The Next Frontier of FINANCIAL SERVICES Leading Insights on Asia’S Trends, Disruptions and Innovations Contents

the next frontier OF FINANCIAL SERVICES Leading insights on Asia’s trends, disruptions and innovations Contents

Executive Summary A Unified Approach 4 19 An interview with David Gledhill, DBS Bank

In Pursuit of Innovation Redefining the Future 5 An interview with Sushil Saluja, 22 An interview with Venkat Krishnan, Accenture Edelweiss Tokio Life Insurance Company

Breaking the Silos Choice and Control 8 An interview with 25 An interview with Aniruddha Paul, Maryan Broadbent, AIA ING Vysya Bank

Finding the Direct Route Harnessing the Cloud 11 An interview with Neil Gardner, 28 An interview with Michael Foong AIG Seng Yiew, Maybank Group

A Community in the Cloud Analytics in Action 14 An interview with Michael Leung, 30 An interview with Laz Cotsios, China Construction Bank (Asia) Medibank Private

Measuring Success Evolution, not Revolution 16 An interview with Vikram Sud, 33 An interview with Andrew Pitcher, Citi Asia Pacific SAP

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In this edition, senior executives – including CIOs, CTOs and CMOs – share their ideas and vision for the future, as they respond to an increasingly digitised world.

The banking and insurance industry across Asia Pacific is meeting the challenges posed by disruptive technology head on. Technological innovation is the cornerstone of most – if not all – business strategies.

The Next Frontier of Financial Services is a series of in-depth interviews with the region’s leaders in financial services and their partners.

Mobile banking strategies for smartphones and tablets lead the agenda for investment priorities. Yet the varied nature of potential customers throughout the region means original products for traditional phones without an internet connection are also being developed across the board.

Cloud is becoming more popular, however there are few signs that financial services organisations will venture into the public cloud domain – yet. A number of the region’s banks are keen to investigate community cloud networks, which offer innovative business-to-business (B2B) payment solutions among other options.

While the banking industry launches a myriad of new products to enhance the customer experience, there is also considerable activity at the back-end to ensure core systems can meet the new demands of these front-end innovations. Whether this amounts to a core banking transformation project, or a more targeted program, the clear driver is the customer.

The insurance industry – acknowledged as lagging banks in terms of technology – is spending considerable investment dollars on leap-frogging into the new digital reality. This includes a vast range of programs from reconfiguring data warehouses, revamping offices and branch networks, to revolutionising the sales channels on offer.

The insurance customer’s position appears to be shifting as organisations have started empowering them with more information, reflecting the current love affair with big data. There is no doubt big data is at the forefront of both banking and insurance senior executives’ minds. However, as one executive notes, it is something that should be approached with due forethought and care.

4 The Next Frontier of Financial Services In Pursuit of Innovation

As a leading provider of management consulting, technology and outsourcing services, Accenture has been afforded first-hand insight into the world's most successful financial services organisations.

A financial services executive might be forgiven for An interview with finding the current pace of change in technology Sushil Saluja somewhat daunting. Yet, Sushil Saluja, Senior Managing Senior Managing Director, Director of Financial Services at Accenture, says these Financial Services, times can only be viewed as exciting – particularly for Asia Pacific, Accenture those in the Asia Pacific, where a combination of factors promises considerable opportunities. It is a matter of several forces coming together, explains Saluja. “But what is not as appreciated is the change in trade flows across the world with a clear movement towards the Asia Pacific region.“ Sushil Saluja is responsible for setting the financial According to Saluja, world trade is forecast to increase services group’s overall vision and strategy and guiding by a multiple of 2.5 times from 2010 to 2020, with 60 the development of client relationships. Saluja joined per cent of all growth in trade derived from Asia, says Accenture in 1988 and has held senior positions in its Saluja. “In a way, that is not surprising given the change financial services division in the UK, Ireland and India. in demographics.” Looking forward, Saluja also sees a shift in the predominant source of innovation. “Over the last 100 years, innovation has come from many places but there has been a lot from the US. If you look forward the next 100 years, I think innovation will be developed much more in the Asia Pacific region.” Saluja points to the number of graduates being produced in the region in science, technology, engineering and maths “About 3.5 million graduates are being produced in China per annum in those subjects compared with 0.5 million in the US. Given those numbers, and the increase in calibre, this means innovation is changing.” He views this shift as inevitable given the region’s requirements. “We are seeing innovation in multiple ways because the needs are changing so dramatically and quickly.”

Chasing the Customer Despite such promise, the region faces a number of challenges, acknowledges Saluja. But he frames these We are seeing innovation in more as opportunities than obstacles. multiple ways because the needs “We see institutions with a heavy focus on transforming their domestic operations to service their are changing so dramatically customers better and to evolve to meet future needs – whether that is better wealth management, better and quickly. access to day-to-day banking, or be that bringing even more people into the banking system.” There is also considerable focus on regional and global expansion as organisations seek to serve their corporate

The Next Frontier of Financial Services 5 Malaysia’s Easy by RHB is cited by Sushil Saluja as an example of innovation where Asia Pacific is leading the world.

Saluja believes technology sits at the heart of any changes in financial services. “Technology has a pivotal role to play in meeting customer needs, which is key in Asia Pacific is pioneering some of financial services. Our most successful clients are using technology to differentiate themselves in the way they the more innovative solutions. meet customer needs. That is not just through point solutions but through the integration of the full customer experience – providing multi-channel access for retail customers and faster and more holistic processing for their corporate customers. Of course, it is not all driven by the customer, notes customers who are chasing trade flows. “You see Saluja. “Internally banks need to run themselves more many examples of banks in Australia and the ASEAN effectively and the answers to that is greater operational region, and even in Japan, looking to extend their reach efficiency.” And underlying all of this is the issue of risk across the region. On the other hand, you see global and regulatory compliance. “That’s a recurring theme institutions wishing to be more prolific in Asia.” in the industry and again technology is being used to Says Saluja: “What is common across all of these is address some of the needs here.” the quest for growth and growth in support of customer Saluja points to the many examples of creative needs is a huge imperative.” He says speed is of the concepts in the region. “Asia Pacific is pioneering some of essence right now, as is scale. “Scale stands as an the more innovative solutions.” Malaysia’s Easy by RHB is opportunity – and impediment in some ways to speed. of particular note. Boasting a network of 400 branches, Look at the volumes of customers some banks in China Easy was set up by RHB Bank but branded separately. have. I think that is a huge opportunity but also a “Easy offers customers numerous small-sized branches, challenge in terms of the pace you can effect change.” typically in shopping malls and subway stations, that are

6 The Next Frontier of Financial Services very heavily reliant on technology in the branch. They are very efficient way for customers to meet their needs.” Then there is Citibank Singapore’s Citi Express – ATMs that meet nearly all its customers’ banking needs without having to visit a branch. The ATMs include a two-way video which allows for conferencing between the customer and the bank. Saluja says this is an exciting development for the region’s rural communities, such as the Western provinces of China, where there are large numbers of people with lower per capita incomes who are less well served by the banking industry. “For Singapore, it is about improving the customer’s banking experience. But if you transfer that technology to these rural communities, you suddenly transform that community with strong access to financial services. It is very exciting.” Singapore’s Citi Express ATMs meet nearly all customers’ banking needs without having to visit a branch. A Learning Curve The much-touted cloud solutions continue to gain traction in the Asia Pacific region, although concerns around security remain for now. “There are still some open questions about security and private cloud versus public cloud.” The main challenge is institutions Nonetheless, Saluja is upbeat. “Every client wants to have a conversation about cloud. There is a much better working out how to embrace it. understanding of its benefits and how it might be used But we are getting there; we are in an organisation. The main challenge is institutions working out how to embrace it. But we are getting getting there quite quickly. there; we are getting there quite quickly.” The mature markets want the benefits of cloud without removing their legacy systems, explains Saluja. This stands in contrast to the emerging markets which generally want to use cloud as an innovator, “to be more nimble and to do things more cost effectively.” Learning to Listen Saluja points to an Accenture client who was keen Social media has also been met with some caution but to exploit cloud for the benefit of its human resources it is making significant inroads, says Saluja. “There is no division. As a financial services group with a regional doubt financial institutions are adapting to social media. footprint in the Asia Pacific, it was juggling the Human I would say there is more to be done to really embrace Resources (HR) needs of 10,000 staff across 10 it, but most institutions are getting better at listening to countries. “They wanted access to core HR processes the dialogue that is going on. Increasingly institutions to be made much more readily available to employees,” are becoming more active and engaging with their explains Saluja. customers via social media.” Accenture designed a system which allowed the Saluja says the next step involves social media being group to move its HR processing to a user cloud-based a key part of the transaction process. This still requires solution and rationalised everything it did across the a big shift in mindset for banks and insurers. “That is 10 countries to a more standardised approach. “Within where further development is to be done and we will one year all 10 countries were using a redesigned and see more changes going forward.” standardised solution for HR processes.” That said, the issue of reputational damage is The gains were felt at a number of levels, says Saluja. becoming less of an issue. “Financial institutions are “The benefits were around employees being able to learning about balancing the different components that understand and get stuff done more effectively. They make up reputational damage. They are learning to could access cloud solutions directly.” The company embrace listening.” also enjoyed cost savings. But Saluja views the In the meantime, institutions need to get their head rationalisation of processes as particularly significant. around the next big thing, says Saluja. “It is all about “That is where cloud can really help. It facilitates digital – real time, anywhere, any time. It is a good way standardisation," says Saluja. of encapsulating how people are leading their lives.”

