The Shift Towards Phygital: Key Takeaways

AIBP Insights is a series of discussions held online which brings together a focus group of ASEAN stakeholders to discuss topics related to enterprise technology adoption in the region.

For many, the ongoing COVID-19 pandemic ushered in a world unlike any other we ever experienced. As vast chunks of the global economy are temporarily shut down, much of daily life shifted from the physical world to the virtual one and enterprises are forced to find new ways to work. Vaulting to the top of the agenda for many enterprises are ongoing efforts to reimagine the customer experience (CX), which has emerged to be a critical differentiator amid the pandemic.

Digital has altered the fundamental architecture of how financial institutions operate and serve their customers, who now expect highly personalised and relevant experiences. By leveraging the power of phygital, financial institutions will continue to innovate and provide convenient solutions to customers.

In our discussion earlier today on The Shift Towards Phygital in Financial Institutions, our panelists from Affin Bank, Union Bank of the Philippines, RHB Banking Group, Astra Kreasi Digital, Bank Syariah Indonesia, Krungsri Bank and Twilio came together to discuss and share their perspectives on finding the right communication channels for customers, navigating through the highly regulated sector, and sharing their thoughts on the metaverse and central bank digital currencies in the ASEAN financial institutions landscape.

Finding the Right Channels that Click with Customers - Understanding the Various Communication Channels and Digital/Physical Channels Preferences

Bijon Mehta, Global Head of Financial Services, Twilio, kicked off the discussion by sharing that digital transformation for financial institutions boils down to being more proactive in identifying what a customer may need and how a financial institution can deliver personalised products/solutions. Another consideration is identifying and doubling down on the right channels that click with your customers. Some people prefer phone calls, while others prefer emails. More importantly, as Bijon stressed, financial institutions will be required to deliver these in a secure and compliant manner.

Sam Tanskul, Head of Innovation & FinTech, Krungsri Consumer, Bank of Ayudhya, shared that in the last 3-4 years, Krungsri has launched 'U Choose,' a super app that has 85 percent of the bank's customers on it. The three key pillars they are focusing on include acquisition, where customers can apply for credit cards, insurance plans, and personal loans online; servicing, where customers can self-service on the app, such as viewing transactions; and marketing, where customers can accumulate points and redeem benefits. This super app is currently only available to existing Krungsri customers, but they are looking to open up some features to the general public in the near future.

Similarly, Agusta Rinaldi, Senior Vice President, Bank Syariah Indonesia, shared that at the start of their digital journey, they drew customers in by offering points/reward system. They no longer need this incentive as the Generation Z population are becoming more digitally savvy and drawn to digital convenience. As a result, they intend to transform their mobile application into a super app in which customers can conduct transactions seamlessly.

Astra Group recently launched Moxa, a digital financial platform, through PT Sedaya Multi Investama (Astra Financial). Daniel Hartono, Chief Executive Officer, Astra Kreasi Digital, described Moxa as a WealthTech platform that automates, streamlines, and digitises traditional wealth management. His team is attempting to integrate all Astra Financial products into the Moxa app, despite the fact that Astra Financial has over 33 products. Because their customers come from a variety of backgrounds, having both traditional physical branches and digital channels is critical when communicating with them.

Kenneth Loo, Enterprise Account Executive, Twilio, shared his perspectives on working with ING, a global financial institution of Dutch origin, with 40,000 employees in 40 countries and 17 disparate legacy call centres created by different vendors at different times. As the financial needs of ING's global banking customers changed, ING realised it needed to change as well. Customers today increasingly use mobile apps as their primary means of communication with businesses, and financial institutions are no exception. To remain relevant and meet the needs of their clients, ING decided to completely transform their communication by transitioning from legacy systems to API-based, agile communications.

The Highly Regulated Finance Sector?

This shift to digital (or phygital) is accompanied by a plethora of risks related to technology, cybersecurity, outsourcing, operational, regulatory, and legal issues that financial institutions must address in order to continue providing the safest experiences to their customers.

One of the most important topics to cover in this regard is digital compliance and cybersecurity. Laws and regulations are constantly being enacted, which banks and other financial institutions must prioritise compliance with in order to detect and prevent fraudulent activities and maintain regulatory compliance.

Ron Batisan, Vice President, Customer Experience Group, Union Bank of the Philippines, highlighted that increased banking without face-to-face interaction raises the risk of synthetic identity fraud, traditional identity theft, and account takeovers. Similarly, Pak Agusta and Pak Daniel agreed and stated that the audit committee of Indonesia's Financial Services Authority (Otoritas Jasa Keuangan) is very strict when it comes to data privacy and security.?

Central Banks’ Continued Support?

With Bank Negara Malaysia (BNM) expected to announce the results of five new digital licenses by the end of the month, Kee Yeong Lim, Executive Director, Enterprise Banking, Affin Bank, stated that the entry of these digital banks will accelerate the digitalisation of incumbent banks. According to Bank Negara Malaysia's governor, the central bank will look to digital banks to provide relevant products and services to unserved and underserved segments, allowing more people and entrepreneurs to better own assets and save for the future or grow their businesses.

Similarly, K. Sam stated that the Bank of Thailand (BOT) is actively driving innovation and is especially supportive of fintechs, with a sandbox team on hand to encourage and support candidates when applying for BOT digital licenses.

The Next Frontier: Central Bank Digital Currencies & the Metaverse

The metaverse opens up new avenues for reaching out to new audiences, including a younger, NFT-savvy generation. Banks will need to find new ways to connect with this audience. Do you recall going to a branch with your parents to have your bank books stamped? What will the next generation's metaverse equivalent be? Customers may be able to visit virtual branches for high-touch customer service, take a real-time house tour with a mortgage broker, or even discuss retirement plans with an avatar advisor.

Bursting from the crypto community, digital assets are now exchanged and valued in a market, added K. Sam. In other words, people are already paying real money to own virtual assets. They will want to spend their virtual money in real life.

The burgeoning economy of the metaverse is an untapped source of growth, representing opportunities for financial institutions to insure and lend against crypto currency, NFTs, and virtual real estate. Calvin Wong, Head of Digital, RHB Banking Group, concluded the discussion by emphasising the importance of delving deeply into the challenges of the metaverse before deciding on the role they will play and taking advantage of this opportunity to extend their brand. Ron agreed, adding that in the midst of metaverse and digital currency introductions, financial institutions should always prioritise security.

With that, we look forward to continuing our discussion on Building Tomorrow's Digital-First Bank: Turning the Tide on Disruption on 21 April. Do reach out if you wish to join us, or if there are topics in digitalisation you would like to hear more of!?