By Dev Dhiman, Managing Director of GBG Asia Pacific
SINGAPORE - Media OutReach - 28 January 2021 - 2020 catapulted financial institutions forward in theirimplementation and optimisation of technology. According to 71%of Asia Pacific (APAC) technology decision-makers the pandemic has causedtheir organisations to step up digital transformation, while 70%of financial services organisations in APAC believe innovation is now a "must", reflectingthe 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 FIsare expected to evolve.
1. COVID-19 drove a dichotomy in fraud technologyinvestment
There is a distinct difference in investment betweenFIs in countries still heavily impacted by COVID-19, and those in the stages ofemerging from the pandemic.
For countries that have yet to enter into a stablerecovery period, FIs will be making a more conservative approach to overall investmentand sustaining cashflow, but deprioritising investments in fraud technologycould leave them unprepared for the potential rise in financial crime and fraudduring financial hardship. FIs in Indonesia, Malaysia, Thailand, and thePhilippines, which are seeing reinstatement or continued lockdowns in thecountry, may become even more hard-pressed for stronger fraud preventiontechnology to combat an increase in financial crime, as basic fraud systems maynot adequately protect them against emerging and complex fraud typologies.
For FIs in Asia Pacific emerging from or preparing to emerge fromthe pandemic, such as Singapore, Australia, Vietnam, and Taiwan, whileconfidence will be relatively higher, spending will be cautious, as maintainingsubstantial cashflow will remain a priority. Rather than overhauling fraud andcompliance systems, FIs would likely choose to recalibrate, update and optimisetheir digital onboarding as well as payments and transaction monitoringtechnology. Investments would be specific to address prominent gaps and dataintelligence. Alternative data to onboard more challenging cohorts, creatingreadiness against cyber endpoint threats, and relationship analysis may beconsidered to address acquisition growth strategy and growing volumes andcomplexity of online fraud attacks.
2. Digital customer experience expectations willcontinue to skyrocket
Global ecommerce powerhouses like Alibaba and Amazonand has normalised expectations around customer experience (CX) including same-daydelivery services, real-time shipping tracking, and more, in turn significantlyimpacting customers' CX standards for FIs. A recentstudy showed seven in 10 customers demonstrated a deeper loyalty tofinancial services and insurance companies that heavily invest in CX.
In 2021, the industry is already seeing FIs and fintechs race todeliver instantaneous services through new financial products, with GBG'slatest research finding 31% of FIs in APAC planning to offer instant bankaccounts and instant loans, 29% planning to offer instant credit cards, and 22%planning to offer user voice activated fund transfers and bill payments. Totake CX to the next level, there is a probability that the financial servicessector will explore replicating successes from other industries, such as retailbusinesses that have effectively used augmented reality (AR) and virtualreality (VR) technologies to re-create in-store experiences, which could beused by banks to create virtual in-branch experiences.
3. Cross-vertical collaboration and consumer datadrill-down are re-shaping digitalisation standards
Collaborations amongst major enterprises in the digital bankingspace demonstrated the investment across seemingly unlikely industries inworking together to effectively serve customers at scale. Last year, forexample, Trip.comGroup partnered with Standard Chartered, PCCW and HKT to launch a newvirtual banking service and Asia's first all-in-one numberless bank card, Mox,while multinational ride hailing company Grabteamed up with Singtel to prepare to launch their own digital bankinglicense in 2022. While both of these examples span multiple industries, theyeach highlight the impetus among businesses to use business partnerships togain truly 360-degree views of their customers' needs.
Looking at 2021 and beyond, this collaborative mindset is likely tocontinue as government and regulatory bodies work together to focus onaccelerating digital identity availability, while also teaming up with partnerslike telco providers, educational institutions and aggregators to create accessto more comprehensive and accurate data sets. FIs would become more active inexploring the use and ingestion of incremental data sets, beyond the basicinternal data and official sources, to feed into their core fraud engine andenhance fraud detection and prevention.
FIs have already reinvented partnerships to form new marketpropositions. This openness and innovation would spill over into fraudmanagement and propel them to leverage on an expanded ecosystem to layer theirdata with intelligence from specialists in location, mobile data, devices,cybersecurity, data co-relation, and IP. This broader and deeper approach willmore effectively equip FIs with appropriate fraud prevention capabilities asthe world becomes increasingly digital-first.
4. Expanding availability of shorter-term creditofferings across SEA
The rise of Buy Now, Pay Later (BNPL) businesses hasdisrupted the credit landscape with shorter-term credit services for everydaypurchases, faster or no credit checks, instant approvals, and "zero interest". NewBNPL players acrossAPAC have been setup and are quickly catching onto opportunities to offernew and more agile types of loans.
FIs need to remain vigilant in how BNPL products arerolled out, credits are distributed, and debts are managed. This ease inobtaining credit can lead to more exposure to higher risk borrowers. FIsfocusing on growing their BNPL offerings need to build in stronger measures toonboard consumers who have the ability and intent to pay back what they haveborrowed while keeping the standards of BNPL experience to ensure this revenuestream does not go sideways in the long term.
5. Mobile-first technology and data intelligence asfundamental building blocks for dynamic digital onboarding and transacting
Mobile devices are widely used to accelerate thedigital onboarding and transacting process. FIs are automating the identityverification journey and streamlining biometric and facial verification,document verification and data match altogether in instant KYC.
Today, mobile devices do more than enabling theidentity verification process. In Southeast Asia, sevenin 10 adults are either "underbanked" or "unbanked"and excluded from manytraditional financial services. FIs have begun to ascertain the quality of consumerswith limited identity documentation, or thin file clients, leveraging theirmobile phones as a personal identity verification device.
Mobile metadata, device usage patterns and SIM cardrecords are alternatives to traditional verification methods, datasets and datasources. These alternatives offer data intelligence that FIs could use to fillgaps in physical records, providing assessment and validation to the authenticityand quality of consumer profiles and borrowing intent of these untappedsegments.
6. Socially engineered first party fraud andidentity crimes taking on a new level of complexity
Bringing together the above trends and predictions, the combinationof accelerated digital transformation among businesses, skyrocketing consumerusage of social media, ecommerce, ebanking and online platforms, and increased collaborationacross FIs and non-bank organisations result in growing opportunities forfraudsters and crime syndicates to mine data.
Consequently, socially engineered first party fraud,identity crimes like synthetic ID and impersonations would take on a new levelof detection complexity. FIs have a responsibility to counter these attacks,proactively manage the growing volume of channels where bad actors can accesspersonal information, and guard against financial crime and identity theft. As suchthreats continue to broaden alongside other industry-wide trends, consumers'expectations of FIs' commitments to protecting and futureproofing theirfinancial services and products will also grow.
Organisations will need to reflect their commitmentsto customer satisfaction and retention with more sophisticated and agileapproaches to fraud prevention and fraud technology investments.
GBG offers a range of solutions that help organisationsquickly validate and verify the identity and location of their customers.
Our market-leading technology, data and expertise help ourcustomers improve digital access, deliver a seamless experience, and establishtrust so that they can transact quickly, safely and securely with theircustomers online.
Headquartered in the UK and with over 1,000 team membersacross 16 countries, we work with 20,000 customers in over 70 countries. Someof the world's best-known businesses rely on GBG to provide digital servicesand keep the economy moving, from US e-commerce giants to Asia's biggest banksand European household brands.
To find out more about how we help our clients establishtrust with their customers, visit www.gbgplc.com/apac, follow us on Twitter @gbgplcor