has invested over retail finance 3.0 and reshape the wholesale
technical/data background. Its efforts have US$100 billion in technology in 2019. New business mode. Ping An Bank has fully
yielded positive results: In 2017, its total technology R&D accounts for 37% of the promoted AI banking construction.
revenue doubled compared with that of 10 IT expenditure. The proportion will increase
years ago, and profit increased threefold. to 40% in 2020 and to 50% in 2022. Second, build open banking. The digital
In the second quarter of 2018, the number Large banks take the lead in technological transformation of commercial banks
of active digital users was about 47 million, innovation. In 2019, JPMorgan Chase's requires establishing extensive connections
increasing by 19% from 2015. In addition, technical budget was US$11.4 billion, with external partners. CMB has built an
JPMorgan Chase's digital transformation ranking No. 1 in the industry, with a year- open IT architecture with "cloud + API"
has won recognition from the capital on-year increase of 5.6%. About half was and released 130 APIs in the first half of
market, with its share price rising steadily spent on disruptive technical applications 2019. Shanghai Pudong Development
by 170% compared with 2008. Now its internally, and the other half was mainly Bank (SPDB) has explored API banking.
market value ranks first in the US banking used for system and data maintenance. China CITIC Bank's open bank project has
industry. Bank of America, ranking No. 2 in technical attracted 21 partners.
budget, spent US$10 billion on technology
In terms of direct banking, building in 2019, 30% of which went to technical Third, reshape the technical architecture.
an agile and open platform bank has innovation. Wells Fargo and Citigroup The traditional slicing architecture fails
achieved remarkable results. Take ING ranked No. 3 and No. 4, with a US$9 billion to support digital banking development.
as an example. The bank aims to deliver and US$8 billion technical budget in 2019. Commercial banks are reshaping their
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