Future Ready: How can banks build a checkmate-proof IT strategy in 2020?

Heavy investments in technology will mean nothing without investing in manpower, according to experts.

As banks build up their IT capabilities and set up intricate albeit expensive multi-year investments in the hopes of outmanoeuvring competitors, a few key pieces will define their winning strategy in 2020. Asian Banking & Finance asked eight IT vendors on what banks should prioritise in the coming year, and most recommended embracing innovations that pamper the customer like royalty.

The King: Customer Experience

Unsurprisingly, the majority of IT vendors is calling on banks to push for initiatives that have the highest impact on improving transaction efficiency and customer experience. “This can be done with technology that facilitates real-time cross-border payments and enables mobile payment services, and APIs that can integrate the bank’s system with enterprise resource planning (ERP) systems to facilitate transaction processing,” said Navin Gupta, managing director, South Asia and MENA at Ripple.

Open APIs are an especially promising technology, according to Gupta, since they enable banks to participate in the data-sharing ecosystem, and effectively keep pace with the aggressive influx of new FinTech players. “By migrating to more agile architectures and sharing data with external developers via their APIs, banks can co-create solutions to drive customer-centric designs and omnichannel experiences that will enhance customer experience.”

Banks should “think bigger and bolder” with open APIs as recently seen in the success stories of financial and technology giants, reckoned Wissam Khoury, senior vice president and general manager for MEA and APAC at Finastra.

“Enterprises across the globe, from Ping An to Salesforce, Microsoft and Apple, recognise the value to be gained in creating connected experiences that offer a holistic customer journey, and all are thriving as a result,” Khoury said.

The critical challenge of the digital economy is providing a consistent customer experience across networks, including brick-and-mortar branches that remain important in Asia Pacific even as digital banking gains traction, noted Steve Wood, vice president, Asia Pacific Japan at Aruba, a Hewlett Packard Enterprise company.

The Queen: Cloud Technology

As the customer sits on the throne as the most important piece in banks’ IT strategies, cloud technology is emerging as the powerful backbone on which all other application services can be implemented and scaled. “First and foremost, banks need to invest in building stronger IT infrastructures to support the load of the application services being rolled out—after all, any form of outage will inevitably result in customer dissatisfaction,” said Adam Judd, senior vice president, APAC at F5.

Aside from the customer, cloud technology also provides more accessibility and convenience to employees, enabling them to work remotely, and most solutions are affordable and save businesses expensive physical space since they do not require on-site infrastructure, reckoned Jonathan Tan, managing director, Asia at McAfee.

Gupta cited an IDC report that Asia Pacific spending on public cloud services and infrastructure will hit $26b in 2019, up almost 50% from the prior year, with the banking industry a chief contributor to this growth. “The prevalence of cloud subscription services allows banks to pick and choose only the services they need and the capacity at which they need them. This also sets them up for flexibility and scalability, allowing banks to request for more or less resources as and when they require them,” he said.

Khoury warned that it is fast becoming a survival imperative for banks to run open ecosystems via the cloud. “Rising superapps like Alipay and WeChat, together with the growing reach of big tech firms like Google, Amazon, Facebook and Apple in payments and other areas of finance, continue to challenge incumbent banks at their own game,” he said. “This means working in isolation with ‘closed’ systems is simply not an option anymore.”

The Knight: Big Data, AI and Machine Learning

Banks must also spend 2020 learning how to ride the technology trends of big data, AI and machine learning, which are driving the big leaps in customer experience and product development. “From frictionless authentication processes and chatbots to personalised insights and recommendations, banks are training AI models to provide consumers with round-the-clock services today,” said Judd, citing the mobile application of Singaporean bank DBS that provides users with personalised insights on monthly expenditures and shares financial planning recommendations.

“Making the process of engagement and integration better through intelligent automation enables banks to provide efficiency and agility towards how it handles the customer and their transactions be it financial, content or offers,” added Mani Gopalaratnam, chief technology officer at Resulticks.

The Bishop and Rook: Fraud and Customer Data Security

As banks accelerate their digital and data-driven capabilities, they must also build up their security tools against fraud and customer data theft to keep client trust and meet increasingly stringent regulatory regimes. Like the bishop and rook pieces in chess, these tools can be very powerful in deterring incoming threats, but they have blind spots, especially if the rest of the IT pieces do not work together to reduce the overall risk. “The lack of face-to-face verification heightens the possibility of online fraud, making it more challenging for banks to authenticate legitimate customers,” said George Lee, vice president, Asia Pacific & Japan at RSA RSA, about one fast-rising security trend. “Banks need to proactively double down on implementing next-generation fraud risk and intelligence tools.”

Accordingly, banks must spend enhancing their security operations with an integrated view of risk, which Lee reckoned will require banks to determine the distinct roles of each department and collectively develop a plan to combat digital risk and respond to breaches. “Tearing down the information silos between teams such as security and risk management, will equip the bank with greater visibility to the risk at hand and ultimately enabling them to determine how responses can be prioritized, to take appropriate and timely action,” he said.

Stephan Neumeier, managing director, APAC at Kaspersky, warned that banks should be on guard against the increasing sophistication and frequency of cyber-attacks targeting financial institutions for their valuable data, citing his organisation’s latest financial cyberthreats report. “From cyber-robberies which focus on breaching the corporate network through an unknown device smuggled into a company building to attacks on ATM using a direct connection, such threats highlight how the financial threat landscape has evolved in just a year, with new infiltration techniques, attack vectors and extended geography.”

Market sophistication is also not a great indicator of preparedness, according to Neumeier, citing how close to half or 42.6% of surveyed enterprises in Singapore admitted they lack sufficient intelligence on the business threats. “Such statistics underscore the need for banks to better understand how cyberthreats that are constantly evolving in complexity can affect them.”

The Pawn: IT Education

Last but certainly not the least, the people in the organisation represent the pawns that play a crucial role in all IT-powered initiatives. Training employees at all levels is essential to executing the enterprise’s IT strategy.

“A bank’s cybersecurity system is only as strong as its weakest link,” said Neumeier. “Most cybersecurity incidents often arise from human errors such as an employee opening a phishing email or plugging in an unauthorised storage device into the company network, he said, citing a worrying trend of poor data management in recent years, characterised by employees not adhering to cybersecurity standard operating procedures when handling data. Tan reckoned there needs to be a concerted effort within an organisation to create a culture of security, resulting from collaboration between leadership, IT and HR. “There is a human aspect to cybersecurity that businesses need to invest in,” he said. “Highly skilled teams which specialise in cybersecurity and risk analysis will provide foresight and enhance planning capabilities for banks that wish to overhaul their organisation.