The Next Frontier of Financial Services 7 Breaking the Silos

As the largest independent, publicly listed pan-Asian life insurance group, AIA prides itself on being ‘The Real Life Company’. Its new branding has made the most of technology to reshape its offerings to customers.

When it comes to technology, the insurance industry An interview with is some way behind. Rather than playing catch up, it Maryan Broadbent is a question of stepping back and thinking about how Group Chief Customer to leap-frog, says Group Chief Customer Officer of AIA Officer, AIA Group, Maryan Broadbent. “In Asia, and globally, the insurance industry has been slower to adopt technology in terms of its customer experience relative to other businesses. But it is going through huge changes.” AIA is among those insurers keen to transform themselves. “We are doing the obvious things such as Based in Hong Kong, Maryan Broadbent works across mobile solutions and e-commerce. We are updating our AIA’s 17 countries. Prior to her work at AIA Group infrastructure to a mass servicing framework to enable she held senior leadership roles at the Royal Bank of customers to interact with us in the ways they expect to Scotland, GE Money and Metlife. be able to these days,” says Broadbent. “I am not sure that any of this is individually unique, but for insurance, the combination of all of the changes is going to make it feel very different for the customer.” AIA has spent the past year rebranding itself, putting the focus squarely on the provision of health and protection solutions. Explains Broadbent, “With an increasing focus on engaging in our customers’ lives, we are helping them to protect their families but also increasing our emphasis on supporting them to make the most of the future they and their family might have.” Broadbent says AIA’s new focus stands as a huge change, “not to the core of the business but how we talk about our business and how we operate.” It goes some way to addressing one of the biggest challenges in the insurance industry. “We are typically a distribution- led business and in the past have tended to operate in silos. We have to find a way of bringing all aspects of our business together to centre them on the customer and the customer’s needs – to provide a more integrated solution that enables us to enhance the face-to-face experience, and to make our customers’ lives easier.” Adds Broadbent, “The customer experience in The customer experience insurance is a new conversation in recent years.” in insurance is a new Vital Statistics An example of a technology-supported transformational conversation in recent years. initiative is the recent launch in Singapore of AIA Vitality – a science-backed wellness initiative that influences long-term behavioural change towards living healthier lives. Participants have access to a range of

8 The Next Frontier of Financial Services AIA Vitality participants have access to a range of assessments and health screens to help customers better understand their health condition. assessments and health screens to help customers better understand their health condition, and to a network of partners offering products and services to reward the healthy behaviour of those taking part. There is a real need for Broadbent sees it as a win-win for both sides. “While it motivates and rewards customers for monitoring interpretation, and a growing and improving their health, it also provides us with an opportunity to increase customer engagement with AIA.” shortage in the skills needed to It does this by creating more customer touch points and make the most of... big data. providing information that will enables AIA to tailor its customer experience. “It also offers to build stronger relationships with our customers.”

Protecting Privacy It is generally accepted that big data presents a very She says there are already signs that people are real opportunity for the insurance industry. Broadbent is waking up to both the opportunities and threats of an advocate, but also believes that companies, including sharing personal data. “There are some interesting AIA, need to exercise care. behaviours being talked about in the US. Some “The question is: how do we work out how to use teenagers are de-activating every time they log off the data to the mutual benefit of our customers, our Facebook, while other people are loading up Snapchat distributors and ourselves?” says Broadbent. She photos that expire after 10 seconds. It shows an highlights the importance of intuition in making the most increasing consumer consciousness of the data trail they of big data. “That despite being a really technical area, are leaving.” full of algorithms, huge data stores, and so forth, there However, at the same time, says Broadbent, other is a significant human element too – there is a real need people are increasingly happy to share data – as long as for interpretation, and a growing shortage in the skills the company is transparent about what it is going to use needed to make the most of the potential that big data the data for. “It also needs to be clear to the consumer has to offer. It is the same with some of the technology.” how they benefit from sharing, for example, through Broadbent points out that trust is fundamental to the rewards or differentiated offers.” insurance industry. “We are talking long-term products Yet there are others who are still oblivious to such where we need to be there in moments of crisis or potential ramifications. “We need to protect these moments of opportunity for the customer. They need to customers and our business by dealing with data trust us to be there.” responsibly and staying true to our brand aspiration

The Next Frontier of Financial Services 9 The increasing availability of health-related apps leverage wearable technology such as Fitbits.

are led by technology. The increasing availability of health-related apps is a good example – where you can scan moles to identify whether they are potentially We might never have the cancerous, or use wearable technology such as Fitbits. I am thinking, what can we do with that? What can we opportunity to harness big data do with a particular technology to make things better for if we have lost peoples’ trust. our customers, employees or distributors?” Grand Designs Broadbent is also interested in the idea of design thinking and how it may benefit her industry. She points out that insurance is a mix of “fundamentally left brain of being honest and authentic in engaging in our management” – that is, analytical – and “essentially customers’ lives. We might never have the opportunity right brain agent” – in other words, more people- to harness big data if we have lost peoples’ trust.” focused and creative. It is a matter of bringing these That said, Broadbent notes that Asia is in a relatively two different ways of seeing things together to allow for good position for now. While Europe’s corporates are more holistic thinking. “Taking some of the analytics, talking about rebuilding trust, Asia is focused on keeping some of the behavioural economics and wrapping them it. “In Asia we have not yet lost trust, but we have to in right-brain creativity to design future experiences. make sure that we use data responsibly so that we are That is going to be very powerful here.” never in that situation. Once you break trust it is very Future experiences include better communication. difficult to get it back.” Broadbent points to a massive protection gap in insurance that needs to be narrowed. “People have Healthy Practices anxieties in life; they have dreams and goals. They do not Broadbent sees real opportunities for technological always understand that as an industry we have products innovation in the area of health solutions. “Our and services to help them reach those goals. Many of involvement in Vitality and the increasing consumer our distributors are very skilled at explaining clearly and focus on health is making us look at a lot of the health simply to the customer what our products can do to solutions technology.” She gives the example of radio protect them and help them to meet their objectives. But frequency identity cards, which are being trialled by we are not always easy to get in touch with.” pregnant women in Chinese hospitals. The aim is to She says it is a matter of talking a lot more help better serve these women. “You can clock them in about benefits, customer propositions, not simply as they enter the car park and their bed is ready by the products. She also says it is a matter of listening to time they arrive to have the baby – a great example of and understanding customers. That means taking using technology to improve the customer experience.” unnecessary steps out of the process to make Again, Broadbent warns against pursuing technological interaction easier. “It is a matter of using technology solutions just for the sake of it. “Technology has to be where it will make it easier for our customers and a means to an end not an end in itself.” Nevertheless, clients, our agents or our employees, to take the effort she adds, “It is not always about identifying a need out so that we can focus on more value add for the and finding a technological solution. Sometimes we customer,” says Broadbent.

10 The Next Frontier of Financial Services Finding the Direct Route

American International Group, (AIG) is an international insurance company serving customers in more than 130 countries. It is pursuing a number of innovative strategies to help sell insurance directly to individual consumers in the region.

Life insurance is a growing business in Asia. So how An interview with do you attract customers if your business is limited to Neil Gardner general insurance? Chief Marketing Officer This is a very real challenge faced by American and Head of Direct, International Group (AIG) in the region due to the fact APAC, AIG that in most markets the primary agency distribution channels are life insurance agents. “That said, we are a key player in many markets in Asia and the largest general insurer in Singapore which demonstrates the value we provide the customer through our consumer products,” says AIG Chief Neil Gardner has built up a wealth of experience in the Marketing Officer and Head of Direct, APAC, Neil region’s mature and developing markets, taking on lead Gardner. These products include auto, home, travel, roles in such organisations as GE Money in Australia and accident and health insurance. China and Citibank in Hong Kong and Singapore. Furthermore, says Gardner, despite the strong influence of agents in the region, he has seen a change in consumers’ purchasing behaviour. “As the consumer and the market become more technologically advanced, we have witnessed an increased demand from the consumer to purchase products online. While many customers prefer to purchase their insurance products through an agent, companies simply cannot ignore that growing demand.” Attitudes towards purchasing insurance products direct from insurance companies do vary from country to country, however, which is why it is crucial to understand each market and not roll out a blanket strategy, says Gardner. “For example, you have Vietnam where insurance is generally not part of the social fabric, compared to places like Korea where the industry is incredibly sophisticated.” AIG pursues concurrent strategies. “If you want to be in every market in the region you need to segment the countries to have strategies that are relevant to groups of countries that may not be geographically close but are socially aligned,” says Gardner. We have witnessed an increased Getting Technical Technology can offer solutions to these regional demand from the consumer to differences in attitudes towards insurance. AIG makes a point of providing simplified products that people can purchase products online. purchase efficiently and quickly by remote means. “To be successful we need to have simple products that customers can understand but we also need to keep in mind that without the ability to recognise what

