Bank of the Future: Behind the Scenes of Fintech Disruption in Asia


Duncan Hewett, VMware Senior Vice President and General Manager, Asia Pacific and Japan

It was great to hear a colleague recently contacted DBS, my primary bank in Singapore, and successfully use voice verification to be put through to the appropriate customer service agent. Voice biometric recognition software running in the background, which can verify who you are even if you have a sore throat, is one of the many steps the bank took to enhance the customer experience. Meanwhile, during a recent visit to China, I saw fruit sellers using QR codes for e-payments on Alipay or WeChat, reinforcing the country’s complete transformation from a cash economy.

We saw more innovation in consumer banking in the past five years than in the past 50. Historically, the first Diners Club card was issued in 1950. But it wasn’t until 1998 that websites with online transactions became common. Since then, we’ve seen rapid developments, including a wave of mobile banking applications and Alibaba enabling the first face recognition authentication on smartphones in 2015. 

Fintech Disruption in Asia

It’s no surprise that fintech upstarts in Asia push industry incumbents to change on several fronts, especially in the delivery of customer experiences. Digitally native companies with no legacy challenges rapidly innovate through a cloud-first approach in an app-based world. Asia leads in this regard. For example, Rakuten, an online retail marketplace, isn’t just a messaging app. It also issues credit cards and offers mortgage solutions to more than 95 million users.

Another great example is the world’s tenth largest financial services provider, Ant Financial, the finance arm of Alibaba—which is not even a bank. Originally created to give locals access to financial support through the internet, it morphed into the largest financial services platform in China and aims to reach two billion consumers by 2025.

Fintech innovation enables countries across the region—from mature markets to emerging markets— to leapfrog the others. In India, where about 80 percent of transactions still happen through cash, Paytm, a mobile wallet turned e-commerce site, is an attractive proposition for small and medium businesses. Paytm allows them to accept debit and credit card payments at a zero setup fee and zero introductory transaction processing cost. With mobile internet penetration still at 50 percent of India’s population, there is massive potential for growth.

Agents of Change: Ilan Buganim, CTO and Digital Banking Disruptor

How Fast Are Banks Adapting to FinTech Innovation?

Collaboration between banks and fintech companies is mushrooming, and banks’ acquisitions of fintech companies is sporadic. However, fintech redefined what it means to deliver good customer experiences. As a result, customer expectations also altered dramatically in the last few years. Herein lies the key question: can banks with age-old infrastructure keep pace with their disruptors?

The answer is yes, but incumbents must first modernize their infrastructure and create a digital foundation designed to support innovation. New technologies, like artificial intelligence, blockchain and the Internet of Things already impact banking. If their foundations are not ready for the future, incumbents will miss the opportunity to better serve their customers and build new revenue streams.

Banks Need to Digitize from the Inside Out

Banks need to stop taking a patchwork approach and digitize from the inside out. With Asia being home to the world’s top five banks, we need to start at our doorstep.

Banks have a massive advantage: the longstanding trust they established with their customers. Over the years, almost no one I’ve spoken to wants to switch their primary bank account. The loyalty people have to banks is greater than their loyalty to the long-term use of any app. This is something to be proud of, but not to take for granted. A recent survey by Ipsos shows:

Eight-in-10 millennials across Singapore, Thailand and Malaysia encounter problems when making a mobile payment.

While there is an opportunity, there is also a need to innovate—fast.

State Bank of India (SBI) is a great example of a bank that is embracing digitization. For a bank with more than 550 million customers, 750 million accounts, 25,000 branches and 57,000 ATMs, digital transformation could not be more complex. Transformation at such a scale is only possible when the core infrastructure is digital and ready for innovation. With 40 million internet-banking and 30 million mobile-banking customers, the mammoth bank is on its transformation journey, and I engage with them closely. SBI works together with VMware to run Meghdoot, one of India’s largest, most robust and highly-automated private clouds, which supports innovation across multiple fronts.

As you can see from Shiv Bhasin, CTO of SBI’s interview with The Financial Express, the bank successfully transformed its infrastructure—the backbone for all innovation. From spinning up a virtual server in a few minutes to network virtualization that secures its digital wallet application, SBI continues to look into new areas like blockchain and artificial intelligence.

Another example of a bank transforming from the inside out is ANZ Bank, where digital transformation starts with their own employees. VMware works closely with ANZ bank to deliver a digital workspace that enables employees to deliver new customer experiences. From company-issued mobile devices to kiosks and the goMoney banking app to the Grow wealth app for customers, employees of ANZ Bank leverage more than 18,000 devices. 

Opportunity for Financial Inclusion in Asia

The disruption of traditional banking by fintech presents a brand new opportunity for the unbanked. In fact, only 27 percent of people in Southeast Asia have a bank account. Countries like Indonesia, Philippines and Myanmar—unconstrained by legacy infrastructure—are moving at breakneck speed and scale to leapfrog the world in digital payments. In the process, these innovators bring more unbanked citizens into mainstream banking.

In Myanmar, for example, KBZ Bank modernizes its IT infrastructure with VMware’s help, covering all 482 branches and representative offices in Singapore, Malaysia and Thailand. In Philippines, our recent announcement with Land Bank is another step toward extending the benefits of a cloud-based, mobile-first customer experience to rural areas and those who never set foot in a bank.

Digital Foundation Needed for Banks of the Future

To be ready for the future, banks need to build a digital foundation that allows them to scale and drive innovation from the inside out. The best infrastructure for a bank is usually a hybrid cloud, which allows them to be agile, act fast and be efficient.

True transformation is only possible if you have a digital foundation to securely support all applications—be it new mobile apps, digital branches, IoT-based solutions or machine learning to understand consumer patterns and adapt services.