By Dev Dhiman, Managing Director of GBG Asia Pacific
2020 catapulted financial institutions forward in their implementation and optimisation of technology. According to 71% of Asia Pacific (APAC) technology decision-makers, the pandemic has caused their organisations to step up digital transformation, while 70% of financial services organisations in APAC believe innovation is now a “must”, reflecting the impact of COVID-19 in shifting consumers and businesses to being digital-first.
When looking ahead at how financial institutions (FIs) will be impacted by these trends in 2021, there are six key ways in which FIs are expected to evolve.
1. COVID-19 drove a dichotomy in fraud technology investment
There is a distinct difference in investment between FIs in countries still heavily impacted by COVID-19 and those in the stages of emerging from the pandemic.
For countries that have yet to enter into a stable recovery period, FIs will be making a more conservative approach to overall investment and sustaining cashflow, but deprioritising investments in fraud technology could leave them unprepared for the potential rise in financial crime and fraud during financial hardship. FIs in Indonesia, Malaysia, Thailand, and the Philippines, which are seeing reinstatement or continued lockdowns in the country, may become even more hard-pressed for stronger fraud prevention technology to combat an increase in financial crime, as basic fraud systems may not adequately protect them against emerging and complex fraud typologies.
For FIs in Asia Pacific emerging from or preparing to emerge from the pandemic, such as Singapore, Australia, Vietnam, and Taiwan, while confidence will be relatively higher, spending will be cautious, as maintaining substantial cash flow will remain a priority. Rather than overhauling fraud and compliance systems, FIs would likely choose to recalibrate, update and optimise their digital onboarding as well as payments and transaction monitoring technology. Investments would be specific to address prominent gaps and data intelligence. Alternative data to onboard more challenging cohorts, creating readiness against cyber endpoint threats, and relationship analysis may be considered to address acquisition growth strategy and growing volumes and complexity of online fraud attacks.
2. Digital customer experience expectations will continue to skyrocket
Global e-commerce powerhouses like Alibaba and Amazon and has normalised expectations around customer experience (CX) including same-day delivery services, real-time shipping tracking, and more, in turn significantly impacting customers’ CX standards for FIs. A recent study showed seven in 10 customers demonstrated a deeper loyalty to financial services and insurance companies that heavily invest in CX.
In 2021, the industry is already seeing FIs and fintechs race to deliver instantaneous services through new financial products, with GBG’s latest research finding 31% of FIs in APAC planning to offer instant bank accounts and instant loans, 29% planning to offer instant credit cards, and 22% planning to offer user voice-activated fund transfers and bill payments. To take CX to the next level, there is a probability that the financial services sector will explore replicating successes from other industries, such as retail businesses that have effectively used augmented reality (AR) and virtual reality (VR) technologies to re-create in-store experiences, which could be used by banks to create virtual in-branch experiences.
3. Cross-vertical collaboration and consumer data drill-down are re-shaping digitalisation standards
Collaborations amongst major enterprises in the digital banking space demonstrated the investment across seemingly unlikely industries in working together to effectively serve customers at scale. Last year, for example, Trip.com Group partnered with Standard Chartered, PCCW and HKT to launch a new virtual banking service and Asia’s first all-in-one numberless bank card, Mox, while multinational ride-hailing company Grab teamed up with Singtel to prepare to launch their own digital banking license in 2022. While both of these examples span multiple industries, they each highlight the impetus among businesses to use business partnerships to gain truly 360-degree views of their customers’ needs.
Looking at 2021 and beyond, this collaborative mindset is likely to continue as government and regulatory bodies work together to focus on accelerating digital identity availability, while also teaming up with partners like telco providers, educational institutions and aggregators to create access to more comprehensive and accurate data sets. FIs would become more active in exploring the use and ingestion of incremental data sets, beyond the basic internal data and official sources, to feed into their core fraud engine and enhance fraud detection and prevention.
FIs have already reinvented partnerships to form new market propositions. This openness and innovation would spill over into fraud management and propel them to leverage on an expanded ecosystem to layer their data with intelligence from specialists in location, mobile data, devices, cybersecurity, data co-relation, and IP. This broader and deeper approach will more effectively equip FIs with appropriate fraud prevention capabilities as the world becomes increasingly digital-first.
4. Expanding the availability of shorter-term credit offerings across SEA
The rise of Buy Now, Pay Later (BNPL) businesses has disrupted the credit landscape with shorter-term credit services for everyday purchases, faster or no credit checks, instant approvals, and “zero interest”. New BNPL players across APAC have been setup and are quickly catching onto opportunities to offer new and more agile types of loans.
FIs need to remain vigilant in how BNPL products are rolled out, credits are distributed, and debts are managed. This ease in obtaining credit can lead to more exposure to higher-risk borrowers. FIs focusing on growing their BNPL offerings need to build in stronger measures to onboard consumers who have the ability and intent to pay back what they have borrowed while keeping the standards of BNPL experience to ensure this revenue stream does not go sideways in the long term.
5. Mobile-first technology and data intelligence as fundamental building blocks for dynamic digital onboarding and transacting
Mobile devices are widely used to accelerate the digital onboarding and transacting process. FIs are automating the identity verification journey and streamlining biometric and facial verification, document verification and data match altogether in instant KYC.
Today, mobile devices do more than enabling the identity verification process. In Southeast Asia, seven in 10 adults are either “underbanked” or “unbanked “and excluded from many traditional financial services. FIs have begun to ascertain the quality of consumers with limited identity documentation, or thin file clients, leveraging their mobile phones as a personal identity verification device.
Mobile metadata, device usage patterns and SIM card records are alternatives to traditional verification methods, datasets and data sources. These alternatives offer data intelligence that FIs could use to fill gaps in physical records, providing assessment and validation to the authenticity and quality of consumer profiles and borrowing intent of these untapped segments.
6. Socially engineered first-party fraud and identity crimes taking on a new level of complexity
Bringing together the above trends and predictions, the combination of accelerated digital transformation among businesses, skyrocketing consumer usage of social media, e-commerce, ebanking and online platforms, and increased collaboration across FIs and non-bank organisations result in growing opportunities for fraudsters and crime syndicates to mine data.
Consequently, socially engineered first-party fraud, identity crimes like synthetic ID and impersonations would take on a new level of detection complexity. FIs have a responsibility to counter these attacks, proactively manage the growing volume of channels where bad actors can access personal information, and guard against financial crime and identity theft. As such threats continue to broaden alongside other industry-wide trends, consumers’ expectations of FIs’ commitments to protecting and futureproofing their financial services and products will also grow.
Organisations will need to reflect their commitments to customer satisfaction and retention with more sophisticated and agile approaches to fraud prevention and fraud technology investments.