The Next Frontier of Financial Services 11 Adds Gardner: “It is our strong relationships that we maintain with many life companies and agents in the region and unparalleled products that allow us to stay top of mind among agents in the crowded consumer We welcome this new transition as product space.” it allows us to reach the customer He says it is also important to note that some products are a better fit for online purchase portals without the labour intensive and than others. “Travel and auto insurance are already available through direct channels but have not expensive infrastructure required reached the commoditised levels that can be seen to operate in multiple markets. in other parts of the world. For example, in China, car ownership is a luxury that is afforded by a small segment of the population and therefore usually sold through an agent.” In response to the changing landscape, AIG has effectively started to make inroads away from the company’s traditional telemarketing business. Says is happening in the environment and adapt to consumer Gardner: “We welcome this new transition as it allows trends as quickly as possible, an excellent product is not us to reach the customer without the labour intensive enough” says Gardner. and expensive infrastructure required to operate in This works – to an extent. “We still find that if the multiple markets due to factors such as scale and product is sophisticated or people feel the need to multiple language requirements.” understand the product more, they do tend to seek guidance from an agent – either our telephone-based Insider Rewards agents or their insurance agent who could also be their Technology can only go so far in the external life insurance agent.” environment, says Gardner. Any engagement with

12 The Next Frontier of Financial Services the consumer is ultimately elective, social media being the perfect example. “You can build all the platforms, all the enablers you like, but in the less ‘exciting’ industries, including financial services, few customers want to engage with your brand Technology plays a very large socially unless they have a problem. In such part in driving efficiency industries, social media is commonly used as a portal for customers to express their dissatisfaction. internally, which is critical when The challenge is to keep the interaction and content appealing to the customer and relevant to you want to operate in multiple the business.” Where technology can make the real difference markets that have different is improving internal efficiencies, says Gardner. language capabilities and scale. “Technology plays a very large part in driving efficiency internally, which is critical when you want to operate in multiple markets that have different language capabilities and scale. Without a solid technology strategy you can spend an awful lot of money that ultimately may not be a good investment.” Getting the Timing Right That is where AIG is focused. “We have a significant AIG hopes to conclude all three projects within the quota of work underway at the moment internally,” space of two years. However, some nuances between confirms Gardner. AIG country life cycles have appeared. “Different One project involves overhauling AIG’s entire customer countries are at different stages and it does not relationship management (CRM) system. The aim necessarily make sense to roll out the programs in the is to ensure that whenever the customer returns to same order country-by-country,” says Gardner. the organisation through any contact point – be it “In Vietnam you still need a wet signature on a piece phone, internet or even old fashioned mail – the person of paper for insurance products. So how do you have serving that customer will be fully aware of their an online strategy for personal accident insurance when entire history. you need to sign papers?” AIG also has a data warehouse project underway, Meanwhile, payment collection can be an obstacle in what Gardner describes as a customer information emerging markets because not everyone has a credit management solution. The organisation wants to be card. “We are taking a market-by-market approach, as able to leverage both internal and external data, says we believe this is the best way to effectively serve the Gardner, and to provide more campaign execution customer instead of launching the same mould in every control and authority to the marketing and campaign market concurrently.” teams in each country. Adds Gardner, “The organisation has many technology This involves integrating many different aspects projects in flight. It is a matter of testing a concept including data segmentation of customers, workflow in one market and then considering how it is that the management and campaign successes. “At the moment solution can be effectively delivered across the board.” it is a very labour intensive process to reconcile marketing campaigns and we are committed to Focusing on the Future fixing this.” For all the challenges, there is no lack of opportunity. In Yet another project involves re-energising AIG’s policy Hong Kong, for instance, AIG is looking at the segment administration platform – the software that holds all the of tourists arriving from mainland China. account and policy information. “We are moving to a “Seven million people live in Hong Kong, compared single source platform across the region,” says Gardner. with 40-plus million visitors from the mainland each This will assist in AIG’s bid to provide simplified year. Clearly that is a much larger segment of the products and assist with providing economies of scale market to promote our travel products to,” says Gardner. to smaller countries. “We are looking at innovative solutions to tap into “Our new platform will allow customers to pick this segment.” Other cross-border travellers, such as and choose in terms of how they want their Singaporeans travelling to Malaysia for the weekend, products to be structured. So even though this offer another unique market segment. can appear complicated, it is flexible from the “Our focus now is on how we reach these potential customers’ point of view because they can say customers and to enable them to transact.” The solution what kind of coverage they want and AIG can seems simple: “Of course mobile telephony provides you quickly package it together.” with a platform to reach these people.”

The Next Frontier of Financial Services 13 A Community in the Cloud

Financial institutions in Hong Kong are keen to pursue communal bank solutions, including mobile payments. That does not stop them from bolstering their own technological capabilities with the promise of of big data and advanced analytics.

It is true that competition remains fierce among the world’s An interview with financial institutions – particularly when it comes to Michael Leung leveraging the latest technology. But it is not all about Deputy Chief Executive and rivalry, says Michael Leung, Deputy Chief Executive and Chief Information Officer, Chief Information Officer of China Construction Bank (Asia). China Construction Bank Solutions that use such innovations as cloud computing (Asia), President of the and Near Field Communication (NFC) have presented Hong Kong Computer Society banks with an opportunity to build solutions together. “Hong Kong’s banks are themselves working on a number of projects,” points out Leung, who is also President of the Hong Kong Computer Society and sits Michael Leung has worked for almost 14 years at China on the board of the Hong Kong Institute of Bankers. Construction Bank (Asia), formerly Bank of America One example is e-cheques. A digital equivalent of (Asia). He is also the President of the Hong Kong the paper cheque, it allows A to ‘issue’ a cheque to Computer Society and an Executive Committee member B just like the traditional paper-based cheques but of the Hong Kong Institute of Bankers. electronically via the internet – whether that is a fixed or mobile device. It can make use of a community cloud network that is exclusive to the banking industry. “Interestingly, this industry-wide project is sanctioned by the Hong Kong Monetary Authority, which is the banking regulator of Hong Kong. It is now in the early inception stage,” says Leung. Another example is mobile payments using the in-built processor, secure memory and NFC functions of a smartphone. Akin to an electronic wallet in a smartphone, it works as a contactless credit, debit or stored-value card like the Octopus Card in Hong Kong, providing payments solutions business-to-business (B2B), business-to- consumer (B2C) and peer-to-peer (P2P). Leung says that while a few banks have gone ahead to do their own mobile payment solutions, several other banks are now working with Jetco, the ATM network operator in Hong Kong, “hopefully to come up with an industry-wide deployment solution and plan.” Once again, the Hong Kong Money Authority seems to be keen to see this happen, says Leung, and to this end We are seeing only the hosted a consulting session in November 2013. Leung admits there is still some way to go however. beginning of the development “It can go a lot further. In Hong Kong we are seeing only the beginning of the development of mobile payment of mobile payment systems. systems using smartphones.” Customers also have to catch up. Despite impressive take-up rates of many of the banks’ new mobile apps, “many people still mainly use their mobile phones to talk and text,” says Leung.

14 The Next Frontier of Financial Services Keeping it Private Such co-operation among the territory’s banks seems somewhat counter to the idea of ‘disruptive technology’. Then again, there is no doubt that an innovation such as It is just the beginning but we are cloud takes organisations well beyond their traditional comfort zone. Most banks remain cautious about already tapping into big data to stepping out beyond private cloud solutions and China Construction Bank (Asia) is no different, says Leung. check against money laundering. He believes that a raft of issues, including data security and service provider 'lock-in', will mean the public cloud domain remains off limits to banks for some time to come. “You probably will not see anything major happen there in the next couple of years.” Over the past months, the Hong Kong Money Authority Harnessing big data and advanced analytics, however, has put a lot of emphasis on anti-money laundering does not seem to pose the same challenges. Leung (AML) due to a couple of recent transgressions. As confirms that like many other financial institutions, his a result, banks have been asked to strengthen their team is working at developing its capabilities here, processes in this regard. “We are spending more time building on the data warehouse it constructed three and effort on AML this year,” confirms Leung. years ago. Other regulations big on the banks’ lists include the “We are putting the vertical applications on top of onerous Foreign Account Compliance Act (FACTA) – a the horizontal data warehouse. We are making use of United States’ regulation to prevent tax evasion through advanced performance analytic tools – what we call the use of foreign accounts – and Basel III. Both require the management information or business intelligence considerable changes to the banks’ processes and tools like Cognos, OBIEE and SAS – to greatly improve systems. While Basel III might be less of a concern for our business performance and profitability analysis, as Hong Kong banks given they are capital rich, quite a few well as a whole heap of financial and risk management would have little choice but to implement it if their partner reporting and query functions.” or parent companies are in a jurisdiction that mandates it. Says Leung: “It is a matter of making more sense of Liquidity management has also become an issue in this information and extracting useful knowledge.” Hong Kong, as has concentration risk. To a certain He points out that big data is already being used to extent it is related to the fiscal policies in China. “We good effect. “It is just the beginning but we are already tend to lend more these days because China needs tapping into big data to check against money laundering more funds,” explains Leung. “For some time many and assess the credit worthiness of our customers.” It is companies in the mainland could not secure foreign also proving itself in the crime prevention space. currencies domestically so they went abroad to borrow. Similar situations happened elsewhere, such as South Following the Rules Africa, from time to time.” Of course technology is not all just fun and games. Like Leung says that regulators have become increasingly others, Leung feels the weight of all the regulatory alarmed by the mismatch in funding requirements. requirements pressing down on the industry. “Unfortunately It means yet another item on the banks’ lengthy it is a really necessary evil. You just have to do it.” “To Do” lists.

