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In this Showcase, Raheel Iqbal, our Managing Partner, speaks with Islamic Finance News about the evolving digital financial services landscape across the Asian continent in the wake of widespread regulatory changes.
2020 has been a notable year for a variety of reasons – historically resilient global industries buckling under the pressure of underserved markets due to social distancing, stay-at-home orders, and shuttering businesses have truly launched the new decade with many challenges to overcome. The chasm that COVID-19 created inadvertently accelerated the bourgeoning digital landscape in Southeast Asia and across the region, with the financial industry leading the way.
1. With the introduction of a new digital banking licensing model in APAC, how do you see the adoption of digital financial services in the region?
APAC countries have taken the initiative of introducing the digital banking license as a separate category to support innovation and enhance experiences for the end consumer. Non-traditional companies, who are often B2C entities, have applied for it hoping that they’ll be able to break into this segment and disrupt the traditional banking industry. The market is already adopting digital banking, with huge growth reflected in this segment. Customers already trust these service providers with their non-banking lifestyle needs, and as such are more willing to adopt financial services being offered to them in a manner that’s completely different from traditional banking methods. These challengers have the ability to transform the entire operating model, especially how customer-centrism is applied within their other services as well. If you look at the numbers across the markets where these banks have been established, they have a huge number of banking customers adopting their services.
2. Will this new operating model threaten the incumbent banks?
Between new-age business models and APAC’s new digital-only license operating model, challenger banks have certainly become a threat to incumbents. These organizations are agile, delivering far more customer-centric experiences than their traditional counterparts. Challenger banks threaten incumbents because the market isn’t happy with traditional banking players’ services, and want its banking services delivered similarly to how non-financial organizations offer services. These organizations can break down the entire banking services value chain, identify key focal points, and deliver them with vastly improved experiences. For example, they can look at specific areas such as payments, microlending, card management or account services, and break it apart – they don’t have to be a monolithic industry titan to do so – and modularize their services to offer hyper-personalized experiences to customers. Challenger banks have certainly become a threat to the market incumbents, encroaching directly into their market share.
3. What should incumbent banks do to maintain their market share?
Incumbent banks must address the legacy system architectures that they have been operating on for decades. Legacy systems are costly to maintain and update, are inefficient by modern benchmarks, and cannot quickly adapt to dynamic customer segments. A complete legacy system overhaul can be unfeasible for banks and financial institutions, and disrupt day-to-day IT operations.
This is the key driver behind our award winning Digibanc™ Suite, which empowers banks and fintechs with a range of modular, open-API-driven digital banking ready solutions that can seamlessly integrate with legacy systems, creating a faster digital go to market proposition enhancing the overall customer experience delivery. This way incumbents can fast track their digital agenda in a fast and highly competitive market
4. How will this impact Islamic banks and financial institutions in the region?
Digitization can help Islamic banks and financial institutions by offering them technological capabilities that were completely unheard of a decade ago. A modernized digital platform that allows robust, modular architecture can drive up new customer adoption, expand the existing customer user base, and ensure that all operations are sustainable and ethical.
Islamic banks and financial institutions have immense potential across the continents they serve, which is why we wanted to elevate their technological competitiveness with our offering. Digibanc™ IslamicBanker from Codebase Technologies enables Islamic institutions to offer more personalized, intuitive customer experiences on a platform that’s highly customizable, rapidly scalable, and compliant with AAOIFI and local Sharia regulations.
5. What are some of the challenges that new challenger banks will face while creating trust in the market? (or: How is Codebase Technologies helping Challenger Banks in Asia?)
Non-financial organizations focused their energies on developing intuitive user experiences that maintain customer loyalty and stickiness within the lifestyle product space. Entering a market that’s eager to evolve requires a depth of knowledge and agility that Challenger banks won’t be able to deliver without costly internal development. The risk involved for consumers is high – would they trust innovations for more complex, high-risk transactions, or would they be primarily used for low-risk functions, such as children’s allowances and grocery payments? Building trust with new players who don’t have branches or any previous mainstream banking establishment will be very difficult. Codebase Technologies helps challenger institutions by providing them mainstream, enterprise-grade systems that cover banking services in its entirety. While they develop the front-end, we support them with modern core enterprise systems to service their customers and build a mainstream-grade institution.
6. Do you see adoption of modern technology-driven operations like SaaS and Cloud Computing in the region?
SaaS and cloud adoption in Asia for small-to-medium-sized businesses has already been happening over the past 10 years. For challenger banks and incumbents alike, cloud-enabled solutions have been consistently growing in popularity in recent years. Cloud-enabled technologies are crucial for challenger banks because adopting that method of solution delivery expands possibilities for the digital ecosystem. Cloud-based models effectively improve scalability management and cost-effectiveness as well as flexible product and service deployability. Maintenance of a cloud-enabled platform is also much smoother because updates and servicing are centrally applied and automatically deployed to each instance.
Our engineers have created a powerful Digital Banking Platform as a Service called Digibanc™ SaaS, a highly secure platform that delivers enterprise-grade, cloud-enabled digital banking, and financial services operability. Digibanc™ SaaS is built on a modular open-API framework that drives seamless business agility, rapid scalability, and streamlined operational efficiency for banks and financial institutions.
7. What should be the next step for banks to remain digitally relevant?
Banks and financial institutions need to first understand that the historical approach to technology can no longer work in an environment that’s constantly implementing new innovations. They then need to enhance their legacy core systems with technologies that reduce operating times, simplify complex processes, and revitalize the customer journey on deeply penetrated channels.
In order for institutions to rapidly deploy the enhancements needed to compete with challenger banks, they need to take on external support. Codebase Technologies transforms client businesses by enhancing their business agility, empowering seamless scalability, and delivering intuitive, customer experiences. We look forward to working with institutions across the region to evolve their technological capabilities, and reshape the landscape of digital financial services.
Tagged:
- apac, market insights
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