Silverlake Axis: The Future of Digital Banking in Core Banking in Its Current State

Silverlake Axis: The Future of Digital Banking in Core Banking in Its Current State

Digital adoption is no longer an option; it has become a necessity and growth imperative. As the global pandemic forced people to spend more time at home and adhere to safe distancing measures, digital technology came to the forefront of our lives. Digital adoption in core banking has caused an irreversible change, however, this is not an easy transition; there are still challenges that must be overcome to ensure that digital banking has a successful future. 

Mr. Andrew Tan Teik Wei is Group Managing Director at Silverlake Axis. Prior to joining the group, Tan was the Managing Director of SAS Institute in Malaysia and Indonesia. A large part of Tan’s career was with the Big 4 Professional Services firms, in their advisory and consulting divisions. His career began with Andersen Consulting (now Accenture) where he was an associate partner for the financial services industry sector. During his career, Tan has served clients in various industries – predominantly in financial services and in industrial/retail, telecommunications, energy and the public sector.

When speaking to The Fintech Times, Tan discussed how the increasing adoption of advanced technologies was unlocking newer business opportunities and serving new customer portfolios and segments. He also emphasised aligning business modes with technologies and the importance of a strong digital infrastructure to enable success for financial services organisations.

Although digital banking is important, Tan believes that physical experiences will remain relevant and banking professionals will have to balance physical and digital experiences:

The clarion call for the financial services industry to advance their technology systems came as the global pandemic forced people to spend more time at home, with physical distancing measures in place, compelling financial institutions to analyse existing conventional modes of operations. In several cases, Chief Technology Officers had to meet years’ worth of transformation goals, in a few months. Digital adoption is no longer an option; it’s become a necessity and growth imperative.

Amid pressure to streamline operations in adapting to rapidly changing customer needs and expectations, increasing competition as well as regulatory complexities, physical banking is quickly being replaced by digital platforms. As you can imagine, core banking architectures were designed before the existence of mobile technologies or advancement of computer devices and hence the motivation to change legacy was slow. Today, digital technology is at the forefront of our everyday lives and how we function.

What is now being referred to as The Fourth Industrial Revolution (Industrial 4.0) is enabling organisations and consumers to adopt newer technologies in response to data-driven decisions. There is a visible increase in adoption of advanced technologies such as Artificial Intelligence (AI), IoT, edge computing etc., helping
banks to unlock newer business opportunities and serve new customer portfolios and segments. So now the question is, what is the future of digital banking? How will the shift to digitise solutions affect face-to-face core banking operations?

Why are some taking their time to take the digital path?

Covid-19 pressures have led to financial institutions scrambling to enhance customer experience in a digital manner as the realisation of investing in powerful digital systems has proven to not only sustain businesses but prevents long term volatile financial insecurities. Though it may seem counterintuitive, crisis is the ideal
time to double down on digital transformation.

The approach to digital transformation is not plug and play. Digital transformation involves numerous risk, security, while the businesses side requires a strategic approach in deciding the path to advanced technologies. Every bank operates at different innovation levels, keeping in mind the needs of their stakeholders. We are now at a point in time where banks need to recalibrate and reengineer their business
models to embrace digital innovation and technologies. Without a strong digital infrastructure in place to set them up for success, financial services organisations will struggle.

Are banks on the right path?

Almost overnight we saw a rise in e-commerce systems and additional digital payment solutions as more people stayed at home, providing faster, convenient and more efficient financial services solutions to users.

Over this period, digital channels are predominantly used for all business transactions. As a result, consumers who were resistant to technology adoption are forced to adapt to this change. While a few businesses may revert to their traditional models when the crisis abates, most may opt for a hybrid approach as they recognise the benefits of increasing revenues with advancement of digital technology
and recurring revenue with process automation.

‘Brick-and-mortar’ banks will always remain relevant, because not everything can be automated. The World Economic Forum refers to this new shift in marrying the online and offline worlds as a physical/digital hybrid – experience. To succeed in this new paradigm, banking professionals will need to upskill and effectively utilise technology to provide newer customer experiences. Digital technologies provide efficient mechanisms to make services faster, secure, and convenient for customers.

In Southeast Asia, many initiatives to aid in the digital transformation journey have surfaced such as the SME Go Digital Programme in Singapore, alongside others, that provide incentive to encourage investment in automation and technology solutions adoption. Indonesia is heavily investing in growing themselves to be the largest digital economy in the region, with initiatives such as “Making Indonesia 4.0”. On the technology side of things, AI is on the rise, with many eyes on the solutions it now brings to the table in mitigating fraud and money laundering risks. At a time where privacy is playing a key role in the digital ecosystem, AI provides faster decisioning making processes based on previous company data performances.
Automation is also finding it’s time in the spotlight as it provides operational efficiencies in this time of need.

Looking ahead:

Going forward, it’s evident that there is an increase in digital appetite among the new generation of customers that seek convenience, speed and efficiency. It is unlikely that digital channels will go away. They are now part of the new normal. And the only solution to achieve sustained success, is by implementing a secure, stable, and scalable technology that aligns to the bank’s strategic roadmap.

We have already seen the rise of neobanks in many countries around the world to suit different markets, some more sustainable than others. Southeast Asia and the emerging markets may seem lagging behind, but the growth and development in this area is increasing exponentially. It’s undeniable that today’s banking landscape has changed dramatically, providing a tempting alternative to traditional and core banking offerings, saving people time and journey to a physical infrastructure while providing easier access to financial services and products.

The pandemic has expedited digital adoption in many aspects of our lives, impacting many sectors, and these changes have completely disrupted the financial services industry as well. Doing nothing is no longer an option today. It is now up to traditional banks to keep up or match the pace of change to stay competitive.