The Next Frontier of Financial Services 15 Measuring Success

Citi’s Asia Pacific business spans 18 countries, making the most of its global capabilities to support locally tailored solutions. Technological innovations can be quickly rolled out across the region should they prove a game changer.

For Citi, there are three big trends which will continue An interview with to shape its business over the next 12 to 18 months: Vikram Sud globalisation, urbanisation and digitisation. Ultimately, Head of Operations and the international financial institution holds high hopes of Technology, Asia Pacific, become the leading digital bank globally. Citi, Asia Pacific “Our priorities have remained consistent,” says Citi’s Asia Pacific Head of Operations and Technology, Vikram Sud. “These guide our business as well as our operations and technology strategy. We develop innovative new projects and systems in partnership with our businesses to drive growth.” Boasting a 20-year international career, Vikram Sud Sud argues that it is a level playing field for corporates became Citi’s Asia Pacific Head of Operations and today, whether in technology or financial services or Technology in 2011. Prior to joining the group, he held any other industry. “How innovative a company is and the position of Group Chief Operating Officer at Kotak how quickly it can respond to the changing needs of Mahindra for five years, having held senior roles at Citi clients is a prerequisite, not an option, to advance the prior to that. business.” He adds: “Financial institutions that start to behave like technology companies with banking licences will get ahead of others.”

Up Close and Personal There is no doubt Citi is keen to pursue original solutions. One of its highlights of recent times has been its new ATM, Citibank Express, launched in 2013. One could argue that the revamp was somewhat overdue. As Sud points out, it represents the first major redesign of the ATM since Citi introduced unattended branches in the 1970s in the United States. It was worth waiting for however. Taking up one-fiftieth of the space required by a typical retail branch, Citibank Express offers many new features compared with a traditional ATM. “It is about taking our Smart Banking to the next level,” says Sud. “It allows our customers to perform basically all the services available at a bank branch, providing greater convenience and accessibility.” We develop innovative new projects Over a phased release, clients can apply for loans, open accounts, post cheques, scan documents and and systems in partnership with instantly have their ATM, debit and credit cards issued. Inherent in this is the use of biometric identification. our businesses to drive growth. One of its most engaging features perhaps is its video conferencing capabilities. “For a personal touch, customers can also see and speak with a CitiPhone officer via video conferencing at the machine.”

16 The Next Frontier of Financial Services It is this ‘up close and personal’ aspect that helps make the new ATM a very real opportunity for Citi in the region and worldwide. “With more than 90 per cent of transactions in the region happening outside of With more than 90 per cent branches, Citibank Express will expand our coverage across Asia, offering increased accessibility for our of transactions in the region clients,” says Sud. To date Citibank Express has been launched in happening outside of branches, Singapore, Malaysia and the Philippines. The next Citibank Express will expand our 12 months will see continuation of this momentum. “Over the next year, we are looking to roll out Citibank coverage across Asia. Express to in-branch and out-of-branch locations in the region before eventually deploying Citibank Express as a defining game-changer globally.” There is every sign that this lofty ambition will reach fruition.

Back in the Lab “At the heart of these impressive pilots is client Citibank Express was not an overnight wonder. It was engagement,” says Sud. “The fully-interactive and the result of four years of research and prototyping in globally linked lab leverages new technologies to Citibank’s Consumer Innovation Lab in Changi Business enable collaboration with both clients and global Park, Singapore, says Sud. It also involved collaboration colleagues and allows for easy simulation of between the bank’s Asia team and Citi’s global customised solutions.” innovation team, known as Citi Ventures. While the new ATM is already viewed as a success, As well Citi has another Innovation Lab focused on Citibank Express is still in its early days, making it transactions services based in Changi Business Park, difficult to quantify its merits at this stage. However, Singapore. In 2013, it was already pursuing more than even now the bank is working on fine-tuning the system 20 proprietary transactional banking solutions, with based on the figures so far. more than half a dozen being scheduled for launch “While it is too soon to fully measure its success, within the next two years. we have gathered useful and crucial analytics since

The Next Frontier of Financial Services 17 “Mobile banking gives us greater flexibility to serve our clients where and when they need us and it plays an important role in our aim to be the world’s leading digital bank.” Recent achievements include the 2013 launch of Citibank for iPad in six markets across the region. The bank also introduced the ability to trade stocks and to apply for credit cards via Citi Mobile – its mobile banking app – in select markets. Says Sud: “As mobile banking continues to grow as a preferred banking channel, our aim is to work towards incorporating more functionality into the smartphone.” But the bank is also keen to tap into markets that do not have the latest technology. In the Philippines, Citi has introduced its one-time pin (OTP) generator on Citi Mobile. This makes it possible for customers “to really bank on the go,” says Sud, even without access to an internet connection. In Hong Kong, meanwhile, the bank has enhanced its mobile payment solutions capabilities with the launch of 3 Citi Wallet. The multi-purpose mobile wallet service includes transaction history and a location-based special offer service and search function. In addition, the bank has continued to improve its mobile payments solutions for its corporate clients in the region. In China, Citi launched the first and only mobile collection facility in early 2013. In India, the bank introduced its Mobile Payment Solution and Mobile Collect for both its consumer and corporate client bases respectively. However, the new projects do not stop there – some being considerably bigger than others. In October, Mobile banking gives us greater 2013, Citi unveiled its new CitiDirect Banking Evolution (BESM) next-generation electronic banking platform for flexibility to serve our clients corporate and institutional clients. “This represents a multi-year investment,” says Sud. where and when they need us. “The solution goes beyond providing traditional transaction management services through desktops, laptops, smartphones and tablets.” On the markets side, Citi has progressed to Velocity 2.0, which focuses on optimising trading performance, making gains in desktop efficiency and customisation. the launch in terms of client usage, preferences and “One of the best FX platforms in the business, the what they are looking for from Citibank Express,” enhanced Velocity platform continues to help us capture says Sud. “Simultaneously, we are already working on greater volumes, placing us ahead of our competitors.” incorporating more enhancements to Citibank Express, including greater customisation. Being able to capture a Mobile Solutions client’s unique financial transactions will further enhance The pace of projects shows no sign of slowing in the appeal of Citibank Express as an alternative banking upcoming months. Citi aims to work on data analytics channel for our customers.” and customer authentication over the next year using new technologies, says Sud. Project Central The bank is also keen to further pursue innovation in It is not the only project to have consumed Sud’s mobile technology. “We continue to focus on the mobile attention. The Citi team has also made significant in both the personal and corporate space. The adoption headway in the tablet and mobile banking space over rates and cost curves are very encouraging.” He adds: the past 12 months. This fits in with Citi’s stated aim “Now that we have transformed our branches and ATM, of dominating the digital space in financial services. watch out for more in the mobile space!”

18 The Next Frontier of Financial Services A Unified Approach

Singapore’s DBS Bank is a leader in the region. Not content to dominate its home market, the bank has been pursuing strong growth in recent years, supported by a number of critical technology upgrades.

Ripping out and replacing your entire core banking An interview with system might sound dramatic. It is. Indeed, for David Gledhill DBS Bank, replacing its legacy systems became all Head of Group Technology consuming in its key countries of Singapore and Hong and Operations, DBS Bank Kong. It got in the way of the bank’s overriding priorities which were to shore up its foremost markets and to pursue growth in the region, says DBS' Head of Group Technology and Operations David Gledhill. Gledhill joined DBS at the end of 2008, just before the bank reconsidered its original program to overhaul all its legacy systems. Under Chief Executive Piyush Described as an industry veteran, David Gledhill has Gupta, who took the helm in 2009, the bank had spent more than 25 years in financial services, the identified a number of priorities. As well as extending majority in Asia. Prior to joining DBS in 2008, he held its reach, it aimed to become a customer-centric and progressively senior positions with regional responsibilities staff-friendly organisation while building its capabilities in JP Morgan. He last held the position of Head of in SME banking, wealth management, global transaction Investment Bank Operations, Asia at JP Morgan. services and treasury. This called for business-led technology solutions, says Gledhill. “You need very clear business sponsorship and ownership. Where we have been the most successful, the CEO was driving all business priorities that needed to get done.” He adds: “Otherwise they become a technology project.” Gupta wanted the bank to be more flexible in its response to the market and its technology needed to do the same. “Core banking is all or nothing,” says Gledhill. “The bank decided it was more sensible to do smaller, bite-sized chunks, product by-product, rather than a rip out and replace.” It allowed DBS to choose where it was going on a case-by-case basis, breaking things down into easily solvable pieces. It also helped the bank to stay true to its business objectives by reframing the issues at hand. “For example, internet banking is pretty core but it is not traditionally bundled as core banking. Where does Where we have been the most it start and end? We tried to stop thinking about it as a catch-all phrase.” successful, the CEO was driving DBS’ payment system also did not fit a neat paradigm. “Some say it is core banking,” says Gledhill, all business priorities that “some say not. But the fact was we needed to replace it needed to get done. completely with a new payment engine.” Emerging Standards This isn’t to say that DBS has ignored its legacy systems. One of the bank’s major projects in the past

The Next Frontier of Financial Services 19 including several new products on offer and an ability to handle high volume electronic payment requests from customers. The program also improved the bank’s We completely replaced our core risk management capabilities with better credit limit monitoring and an ability to handle tax deduction at banking with an end-to-end solution. source for pre-closed deposits. The bank’s general ledger was standardised and We decided not to cherry pick. a financial consolidator implemented. Productivity also enjoyed a boost with the automation of several manual processes.

