Image: Straits Times
These trends are likely to change the way banks operate and the way customers interact with banks within the next decade. Here are four that panellists say are shaping banking’s future.
1. Way beyond credit cards
Today there is a plethora of ways one can make purchases without handing over cold, hard cash or paying by credit card.
Banks as well as financial technology (fintech) start-ups are working on making these methods even more efficient, convenient and secure.
One such start-up is Toucan, which reduces the hassle of online payments. The Singapore-based company started out as an e-wallet service for work-permit and S-Pass holders working and living here, but is now serving a much bigger customer base in Metro Manila.
Its billing service lets online shoppers in Metro Manila combine multiple bills into one bill to be paid at the end of the month.
It allows people without credit cards to shop online, as they can pay their monthly Toucan bills by walking into a convenience store and paying with cash over the counter.
“Toucan didn’t start off as a payment gateway running on credit, but rather as a prepaid e-wallet for Filipinos without credit cards in Singapore,” explain co-founders Elvin Zhang, 27, and Loh Zheng Rong, 31, in an e-mail.
“However, as our customer base grew, we noticed that a significant number of customers faced plenty of hassles transferring money into their e-wallet every week via bank transfers or cash deposits.”
So the firm, which was one of nine start-ups selected for the final phase of the DBS HotSpot Pre-Accelerator programme – which mentors start-ups and helps them build their businesses – switched to a post-paid credit-based model.
Customers simply get billed at the end of the month for what they spend, just like with a credit card. The result? Demand exploded.
Now, 95 per cent of its business is in Metro Manila. Users of the service do not have to pay any fees, as long as their monthly bill is over $30.
Mr Zhang said Toucan does not see itself as a threat to banks, but rather as a potential partner. After all, Toucan serves customers who would not be able to get credit cards from banks, as they have no credit score or their incomes are too low.
He said: “In our conversations with DBS bankers, we also found that they were very interested in the way we collect and analyse data on our customers.
“Instead of coming up with a system from scratch, which would be costly and cumbersome, they could partner with us.
2. Embrace failure
Fail fast, fail cheap. This is a Silicon Valley mantra that has been adopted by financial institutions worldwide looking to transform themselves, as nimbler start-ups threaten to eat into their market share.
For the past several years, DBS chief executive Piyush Gupta has triggered a major cultural change within the bank so that experimentation and failure are not frowned upon, but are actively encouraged.
For Singapore to retain its status as a regional financial hub, innovation will be key, he noted, and true innovation cannot take root here if our society does not learn to embrace failure.
“You have to be able to be willing to take some risks, recognising that three out of four attempts will fail. How do you get a societal shift which is more embracing of risk-taking? It is not easy,” he said.
“How do you create an entrepreneurial and risk-taking environment?
“A lot of it comes from giving people the chance to make mistakes, from experimenting and not always frowning on failures.”
3. Embrace innovation
While Singaporean workers have to learn to take risks and keep their skills relevant in a technology-driven world, the Government has a role to play in creating an environment that enables innovation, the panellists noted.
Mr Leong Sing Chiong, the Monetary Authority of Singapore’s assistant managing director of the development and international group, said the Government has indeed been hard at work to make Singapore an attractive place for companies to establish their innovation labs, and for tech start-ups to set up base.
And fostering this innovation community helps put Singapore at the forefront of the tech revolution, he added.
“Once we better understand the innovation that’s going on in these labs, and the transformational ideas people are thinking about in the fintech community, it would give us a very valuable glimpse of how the financial services … will look like in the next five to 10 years,” said Mr Leong.
Capital Match founder Pawel Kuznicki added that creating this ecosystem is more important than aiming for something lofty, like creating Singapore’s version of Google or Alibaba.
He said: “At the end of the day, there is so much luck involved in creating the next Google, Facebook et cetera.
“One should aim at creating an ecosystem of thousands of nimble start-ups. If you have thousands of such five- to 10-people start-ups, then it’s going to be so much more beneficial to the economy than just trying to build another Google.”
4. New coin on the block
This is one technology that is being studied closely by banks and regulators worldwide and it could transform everything from how the Government keeps records to how people transfer funds to each other.
In Singapore, blockchain is being seen as something that would be particularly useful in trade finance. Start-up Attores is working on building a blockchain system that could revolutionise banking services such as trade finance, which is still paper-intensive.
As goods move from exporter to port to importer, each party has to transfer vast amounts of paper and information at each stage of the process.
This includes financing and insurance documents, as well as information on the cargo itself. By moving to an impartial blockchain system, the parties who need access to the data can get it online.
It will also prevent the financing of the same goods multiple times, as financial institutions will be able to check if goods have already been financed.
Attores co-founders David Moskowitz and Gaurang Torvekar felt one way for their start-up to stand out from others that are also experimenting with blockchain technology is by getting insights and mentorship from a bank.
Attores was recently accepted into United Overseas Bank’s The FinLab accelerator programme.
Similar to DBS’ programme, it provides start-ups with funding and mentorship.
“Our mentors at the bank guided us towards a clear direction and insights on industry needs so that we could refine our product market fit,” the founders said in an e-mail.
Attores is now finalising a proof of concept – a demonstration that its business idea and model are workable and applicable in the real world – that it says “could potentially help financial institutions gain more efficiency and open new lines of business”.