Every financial institution is considering digital transformation to meet growing customer expectations for speed and convenience, lower operating costs, and fend off competition, including technology companies that turn to financial services. Some spend more than 10% of their annual income on technology investments, according to Bloomberg. “This is a huge investment and most financial institutions cannot sustain it for the long term,” said Michael Fei, CEO of Small Business Banking at OneConnect Financial Technology, Partner at Ping An Insurance.
The covid-19 pandemic has revealed how even financial institutions that saw themselves as digitally advanced are, in reality, still associated with analog processes throughout the processing chain.
“For many financial institutions this has been a wake-up call,” Fei says. “In the past, many thought that if they had an online portal and a mobile app, that was enough. But now they have realized no. Some banks have online portals and mobile apps where you can apply for loans, but they still have to send items to the customer and perform an on-site inspection before they can process the loans, which was not possible during the process. covid. Banks have had to reshape and rethink the entire process of their lending products. “
Banks have also recognized their lack of in-depth customer knowledge, which is essential to inform responsible and flexible decisions during an economic downturn, as customer needs change rapidly.
“Now that everything is digital, financial institutions are realizing how little they knew their customers,” said Tan Bin Ru, Managing Director for Southeast Asia at OneConnect Financial Technology. “Customer hyperpersonalization tools, to understand which products to offer, have been conceptually recognized for a long time but not implemented – now banks are heading there and really getting the tools to do it.” Traditional banks that previously did not use alternative datasets now want to further integrate them into secured loans, Tan says.
The power of partnerships
Banks have increasingly understood that they need outside help to execute their digital transformation agenda. “Banks usually have very rigid systems and procedures,” says Fei. “For example, if you want to launch a new product, you have to go through the process, and it takes at least six months. In the age of digitization, that doesn’t work because customers want things immediately. This has put enormous pressure on these financial institutions to set up agile operations and systems to be able to meet the needs of their customers. “
But the number of tech companies entering financial services can be overwhelming, and not all of them have expertise in the field, which can lead to mistaken attempts to apply new technology everywhere. Without financial services experience, tech companies may also underestimate the tradeoffs involved in deploying certain digital tools.
OneConnect combines digital technology expertise with in-depth knowledge of banking. Fei, who previously worked at HSBC China and Bank of Langfang, a Chinese commercial bank, describes partnering with a Chinese national bank to redesign its customer service center to illustrate why the banking experience matters in digital reform. The lender was looking to transform a 6,000-person call center to a smarter, AI-enabled approach with greater use of automation. But customer service automation must be done with care; customers will not appreciate being entrusted to a robot for certain sensitive or urgent requests where a human counterpart is desired.
OneConnect has built a knowledge map with the bank, to understand and anticipate the problem a customer is trying to solve with a given query, then understand when and where to apply automation versus human support. “It required a deep understanding of the business and the industry, which many tech companies don’t have,” he says. “You need it, to know when to intervene, what robotics should do and what a human being should be. Many tech companies can’t offer this.
Rather than advocating digital transformation at all levels, OneConnect strives to strike the right balance between personalization and integration, and understand that banks are looking for a blended or omnichannel approach. “Our banking customers and their customers want to be offline for some things and online for others; they want that flexibility, ”says Tan.
A second partnership problem that banks face is the sheer number of technology providers and startups, which can be overwhelming and complicate their digital transformation journey. We do not know which fintechs will survive and which will not; startups may offer compelling technology, but if their underlying business model proves to be unviable, or if they cannot raise sufficient funds to support their expansion, or if they pivot in a new direction, a bank is exposed .
In many cases, banks are going into many different fintechs because no startup can handle the extent of their needs or because the bank wants to diversify its risks. “Because the digital journey is such a long process, many banks feel they have to look at 15-20 fintechs to piece together their journey, but the more players they have, the more risk there is,” says Tan.
OneConnect solves both problems–an overly complicated supplier network and the risk of working with nascent technology companies – offering a wide range of turnkey solutions, with the commercial scale and security that customers can rely on. Typically, a bank plots the desired route and up to 80% of those solutions can be provided by OneConnect, Tan explains. The company, listed on the New York Stock Exchange, also draws on more than 30 years of financial services experience from its parent company, Ping An, described by The Economist like a window into the future of finance. “No other traditional financial services group in the world can match Ping An’s ability to develop technologies and deploy them on such a scale,” according to the magazine. recently wrote.
OneConnect: the journey so far
OneConnect has developed a large business in China, serving all of its major banks, 99% of its urban commercial banks and 53% of insurance companies. But its footprint is increasingly global, with more than 50 international clients in more than 15 markets, including Singapore, Indonesia, Malaysia, the Philippines and Abu Dhabi.
The company developed new technology solutions to improve pricing accuracy, such as alternative data, an AI-based credit scoring model for a credit bureau in Indonesia, and helped Malaysian banks develop applications user-friendly, digital portals and integration. It takes advantage of image recognition, a key part of “insur-tech” that allows insurers to quickly assess claims and pay out to eligible beneficiaries. OneConnect has partnered with Swiss Re, a European insurer, to develop an end-to-end digital solution for auto claims processing, based on AI-based image recognition and advanced data analysis. The tool can analyze photos of damage to a vehicle, identify repair needs and costs in minutes, offer cash payments, and even provide value-added services like directing drivers to a repair garage.
OneConnect also helps build the fintech ecosystem by working with governments, regulators and stakeholders. It works with the Singapore blockchain association to develop the skills, literacy and talent pool needed to enable innovation and has partnered with Abu Dhabi Global Market, a financial hub in the United Arab Emirates, to support the development of a “digital laboratory”. a sandbox for fintechs to collaborate and develop their innovations.
Working closely with its domestic and international partners, OneConnect helps the financial industry move quickly into the digital age by leveraging the right tools at the right time, to the benefit of clients and financial institutions by expanding access to services and reducing costs.
This content was produced by Insights, the personalized content arm of MIT Technology Review. It was not written by the editorial staff of MIT Technology Review.