KUALA LUMPUR (Jan 5): Banks require an innovative digital banking strategy that supports a variety of channels to attract and keep customers, while combating increased competition from traditional and non-traditional players, according to SAP Malaysia managing director Terrence Yong.

In a statement today, Yong said digital technology was dramatically changing the banking industry by influencing the way banking is conducted and also turning money into the ultimate digital service.

“Omnichannel banking enables banks to focus on providing a consistent channel that offers an optimised, seamless experience and meets immediate customer needs.

“For banks, this is an opportunity to fully understand the customer, by coupling individual digital channels to sophisticated analytics engines. As a result, they can focus their attention on more profitable customers and activities that drive revenue,” he said.

Yong said that in recent years, Malaysian banks had been on a positive growth trajectory and this has been largely due to lessons learnt from the financial meltdown of 1997.

“Today, Malaysia has a different — and much healthier story — altogether. Banks have greater market capitalisation, and policies placed by Bank Negara Malaysia have resulted in sustainable growth.

“There is another element that has contributed tremendously to the sustainable growth of Malaysia banks. This crucial element is technology — and its evolution — aided by carefully focused technology investments by the banks themselves,” he said.

Yong explained that in the past, multiple issues had plagued the banking industry, when it came to technology, parts of which have stemmed from silos of legacy solutions.

He said these often led to integration challenges and efficiency issues.
 
“Thanks to increasingly challenging business environments, banks have found that revisiting their IT architectures have been necessary to reduce cost, increase turnaround time and improve efficiency.

“With these architectural review initiatives, benefits in multiple areas such as channel capabilities, in particular digital channels and streamlining of processes, were seen,” he said.

Yong said besides capitalising on deep customer insights, there were two means that banks could take into consideration in managing the environment, and to meet the need to reduce IT costs, without compromising on technological advantages.
 
“The first is a move to look at partnerships and profit sharing with vendors. Basically, banks and partner vendors share the cost of development, along with potential profits derivative of the system. This could provide banks [with] some help in such costs, instead of bearing the brunt of the entire IT cost.
 
“The other possibility is for banks to consider longer ROIs. Typically, banks have always looked towards a short ROI, due to the immense pressure they face from stakeholders, especially where outlay in the IT arena is concerned. Instead of only considering three or four year periods, banks may have to consider staggered payback instead,” he said.

Yong said that whatever the chosen model may be, technology as an enabling platform of growth is here to stay — and banks should start viewing technology as investments towards sustainable growth, rather than a cost booked in their ledgers.
 
“Leveraging technology to improve the bank’s capabilities also drives a very strong focus on enhancing the overall customer experience, through lower-cost digital and multichannel integration and marketing, improving security, and extending touchpoints on mobile devices,” he said.