Bite Sized Chunks few years has been the rolling out a new core banking It was the main markets that proved the stumbling block platform in its emerging markets and overseas when it came to replacing core systems. “Singapore and countries using Infosys’ Finacle. “In all of our growth Hong Kong were hugely complex undertakings so we market countries we completely replaced our core decided to simplify,” explains Gledhill. banking with an end-to-end solution. We decided not to Choosing smaller, more manageable projects instead cherry pick.” has been no modest feat however. In Singapore, DBS The bank had little choice, says Gledhill. The 14 has managed to reconfigure its loans and central liability markets boasted a disparate set of legacy systems for institutional banking clients. from different vendors, some systems facing end- The scope of the project comprised the full product of-life or end-of-support issues. On top of this there life-cycle for servicing borrowing customers, from were decentralised hardware setups which resulted in clients’ account opening experience to their credit unnecessary redundancies. assessment and facilities offering, all the while fulfilling “There was a lack of standards everywhere,” adds DBS’s capital and regulatory reporting. Gledhill. “It was a big challenge to standardise them all.” “It has been a massive amount of work cleaning up Completed by the end of 2011, the project took the credit structure,” says Gledhill. “But in the end it 20 months. The end result saw numerous benefits was a much, much better solution.”

20 The Next Frontier of Financial Services The project has delivered clear results. All corporate client static information has been consolidated. This means all account information with credit facilities details has been moved from 10 legacy platforms to one. Meanwhile, all loans have been migrated from two current loan legacy systems to a single platform. This amounts to approximately 100,660 loans with a book value of about SGD 70 billion ($59.91 billion).” In addition, the program has set up a standardised, single-touch process for maintenance of borrowing clients while there is now a single-customer identifier across all branches and group entities to improve on the group-wide consolidation of customer exposure. Capital reporting and Basel regulatory reporting have been streamlined as well, says Gledhill, down from two platforms to one. While the metrics of the project are limited at this stage, tens of thousands of data records have been reviewed and cleaned up and about 800 duplicated fields eliminated. “Account creation and disbursement are 12 per cent and 23 per cent faster respectively.”

An Ideal Solution The launch of DBS’s customised proprietary online platform, IDEAL 3.0, marks another important achievement for its technology team. Replacing the bank’s ageing IDEAL Classic, it is described as a first of its kind One of the biggest challenges is – offering a single platform for corporate customers to manage their cash and trade finance transactions. working out what the end game will This means customers can use the one end-to-end platform to go from creating trade finance instruments, look like. That is where the fun is. such as letters of credit and shipping guarantees, to payment settlements. It is made possible, says Gledhill, by using a service oriented architecture (SOA) framework with tight integration into the regional product processor. Gledhill says it is a matter of knowing your business IDEAL 3.0 also offers an integrated payments solution priorities. “You have to think why you are doing something. which supports seamless local and cross-border funds You always need to frame it as a business problem.” transfer – with more than 40 payment types – again Gledhill says how banks respond is critical in the using the common SOA framework. Another feature current landscape. Where they put their investment is its bulk file transfer module designed for a client’s dollars is key. “You need to get minds around the fact transmission of a single file regardless of payment type that things are changing rapidly and that you need to or currency. take some investment risk. If there is not that level of “The key measure of its success is the increase in consciousness, you have problems.” adoption rate by our corporate customer base and its It does not mean banks know where things are monthly transaction volumes,” says Gledhill. “We are heading necessarily. “One of the biggest challenges is currently acquiring 1,900 new customers a month, working out what the end game will look like. That is which is a record high in the history of IDEAL.” where the fun is. One thing is certain, technology will cause major disruptions. At the moment we have built Focusing on the Business traditional banking on the go but we are working on Gledhill feels confident that ultimately DBS has chosen what will be a new experience.” That will change in the the better, more intuitive path. “There was religious next five to 10 years, says Gledhill. fervour that core banking was a goal in itself,” says Part of the challenge is to decide whether you will Gledhill. “We shifted from that perspective to digging be a leader or a fast follower. For DBS, it is a matter deep into what were our real business priorities.” He of being both a leader and fast follower, says Gledhill, says that while replacing your legacy systems might depending on the area. “We are making conscious solve certain problems, it can detract from other issues. decisions in that regard.”

The Next Frontier of Financial Services 21 Redefining the Future

India’s Edelweiss Tokio Life Insurance Company is a joint venture between Edelweiss Capital and Japan’s Tokio Marine. It aims to exploit its advantage of not having a restrictive legacy system to weigh it down.

Sometimes it is a blessing to be the newcomer on An interview with the block. For India’s Edelweiss Tokio Life Insurance Venkat Krishnan Company – just two and a half years young – it Chief Technology Officer, means creative new ideas can reign supreme, Edelweiss Tokio Life unfettered by the constraints of an ancient Insurance Company legacy system. This has certainly been the experience for Chief Technology Officer Venkat Krishnan, who joined the life insurer in July 2013. “Old companies have the baggage of legacy systems to deal with. Any innovative ideas are limited as a result. It means Venkat Krishnan joined Edelweiss Tokio Life Insurance they always have to think about the existing systems Company as Chief Technology Officer in July 2013, and work out how the two can complement having spent 15 years in information technology in the each other.” areas of banking and insurance. Krishnan says that being a young organisation allows Edelweiss Tokio to avoid such drawn out processes. “We can collapse those system constraints and as a result we do not have to take on a lot of risk by potentially compromising those controls.” He says the relative youth of the insurer’s chief executive has also helped to spur innovation. CEO Deepak Mittal welcomes new ideas and drives any technology project from the top down, says Krishnan. “We have a CEO who is young so it means we experiment with a lot of technology. It gives us the comfort to do things that are very different.”

Finding a New Way Krishnan has established a number of priorities as Edelweiss Tokio’s new CTO. Driving profitability through operational efficiency is one of them. “By that I mean trying to find bottlenecks that are there in the system, occupying most of our bandwidth from a business perspective. Driving operational efficiency will We want to redefine how we sell automatically give us benefits.” Another priority is to redefine the distribution of to the regions, how we can sell financial products through the implementation of leading technology. “We want to redefine how we sell to the through various channels much regions, how we can sell through various channels much more efficiently.” more efficiently. A large part of this comes down to the human element. It is about trying to recognise and meet customers’ needs, at the same time as understanding what the agent does and needs. “This ties in well

22 The Next Frontier of Financial Services Call Centre Employee Executive

Internet Intranet Portal

Third-Party Partner/Agents/ Administrators Bancassurance Internet Service Agency Enterprise Agency Portal Portal/Mobility Platform Portal Internet Customer Portal

Internet

Edelweiss Tokio manages its business ecosystem using Enterprise Portal/Mobility Platform, a technology-agnostic Customer channel that enables better customer service delivery and consistency across all service partners.

with our organisational philosophy that understanding a customer’s needs first are far more important to us and only then do we offer any solutions,” says Krishnan. We want technology to make the “We are trying to understand the psychology of the customer; the psychology of all the actors in the process easy for the end customer, system,” says Krishnan. As part of the solution, Krishnan aims to improve while also empowering our branch efficiency and transparency through the digitisation of data, to ensure “what you see is what you get.” offices in the regions. He says having the right kind of data available is one of the big challenges of India’s insurance companies. “Effective data warehousing − where you can slice and dice data and send out the right kind of information, from the branch officials to the central office − is very important to us.” Growing Pains Among other things, it will benefit the product team, The virtualised data centre will also help to address he says, enabling it to analyse the various trends before some of the issues around decentralisation of the creating a new product. insurer, as it expands into India’s many regions. However, it does not stop there; one of his major Growing an organisation successfully without over- projects in the next 12 to 18 months will be the reaching can be a challenge. Edelweiss Tokio’s new CTO end-to-end virtualisation of the entire data centre frames it as an opportunity, saying “we want to look at [See box: On the Job]. what can we do remotely – and much more efficiently.” This will help to minimise the insurer’s “technology The aim, he says, is to ensure effective delivery footprint,” says Krishnan, while at the same time to and from the branches while making certain that building the resilience of the insurer’s infrastructure. the integrity of the system remains intact. “We want “We are looking at making it much leaner in terms technology to make the process easy for the end of set up while at the same time running more customer, while also empowering our branch offices in business applications.” the regions.”

The Next Frontier of Financial Services 23 To this end, Krishnan will implement a mobility strategy, which at the same time simplifies the available technology with the aim of “enabling our people to You can build a beautiful platform handle more business in a more efficient manner and with fewer issues.” but at the end of the day, the key In all this it is important that the central office fully supports the operations and underwriting in the branch is that it should get used. offices, says Krishnan. “So if people get stuck with processing a particular product, they can invoke a foolproof mechanism whereby a centralised agent or help desk can help them to complete that process while still in the branch.” This would include an effective logging mechanism to ensure nothing was compromised from a security perspective, says Krishnan. “We will thereby be able to understand what person has given control to the central office.”

