In the last five years, traditional banks have faced immense disruption by new players in the field. Today, the pandemic accelerated that disruption: In 2020, more than half of banking customers surveyed in APAC were willing to switch to neobanks, or new digital contenders. What makes consumers reconsider their options, and could 5G be the key to this switch?
Below, Justin Tan (Financial Services Consulting, APAC), Ernest Yiu (Financial Services, Hong Kong) and Kee Yin Lai (Digital and Technology consulting, Singapore) share their insights on 5G and the digital banking landscape in APAC.
How can 5G benefit the banking industry?
Virtual advisors and more intuitive, and responsive conversational interfaces are just some of the advantages. While 5G may not immediately create such new uses or, strictly speaking, revolutionary financial services offerings, its computing power, speed, and reliability will make it possible to increase the possibilities of customer capture and optimise the provision of financial services.
Banks, like customers, will benefit from an ‘upgrade’ in performance: massive amount of data will be delivered through multiple communication channels, whenever and wherever they want. 5G will further accelerate the development of various applications and platforms: chatbots, enhanced videoconferencing using augmented reality or even holography, connected objects. (IoT), etc. This evolution is especially crucial in the post-pandemic economy.
It is worth noting that the APAC region has delivered more digital services and products during the pandemic, particularly in banking and commerce. Digital banks saw their customer base grow three times compared to traditional banks in the past year. The latter is largely reliant on legacy systems and the challenge is to harness the data they have while rethinking their business models. Even though 5G adoption will vary from market to market, the region’s key sectors can expect an increase in 5G-related demand and higher investment by 2025.
How far will customer relations change?
The deployment of 5G will invite banks to imagine a plurality of additional services for the benefit of customer relations, a key priority. With the rise of neobanks, FinTech and GAFAM in a digital world, mainstream commercial banks are not the only ones creating value for their clients. The next step is share or add value with other major players, via open APIs to grow and engage their customer base. In APAC, more than a quarter of the top banks are already massively modernising their platforms, and this includes API-enablement. In fact, virtually every leading bank in each key market has either embarked on ambitious technology / digital transformation programs, or have concrete plans to do so.
The relationship between the organisation and its customers will be redefined with 5G. With ultra low latency, increased adoption of connected devices, big data & artificial intelligence technology, massive data are transmitted, stored and processed almost in real time to enable financial institutions to better analyse and anticipate customer behaviors and risks in order to drive better decisions. Banks which invested in big data and AI-driven technologies pioneered by the likes of GAFAM and Alibaba in the last couple of years are already yielding positive outcomes with improved customer profiling and being able to better anticipate and match products and services to personalise the client’s experience.
What will be the “augmented experience”?
In the future, there will no longer be a pure “digital” or “physical” customer journey – it will be a hybrid of the two as technology integrates one into another. However, the customer experience can only be truly augmented if it is fully integrated from end-to-end. Therefore, it is extremely important that banks capture the customer at source.
On average, a bank in APAC will manage more than 10 channels. Creating new ways to interact will differentiate players. By scanning a code using a smartphone, the client can now subscribe to and receive a financing proposal online. The contact’s information is sent to the bank, and an advisor can discuss it with the client right away via videoconferencing. This is simply one of the many omni-channel experiences banks can offer.
It also turns out that Artificial Intelligence and Machine Learning is a perfect match for 5G. With 5G, banks can boost their AI and ML capabilities, improving their business processes from know-your-customer (KYC) to advisory services. This is a growth priority in APAC.
What will this transformation mean for APAC?
While many subregions have pushed forward with 5G, there are some which have yet to catch up. It is commonly cited that the TMT sector will not be able to quickly recover the capital expenditure required to build the 5G networks. On the contrary, the Capex spending to date shows that companies are taking a measured approach to 4G LTE. Operators in Singapore, Korea and China have been sharing 4G network infrastructure and gradually expanding their coverage to keep the cost down.
Despite the difference in pace, we are definitely seeing a digital transformation across APAC, and riding this 5G wave will mean that financial institutions and third-party providers in the region will open up to a world of possibilities.
At the moment, shaping such a mobile environment can pose a real challenge for traditional banking structures in the face of GAFAM, whose experiential quality is part of the DNA. But 5G may be the tipping point in this race for the most enriching customer journey. Traditional banks should not only embrace this potential gamechanging technology, but also undertake real and significant business transformation in tandem to be able to fully exploit the spectrum of possibilities offered by 5G.