5 min read

Banking on Experience: How Customers Are Revolutionizing Financial Services

Guru Venkatachalam

The revolution sweeping through financial services has brought new purely digital players to the market and is driving massive change through traditional banks and other financial institutions. Across the globe, customers’ digital experience is reshaping traditional banking services and relationships, and the Asia Pacific region is leading this transformation.

Partly in response to a pandemic that closed bank branches worldwide, customers are demanding almost every service to be available digitally, and in most cases, via a mobile app. Every bank is becoming a digital bank. Markets that have had a large unbanked population have, over the last few years, leapfrogged directly into mobile banking, bypassing traditional banking.

According to McKinsey’s 2021 Personal Finance Survey, the share of consumers in Asia actively using digital banking has jumped to 88% this year, compared to 65% four years ago. More than 60% of Asian consumers are now open to switching to a digitally-focused “direct” bank, McKinsey reports.

And financial services companies are raising their digital game. In VMware’s own Digital Frontiers 3.0 study, more than half of respondents said financial services groups in Southeast Asia had improved digital services compared to before the pandemic. 

The big digital shift has helped open the door for fintech players like Ant Group in China, BankBazaar in India and Afterpay in Australia to enter the market. It’s a market where the big digital names like PayPal, Stripe and India’s Paytm have already carved out substantial businesses. Along with China’s AliPay and WeChat Pay, which have been acknowledged as global leaders in fintech scale and innovation for some time.

To keep up with the disruption, traditional banks are innovating at a rapid pace and expanding their scope beyond traditional finance and are beginning to offer services that look more like those of pure fintechs. In Singapore, DBS’ PayLah app offers anything from simple payments to food orders and purchasing of public transport fares, while Thailand’s Kbank has teamed up with Grab for its own e-wallet service offering payments and loans. Services like PayNow in Singapore and the New Payments Platform in Australia allow customers of multiple banks to make payments to each other using only mobile phone numbers. Chinese giant Ping An, which started life as a conventional insurer, has become a technological powerhouse offering services across areas as diverse as healthcare, auto services and real estate. In India, HDFC Bank offers AI-powered 10-second car loan approvals.

Customer-Driven Transformation

One of the major drivers of the success of the new fintech players is their superior customer experience and ease of use. Traditional banks are innovating faster than ever to improve customer experience.

At VMworld, several leading financial institutions shared how they are transforming to become digital-led banks. Customer experience is key, powered by a move away from legacy infrastructure to agile, cloud-based platforms to keep up with what customers want.

In my discussions with banking technology leaders, there were some key common themes among their transformation strategies that stood out:

  • Application Modernization
    Banks are modernizing their retail platforms to grow revenue, increase efficiency and lower costs. Behavioral scientists, data scientists, bankers and developers are working together to develop the compelling customer app experiences they increasingly view as major competitive differentiators. Amid hot competition in the space, speed to market is also becoming crucial, with the addition of services and microservices, using platforms like VMware’s Tanzu, creating short development timescales and the ability for frequent releases.

    More apps also mean more data, which in turn means more insights about customers. Those insights fuel the hyper-personalization of marketing and service offers. Making sense of this data requires analyzing transactions in real time, which means many banks are turning to AI and machine learning, moving analytics workloads to the cloud.
  • Digital Workspace Solutions
    The speed and service now demanded in financial services is changing the workspace, both on the customer frontline and in DevSecOps.Banks want to improve customer service and lift productivity, while maintaining the security and data integrity that remains the cornerstone of the industry. One bank told me that this year 90% of its infrastructure has been managed by employees working from home. Cloud-based solutions that keep source code safe and provide relevant developer access are removing old roadblocks and speeding up rollouts, with thousands of remote developers able to work on projects at once.
  • Multi-Cloud Adoption for Consistent Digital Experience
    Attracted by flexibility and infinite scalability, banks are increasingly answering the challenges of app modernization and digital workspaces by integrating with public clouds. Multi-cloud and hybrid cloud allows modern apps to talk to core legacy systems for a responsive, innovative and seamless experience for the customer. Multi and hybrid cloud also give the flexibility to deal with different regulatory requirements in different jurisdictions.

    One bank described a journey from two releases per month on traditional infrastructure that became 20 releases a month in a virtualized environment, before accelerating to 120 releases per month on cloud. “Speed is our lifeblood,” one bank CTO told me at VMworld. “You are only as fast as your infrastructure.” As well as enabling shorter release cycles that get new features to customers faster, development done in the cloud means that tech talent can be sourced from almost anywhere in the world, scaling up and down as required.
  • Experience Matters
    Financial services firms old and new now have to gauge how they measure up to digital giants like Meta, Google and Netflix in customer experience terms. “Digital experience” can include anything from how easy a service is to use to its ability to meet customer needs with timely offers.

    The stakes are high. According to our Digital Frontiers 3.0 study, 59% of Southeast Asian consumers would switch to a competitor if the ongoing digital experience they get from a brand does not live up to expectations.

    Banks are taking action. The end goal of many customer experience initiatives is to forge a digital relationship that is strong enough to support their customers’ financial products digitally, as well conduct routine transactions.

    India’s IndusInd Bank, for example, says that since the pandemic, 70% to 80% of its customer acquisitions have come via digital channels.

    Using multi-cloud infrastructure, IndusInd has rolled out innovative customer-facing applications. One app is  IndusAssist, which allows customer to conduct everyday banking tasks via talking to Amazon Alexa. Meanwhile, IndusInd’s Video Branch mobile app, allows customers to conduct face-to-face banking with their Branch Manager or Relationship Manager across a full range of transactions, no matter where they are in the world. Innovations like these helped IndusInd win the “Improved Customer Experience” category at the first-ever VMworld Customer Excellence Awards last year.

License for Change

Eyeing the democratization of finance and greater competition, regulators around the Asia Pacific region seem keen to encourage the growth of new digital financial services. In this environment, some banks are even planning to shift their core banking systems into the cloud—something that would have seemed unlikely not that long ago. More regulatory leeway is also increasing the speed of change, which is adding to the pressure on all players to keep up.

And all this is happening in an environment of greatly increased competition. As well as the new breed of fintechs, companies from other industries, such as telco, are also beginning to offer financial services to their large existing customer bases.

“We are a tech company with a banking license,” is something we now hear all the time as traditional banks embrace tech and forge partnerships to compete in this new marketplace.

We are witnessing some of the biggest changes in financial technology since banks first computerized in the middle of last century and are heading into an exciting and customer-driven new era.