Going Live Krishnan aims to improve communication between the end customer and the product specialist sitting in the On the Job central office through the use of video conferencing. “It means that if an agent or branch office gets stuck, they BYOD is a key priority in 2014 can invoke a video conference application right in front of the customer. The customer can ask a query and the central office can respond. It will be a much more effective communication medium.” The benefits of video conferencing do not stop there. Krishnan points to its potential in effective underwriting as well. “People are well versed in telephone underwriting. We want to experiment with video-based underwriting using whatever kind of device a customer has," says Krishnan. The idea is that underwriters will gain a greater understanding of the customers, says Krishnan, which in turn will have a bearing on the policy premium, making it much more accurate.

Driving Change One of the biggest hurdles can be the issue of whether employees will choose to embrace the new technology, says Krishnan. “You can build a beautiful platform but Edelweiss Tokio Chief Technology Officer, Venkat at the end of the day, the key is that it should get used.” Krishnan, has a number of projects to tackle of the According to the CTO, he benefits from the fact that any technology project at Edelweiss Tokio is essentially next 12 to 18 months. Some of the largest are: a top-down initiative. ➜ Implementation of an effective enterprise portal “The CEO is driving the entire project so it means and mobility strategy we have the right kind of interest and the right kind of support for that technology. It ensures that any ➜ Re-engineering of business processes and challenges regarding usage are minimised.” building an enterprise content management It also helps that the financing of technology is about platform the bottom line rather than the top line, says Krishnan. “Our business strategy and IT strategy are driven by ➜ End-to-end virtualisation of entire data centre very basic parameters, which are operational efficiency ➜ Implementation of a highly secure Bring Your and product knowledge. Always we are measuring our operational dashboards and our financial ratios to ensure Own Device (BYOD) strategy that we know our bottom line. We want to improve that on a year-on-year basis.”

24 The Next Frontier of Financial Services Choice and Control

ING Vysya – a merger between India’s 80-year-old Vysya Bank and the Dutch ING Group – stands as the seventh largest private sector bank in India with a network of more than 1,000 outlets across India.

ING Vysya Bank prides itself on being a financial An interview with services institution where “innovation and transformation Aniruddha Paul are the way of life.” Certainly the Indian bank is proving Chief Information Officer, its ability to keep abreast of the latest technology, ING Vysya Bank launching its second generation mobile apps in July, 2013. But sometimes it is about pulling off the more pedestrian of projects – carrying out transformations that revolutionise the bank’s back end, far from the public gaze. In this vein, Chief Information Officer Aniruddha Paul points to the replacement of his bank’s ancient data centre as a significant feat for his team. Aniruddha Paul joined ING Vysya in 2007 as Head of IT “Our IT team’s biggest recent achievement has been change delivery. He was elevated to the position of CIO to build and commission a brand new data centre on in July, 2013. Previous appointments include senior roles schedule and migrate the contents of the old data at Cerulean Infotech and Citibank, India. centre with zero downtime to business operations.” What made the new data centre particularly challenging was the fact that it had to be done in the same physical pace that hosted the old data centre. “The team had to be extremely careful to ensure normal operations were not disrupted even in the slightest,” says Paul. “And all of this in the middle of one of the busiest IT change calendars in recent times in our bank.” He says that such a project is critical if the bank is to continue pursuing business-led innovations. “In many ways, data centres are at the heart of IT. For the last half a decade, we have focused on what I call business IT – that is, IT enabling the business transformation agenda of the bank. This year, we have returned to core IT – re-examining our IT infrastructure stack, and the way we manage our application and infrastructure monitoring and deployment processes so that we can assure our business counterparts on IT capacity, Our IT team's biggest achievement reliability and availability aspects.” There is no doubt ING Vysya desperately needed a has been to build and commission new centre. “We were literally running out of room in the old data centre!” says Paul. “We have now ensured a brand new data centre on we have enough capacity to serve our business needs schedule and migrate the contents for the next seven years.” However, there were other challenges to overcome, of the old data centre with zero the physical design of the data centre included. This led Paul and his team to design their own server racks and downtime to business operations. wiring deployment systems rather than to buy off-the- shelf. Their gamble paid off. “Their custom designs have worked really well in packing in more server density without compromising on manageability,” says Paul.

The Next Frontier of Financial Services 25 Bells and Whistles The revamp included significant investments in advanced tools to manage the data centre. “The new centre comes loaded with state-of-the-art technology in terms of physical security, infrastructure and application It is important for established monitoring capability,” says Paul. The bank also deployed a private cloud in the data businesses to make informed centre for captive use. “We like the extent of scalability decisions on their existing that cloud provides, but we draw the line at hybrid or public cloud.” business models, or they will Paul sees cloud, along with social media and mobile solutions, as an inevitable part of the new landscape. lose relevance. “They represent disruptive IT and business models. It is quite likely that newer entrants will embrace these technologies by default and craft suitable go-to strategies for the marketplace, and it is important for established businesses to make informed decisions on their existing business models, or they will lose relevance.” At the same time the bank has been keen to give its Appy Times data architecture a bit of a makeover. “We have made Of course, from the outsider's perspective, it is all some important incremental improvements to our data about the front-end. But ING Vysya has progressed architecture in terms of shielding our online transaction here too with the launch of its second generation processing (OLTP) systems from analytical overheads,” mobile apps in 2013. Currently available on the Apple says Paul. It was achieved by building operational iOS mobile platform, the apps will soon be extended data stores for this purpose and leveraged largely for to other platforms such as Android, BlackBerry and operational reporting. Windows Phone. The bank also made progress in implementing The new app allows customers to use their mobile logical data models for regulatory reporting. “We are devices to pay utility bills, transfer funds to other preparing ourselves for the next big steps in establishing accounts, view mini-statements, request cheque books, domain specific data marts for analytical reporting and stop payment of cheques, among a whole host of predictive analytics,” explains Paul. progressive features.

26 The Next Frontier of Financial Services ING Vysya chose IBM Worklight to help develop and manage the cross-platform apps and, in fact, was its first client in India to go live with a publicly downloadable app. Says Paul: “We have leveraged the IBM Worklight platform to create intuitive, user- experience design led, rich client applications for our clients who have smartphones.” The response has been encouraging. “Our customers seem to like what we have delivered. Our iPhone app, for example, has received a lot of positive feedback on the app store.”

Financial Inclusion At the same time, the bank has kept in mind its varied customer base. “At the other end of the spectrum, we have innovated with SMS-based banking, beyond the conventional informational aspects of obtaining alerts and balances.” This means, for instance, that the bank’s customers can open and close fixed deposits simply by sending an SMS. “We always keep in mind that our customer base has wide variety, and we must innovate at both ends of the spectrum to be relevant,” says Paul. This view is in line with ING Vysya’s plans to reach out to new customers and to expand into new market segments. That means finding ways into India’s remotest regions and meeting the needs of its significant base of unbanked poor. Paul is keenly aware of the fact that half of India’s I see us returning to ‘business IT’ population remains outside the banking sector altogether. “At a societal level, the biggest challenge in 2014 and beyond. In terms of for banking in India is in becoming relevant to the 50 per cent of the population that is as channels, process automation and yet unbanked.” He says that even while banks roll out new products, business analytics. platforms and channels for the already-banked – a prime target for new banks that are slated to enter the Indian market in 2014 – the focus must also be on technologies that bring the rest of the population into the financial arena. This necessitates a multi-pronged approach, says Paul, which includes: ■ Reducing the cost of customer acquisition through enterprise level, says Paul, banks will have to employing user authentication tools e-KYC and invest in technologies that enhance security, Aadhaar for financial inclusion, along with data mining lower risk and ensure 24/7 availability of and analytics for crossing-selling and up-selling to the banking services. already banked. ■ Lowering the cost of the banking footprint using such Back to Business technologies as virtual desktop infrastructure (VDI) For Paul, the next 12 to 18 months are a time to and video conferencing. refocus on the business opportunities. “We spent ■ Lowering cost of banking transactions through, 2013 re-tooling IT to ensure that we are in good shape for example, peer-to-peer money transfers and to deliver business priorities in the years ahead. biometric authentication. I see us returning to ‘business IT’ in 2014 and beyond, These approaches aim to address the banking in terms of channels, process automation and challenges in India at the societal level. At the business analytics.”

The Next Frontier of Financial Services 27 Harnessing the Cloud

Maybank Group is Malaysia’s largest financial services institution, with plans to become an undisputed leader in the region. At the same time, the bank is rationalising its internal workings with a focus on straight-through processing.

