Photo - Albert Chai, Managing Director, Cisco Malaysia
According to networking solutions provider Cisco's latest study, Malaysia's retail banking sector is missing out on significant digital revenue opportunities.
Cisco Malaysia's managing director Albert Chai said the company's new research - 'Roadmap to Digital Value in the Retail Bank Industry' - points to a global retail banking opportunity worth US$405 billion (RM1.6 trillion).
This estimate is the Digital Value at Stake (VaS) that retail banks can possibly realise from 2015 to 2017, said Chai. However, in 2015, financial services as a whole captured just 29 percent of that opportunity globally.
The report found that the challenges of slowing growth and innovation, and cybersecurity weakness were among the barriers to missing out on more than 70 percent of potential revenue opportunities.
Speaking of the Malaysian retail banking landscape, Chai said, "Malaysians today are demanding more from financial services, as ownership of mobile devices moves into the billions and 4G connectivity becomes the norm. Retail banking customers demand quicker service and response times, immediate access to funds and investment insights for profitable returns."
"These tech-savvy customers and the growing pool of agile 'fintech' challengers present real hurdles for Malaysian banks," he said. "Financial institutions may see the emergence of fintech as a threat to their share, but in fact, it offers retail banks an enormous opportunity to reimagine their customers' banking experience."
Capturing the value
Chai said the financial sector in Malaysia has yet to capture the VaS opportunity. "The key is in digital technologies and business models; a transformational direction."
Key digital solutions - including sales and service transformation, mobile payments, analytics, video advice, and cybersecurity - will drive more than 90 percent of the value for retail banks, he said.
"[Another] key finding is that the next-generation workforce is one of the banking industry's competitive advantages," Chai added. "Bankers should be empowered with real-time data insights and freed from tedious manual compliance tasks. This in turn can drive new levels of efficiency, productivity, innovation and ultimately enhance customer satisfaction."
"Next, focus should be on creating the most compelling customer experience as possible, across all channels," he said. "Digital-enabled capabilities such as Bank Simpanan Nasional's Virtual Teller Machines and mobile payments can vastly transform the customer experience. They create the kinds of relevant, personalized and convenient offerings that customers expect."
"However, as a service that relies on trust, effective cybersecurity is the critical foundation of this roadmap. Without it, banks will lack the confidence to try exciting new digital solutions and experiences - and correspondingly, your customers will lack the trust to try them," said Chai.
"With these three key elements in place, Malaysian banks can look forward to attaining a competitive edge, staying ahead of fintech disrupters while meeting the banking needs of Malaysia's increasingly financially- savvy society," he said.
Commenting on the global aspects of Cisco's new research, Jason Bettinger, director of Financial Services for Cisco's Business Transformation Group, said "The ability for digital technologies to create and drive new revenue opportunities, combined with the ability to lower operational costs through digitised business processes, brings tremendous opportunity,."
"But, too many banks are moving slowly or not at all. By waiting to digitise their businesses, or by delaying new technology initiatives, banks risk not only missing out on the potential Value at Stake, but are actually at risk for being put out of business altogether," said Bettinger.
According to a 2015 study by the Global Center for Digital Business Transformation (DBT Center), an IMD Business School and Cisco initiative, 4 out of the top 10 retail banks will be displaced by digital disruption in the next three years. However, only 27 percent are taking a proactive approach by disrupting their own businesses.
Cisco's research identified key digital use cases in the retail banking industry that drive more than 90 percent of the US$405.3 billion opportunity. These digital solutions include video-based advisors, workforce transformation, mobile payments, virtual tellers, information-based consulting, white-label services, connected ads, marketing, and more.
"By assessing, adopting and combining the right digital use cases for their needs, and doing it securely, retail banks will capture their share of the Value at Stake and be in a position to operate more agilely and compete," said Bettinger. "By innovating and driving relevant new products and experiences to the market quickly, they can be the new disruptors."
To calculate Digital Value at Stake, Cisco conducted an economic analysis across the private sector, including 16 industries - financial services being one. The analysis was rooted in customer engagements and evaluation of 350 private sector digital use cases. Thirty of those were focused on financial services.
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