Maybank Group’s projects are in the “highly An interview with confidential” sphere just now. But watch this space Michael Foong Seong Yew throughout 2014, says its Chief Strategy and Chief Strategy and Transformation Officer, Michael Foong Seong Yew. Transformation Officer, Like others in the industry, Foong is only too aware of Maybank Group the obstacles facing the banking sector. “We are facing reduced net interest margins, increased operating costs and increased competition that narrows the margins we can charge our corporate and other customers. Those are the key challenges we have to address over these next two to three years.” Prior to taking charge of strategy and transformation at For Maybank, the solution is twofold and will underpin Malaysia’s Maybank Group, Michael Foong Seong Yew the bank’s strategy over the next few years. Firstly, says spent 17 years as Managing Director of Accenture’s Foong, automation is critical. To this end, Maybank is Management Consulting division in Malaysia. considering a series of technology projects that focus on straight-through processing. “Straight-through processing is something we want to implement not just within one country but on a regional basis,” says Foong. “And that means straight- through processing not only through new technologies, but through the centralisation of Maybank’s processing plants across the region. That is something we want to look at.” But this will rely on the second part of the solution: process re-engineering. Foong says deconstructing the bank’s value chain and removing those parts that don’t add value is essential. “Obviously we are not going to automate processes that are inherently inefficient. We are looking at ways to slim down the processes before we start automating them. That will be enabled more by good old fashioned process reengineering and six sigma methodologies rather than just by technology.” He says it makes good financial sense. “We will achieve the greatest bang for our buck when we invest in technology only after we reinvent our processing Straight-through processing is capabilities so that we can deliver our products and services in a much faster fashion – as well as enable something we want to implement greater responsiveness to customer queries and requests.” Once things are slimmed down, Maybank will rely on not just within one country but on technology to take it to the next level, says Foong. Of course, this raises another issue for the region. a regional basis. Asia Pacific suffers from a scarcity of skills throughout the entire spectrum of technology project delivery. It is a problem that has existed these past five years and sees no sign of abating, says Foong. “You can talk about the

28 The Next Frontier of Financial Services scarcity of skills in project management, in coding, in plugged in to be able to pay on a variable basis rather the ability to manage and direct large scale changes, as than a fixed cost.” well as in technology architecture.” Foong sees this as essential in the current environment. “If you don’t come to grips with that, you Investing Big will continue to lose a lot of money on the table by Yet Maybank is as keen as other banks in the region having to invest large amounts up front.” to overcome such obstacles in its bid to pursue the It also enables banks to be more agile in their current wave of opportunities in technology. Foong solutions. “It means you get to market sooner. You can believes big data leads the pack. “I think in the future experiment, learn about a particular tool or solution, and if you don’t have big data you will be at a severe then scale up. That is quite different to the old school competitive disadvantage in all lines of business, years where you spent two years designing an industrial including investment banking but particularly in retail, solution. You would wait for the end of the second insurance and asset management. If you don’t develop year to launch it and by then the market might have capabilities in big data and analytics I think you may changed.” lose competitively.” Also squarely on Maybank’s radar are solutions which The Right Partner harness the likes of cloud, promising to dramatically To this end, Maybank is looking at opportunities to reduce costs in infrastructure to deliver the same level team up with technology vendors. The new reality of service. “You could call it a combination of cloud makes selecting a suitable partner ever more important. solutions, or just getting the right hardware platforms Foong says Maybank chooses its partners based on their approach to long-term relationships. “That is really important to us. Anyone that is transactional in nature is not that interesting to us as a partner.” A vendor that can achieve results fast is high on the bank’s list too. “Quick proof of concept and quick In the future if you don't have generation of value is very important to us.” There is also the need for a partner that can work big data you will be at a severe with Maybank to quickly scale up once it creates a solution. Waiting for three years to launch a product competitive disadvantage. simply is not attractive, says Foong. “We do recognise that some solutions require time to bake but we are looking for opportunities to reduce that turnaround time.”

The Next Frontier of Financial Services 29 Analytics in Action

Medibank Private is Australia’s largest provider of private health insurance and health solutions. In an industry beset by slim profit margins, the group is keen to embrace the latest technology to offer much more for considerably less.

Australian health insurer and solutions provider An interview with Medibank Private (Medibank) has many ideas about Laz Cotsios how to revolutionise the insurance space and technology Group Executive of plays a large part in all of them. Private Health Insurance The primary aim for Group Executive of Private Health Medibank Private Insurance, Laz Cotsios, is to provide members with greater information so they can make more informed choices. “As a society we are data rich but information poor. One of the issues we suffer from as consumers is an asymmetry of information. It is skewed in favour of the health sector and not the consumer.” Laz Cotsios has notched up many years experience To this end, Cotsios believes big data represents a in the energy and finance industries running and huge opportunity for Medibank. Ultimately he envisions transforming large scale operations which included the overlaying of data from numerous sources to give back office processing, call centres as well as IT ‘run members a more complete picture. and change the bank’. Prior to Medibank, he was Chief “As an organisation, we will become more relevant to Operating Officer and Managing Director at UBS Wealth our members as we provide a whole lot of information Management in Australia. around health and well-being, allowing them to make more informed choices.” Yet at this stage it remains on Cotsios’s wish list. “We are very much in the early days,” he acknowledges. Nonetheless, his vision ties in with another recent initiative by Medibank: becoming a Coles Flybuys loyalty scheme partner in July 2013. As Coles is one of Australia’s largest retailers, this will give Medibank access to huge amounts of information about its members. Cotsios is the first to point out that there were other reasons for the arrangement though. “That was really a loyalty play for us. One of the biggest issues we have is recognition of loyalty.” Under Australia’s Private Health Insurance Act, insurers are unable to offer no claim bonuses. “That As an organisation, we will means we are looking for other ways to recognise customer loyalty, including Increasing claim limits based become more relevant to our on tenure, for example, dentists or optometrists.” In addition, Medibank wants to encourage members members as we provide a whole to eat well in line with its health care mandate. lot of information around health Consequently, the insurer is giving members three FlyBuys points for every dollar spent on fruit and and well-being, allowing them vegetables at Coles. to make more informed choices. Insuring the Future Cotsios is also keen on mobile applications. “I think they are the way of the future.” He imagines today’s static policies becoming far more fluid. “I foresee with

30 The Next Frontier of Financial Services Medibank’s Health Solutions group has already adopted cloud. At this stage all data is stored within Australia or on-site.

handheld devices that you should be able to dial up Ultimately, he says, technology will be the big your policy – put a child on, take a child off; increase or disruptor in health care. Until now, “technology lower your excess – so your policy becomes flexible.” has been seen to get in the way of healthcare”. He Also inevitable, says Cotsios, is cloud. He sees it as envisages a day, not too far away, when people don’t a huge opportunity for Medibank’s insurance arm to have to attend their doctors’ clinics for routine tests. leverage. For now, everything is deployed in-house. “We operate a very slim margin business and the cost of The Need for Speed technology is concerning. I don’t subscribe to the fact Moving more nimbly is vital in the current insurance that we have to own everything and build everything. environment, says Cotsios, forcing the group to up the I think absolutely cloud is the way of the future – only ante in response to market pressures. paying for the services you use as opposed to building To this end, the insurer has released seven products infrastructure that potentially becomes dated.” in the last eight months, compared with three in the That said, Medibank’s Health Solutions group has last three years. It is a significant difference but the already adopted cloud, albeit in a limited form. At this group executive doesn’t see these pressures abating stage all data is stored within Australia or on-site. [See anytime soon. box: Towards the Cloud] “The market is changing and consumer needs are It is a controversial issue, the overriding concern being changing. We have seen increased competition in the privacy. “Privacy is always a concern and unfortunately market place so we need to respond in a more timely health privacy is a major issue,” says Cotsios. However, manner,” says Cotsios. he does not believe a solution is too far away. “We just Cotsios also notes that price has become a major need to make sure we can satisfy regulators that we issue for a number of consumers. “We have had to have robust controls around information.” respond to that challenge.” It is a big ask, given profit

The Next Frontier of Financial Services 31 margins are wafer thin already and show no sign of improving any time soon. “We have an aging population. We have increasing medical technology costs and disease,” points out We have an aging population. Cotsios. This means that costs are escalating at a far greater rate than the insurance industry’s premiums We have increasing medical putting considerable pressure on profit margins. The insurer has also taken great strides to improve its technology costs and disease. product lifecycle by reinventing its workplace set up. In January 2013 it began an activity-based work pilot in preparation for the move into its new Melbourne-based building, slated for completion in August 2014. The results were particularly gratifying. The group saw its product build process time slashed from 49 weeks to a mere seven. workplace”. That comes as something of a relief given The idea of the group’s activity-based work place is it was one of Medibank’s concerns in setting up the to bring people together for a particular project so, as activity-based work environment. Cotsios explains, the subject experts are no longer on an Indeed, the original plan had been to rotate different entirely different floor from the IT. teams through the pilot program. However, the decision “We found in building a product, 60 per cent of the was made to hold off as it became clear employees time was messages sitting in email trails waiting for found it too hard to revert to their old technology ways. people to make a decision. By getting people in the “Most people who are working in there cannot see same location, you get to the heart of issues extemely themselves working in the old environment again. It is quickly,” says Cotsios. hard to take them out, take their technology away, and Cotsios says management has witnessed improved give them the old technology.” staff engagement through the pilot. Meanwhile, Adds Cotsios: “The days of the old functional type of “employees are excited now at the prospect of the new organisation are coming to an end.”

Towards the Cloud

Medibank’s Health Solutions group has already made the move to cloud – albeit in a limited capacity at this stage. The group has opted for solutions that enable in country or onsite data storage. “Due to data sovereignty requirements the use of standard cloud solutions is generally not something available to MHS,” says Medibank Chief Information Officer Brett Winn. Yet there are still benefits to be had. “For application development, web hosting and other non-clinical systems the use of cloud services has expanded our ability to build and test software at a reduced cost base [compared to] hosting the equivalent systems internally.” Not only does it save money, if offers ease of use and speedy deployment, says Winn. “Cloud technologies are very robust and highly configurable which enables complex business to undertake a range of activities using either public or private cloud services.”

32 The Next Frontier of Financial Services Evolution, not Revolution

With locations in more than 130 countries, SAP AG is a world leader in enterprise software and related services. In 2013, SAP expanded its reach to Asia Pacific and Japan, to introduce its innovative technologies for financial services.

For all the disruption wrought by the flood of new An interview with technology, some question the extent to which it has Andrew Pitcher changed the fundamentals of financial services. SAP Senior Vice President Yet to be delivered in many instances is significant and General Manager and sustainable business transformation, according of Financial Services, to Andrew Pitcher, Senior Vice President and General Asia Pacific, SAP Manager of Financial Services, Asia Pacific, at SAP. “We have seen many organisations invest in new, innovative and lower cost technologies. However, in all but a few cases, the fundamental metrics of the organisation have not changed.” Andrew Pitcher has spent 21 years in the financial Pitcher’s wish list for financial institutions is long. He services industry, the last 17 at management and believes further investment is required to deliver deep technology consulting company Accenture. He joined customer insight at the point of sale in real time – SAP in July 2013, taking on the newly created role of including pricing, risk and settlement. He also highlights General Manager of Financial Services, Asia Pacific. the need for omni-channel business processes for customers and staff, straight-through processing, innovation in payments, flexible technologies that provide business control, substantially improved data management capabilities and innovative deployment methods that will significantly reduce the total cost of ownership of technology in the 'new financial services industry'. That’s not to say the banking and insurance industries are sitting still – far from it, says Pitcher. He has observed considerable innovation in financial services in Asia Pacific over the last three years and points out that most of SAP’s customers have Chief Innovation Officers who operate across their businesses, not simply in technology. “We see a lot of focus on innovation in customer experience, in payments, in the cloud – with business- to-business (B2B) solutions – and in the way social media is being leveraged.” Adds Pitcher, “financial services organisations have finally started to work out how to bundle products for their customers and to price risk in a more dynamic and real-time way.” Cloud take-up is accelerating ... Getting Comfortable with Cloud as the need to reduce capital Pitcher believes cloud is making a significant impact on the region’s markets. “Cloud take-up is accelerating. expenditure has dominated. Twelve months ago many countries said cloud was off limits, we now are seeing take up of cloud almost everywhere, as the need to reduce capital expenditure has dominated.”

The Next Frontier of Financial Services 33 SAP’s in-memory capabilities (SAP HANA) will help banks not only process large volumes of data faster, but more importantly aid in turning that new capability into tangible value.

He admits that there remains caution around customer and financial data in banking, capital markets and insurance. However, he points out that many non- customer facing and enterprise processes are being Organisations who embrace the moved to the cloud, either within country or outside. “For the most part, SAP customers are using cloud new deployment models will have a for customer relationship management, B2B exchanges of financial information, in enterprise resource planning significant financial advantage. and data management.” Pitcher notes there are now many mature and flexible solutions available in all the sub-industries across financial services. These include SAP’s Ariba (Procurement) and Success Factors (HRM), both of which are established players across the banking, He warns that financial services institutions need capital markets and insurance sectors in Australia, to move quickly. “In some markets there is a lack of South East Asia and Japan. understanding of how cloud can reduce the total cost Adds Pitcher: “Interestingly, our financial services of ownership and improve speed-to-market. Those network, which links corporates directly to their banks organisations who embrace the new deployment via the cloud to improve cash management, treasury models will have a significant financial advantage. and payments, is also gaining traction with our clients in We would recommend a full assessment of the the US, Japan, South East Asia and Australia. It could available opportunities and comprehensive consideration be a game changer.” given to data security, supplier management and Pitcher views cloud as primarily reducing capital commercial models.” expenditure but agrees that there are significant benefits from business process standardisation and speed-to- The Benefits of Insight market from off-premise solutions. “We have results in Social media is also finding its place in the region’s all markets from the movement to cloud.” financial sector, says Pitcher. “The majority of our

34 The Next Frontier of Financial Services customers are hard at work in the implementation of their customer-centric strategies. As part of these strategies, financial services institutions are most interested in gaining insight about their customers to ensure they are best equipped to address their customers’ needs and concerns.” Pitcher points to Ovum’s Business Trends Survey, which found that Asia Pacific banks, on a global basis, were the most advanced in use of social media, and were more focused on developing social media strategy then their global counterparts. Social media for banks falls into three main areas, says Pitcher: awareness and marketing; products origination (in conjunction with other channels); and customer servicing. He says that converting this insight into tactical and strategic refinements of the sales and services strategy is critical. “As an example, several of our clients in the region are changing their sales and service platform strategy and offerings to respond to direct customer feedback received on a sustained basis through social media. Allied to this is the desire of customers to be able to purchase new simple banking products via social media channels.” The winners will be those Pitcher believes that reputational risk and social media are closely interlinked and cannot be ignored. “The who use advanced analytics winners will be those who use advanced analytics to intimately understand the sentiment of social media and to intimately understand the those who then invest in driving increased customer advocacy, like some of our clients in South America.” sentiment of social media. Customer advocacy describes the willingness of a customer to continue to use and openly support the financial services organisation in the marketplace. Says Pitcher, “Positive customer advocacy is normally only achievable following significant organisational investment and focus in customer understanding, customer-centricity, sales and service enhancements Transformations Run Deep and, increasingly, loyalty and rewards programs.” Today’s technological innovations are not all about the customer experience. Pitcher notes that financial Real Time Processes services organisation across the world are facing SAP sees many opportunities in analysing big data considerable challenges when it comes to addressing and as a result has been busy creating solutions. “As it risk and regulatory compliance and reducing the costs relates to big data, SAP’s in-memory capabilities (SAP and complexity within their business. HANA) will help banks not only process large volumes The business transformation that Pitcher sees among of data faster, but more importantly aid in turning that SAP’s most successful clients go well beyond point new capability into tangible value,” says Pitcher. solutions. “These transformations are centred on the To get the most out of the big data, SAP offers customer experience and straight-through processing predictive analytics solutions “to not look at how the but also operations efficiency and risk and compliance.” world was, but how it will be,” says Pitcher. “The faster It sounds like a lot to process. But there is no a bank can analyse data, the better the predictive value sign that it will slow down anytime soon. According of it, and as a result we see the industry moving from to Pitcher, the next step is ‘real-time’ everything – batch to real-time processing.” customer information, leads, origination, underwriting, Pitcher believes that faster data processing and analytics, financial information, fraud detection, sophisticated analytics to achieve a 360-degree view compliance, settlement. of the customer will be crucial in developing true Pitcher concludes: “Making all business processes relationship-based pricing, and answering the question, real-time, using data management and analytical “How do banks make money from data being held in capabilities that are a step-change to what we see their back systems right now?” today, is the future. No question.“

The Next Frontier of Financial Services 35 SAP Asia Pte Ltd. (Regional SAP Headquarters) 30 Pasir Panjang Road #03-32, Mapletree Business City Singapore 117440 Phone: +65 6664 6868 Fax: +65 6664 7000

SAP Australia Pty. Ltd. – Sydney SAP Australia Pty. Ltd. – Melbourne Level 7, 168 Walker Street 2nd Floor, 441 St. Kilda Road North Sydney NSW 2060 Melbourne Vic 3000 Australia Australia Phone: +61 2 9935 4500 Phone: +61 3 9862 7100 Fax: +61 2 9935 4644 Fax: +61 3 9862 7244

SAP China – Beijing Chaoyang SAP China – Shanghai 12th Floor, Tower 2, China Central Place 47th floor, Wheelock Square No. 79 Jianguo Rd, Chaoyang District 1717 Nan Jing West Road Beijing 100025 200040, Shanghai China China Phone: +86 10 6589 8050 Phone: +86 21 2221 3000 Fax: +86 10 6589 8999 Fax: +86 21 2221 3999

SAP India Pvt. Ltd. – Mumbai SAP India Pvt Ltd. – New Delhi 5th Floor, G-Block 6th Floor, plot no A-2 MGF Corporate Park, C-59, BKC, Bandra East MGF Metropolitan Mall, Saket, Mumbai – 400 051 New Delhi – 110017 India India Phone: +91 22 6655 6888 Phone: +91 11 6602 7200 Fax: +91 22 6655 6826 Fax: +91 11 4162 8919

SAP Hong Kong SAP Japan Co., Ltd. – Tokyo Suite 1111-1114, 11/F Cityplaza 4 SAP Japan Building 12 Taikoo Wan Road 1-6-4 Kojimachi Chiyoda-ku Taikoo Shing Tokyo 102-8022 China Japan Phone: +852 2 539 1800 Phone: +81 3 6737 3000 Fax: +852 2 539 1818

SAP Malaysia Sdn Bhd. (236985-P) SAP New Zealand Limited – Auckland Suite 22.09, Level 22, GTower Level 15, 199 Jalan Tun Razak 151 Queen Street 50400 Kuala Lumpur Auckland 1010 Malaysia New Zealand Phone: +603 2175 5000 Phone: +64 9 355 5800 Fax: +603 2163 2688 Fax: +64 9 3555899