SINGAPORE (Nov 11): These days, banks are no longer just providers of financial services. With smartphones and artificial intelligence (AI), banking apps know a lot more about their users. For Pranav Seth, this means he can design banking and other services around users’ lifestyles and their needs and wants.

“It’s all about the customer. We do not restrict ourselves to financial services only. We are looking at the life of our customer, and then [will figure out] how banking [can assist them],” says Seth, senior vice-president and head of digital and innovation, global consumer financial services, at Oversea-Chinese Banking Corp.

The latest version of the OCBC Mobile Banking app, relaunched earlier this year, has new features, many of which involve AI and machine learning. For instance, there will be insights into how much money is lying idle in a particular account. “Based on our analysis of your funds and spending patterns, this is what you should be doing to maximise your saving potential,” Seth suggests.

Or if you forget to pay a bill, the app can nudge you to pay the bill or convert it to giro. Or perhaps you have a travel goal. “We can set aside money on a savings goal for the trip,” Seth says. Once the travel ticket is bought, the app can remind the customer to activate credit cards for overseas use.

The app can go as far as understanding food preferences or wellness choices such as a gym or, eventually, an activity such as running or cycling. “We found in our OCBC Financial Wellness Index that Singaporeans are really interested in healthy living, healthy food. We can track your [expenses] on eating out, and suggest restaurants that you might like. And, obviously, if OCBC [cards] have discounts at particular restaurants, we can show those to the customer,” Seth says.

Updated voice-enabled app

Since August, the OCBC Mobile Banking app has offered an AI-powered voice-based virtual assistant — which has helped with more than 20,000 requests. According to the bank’s announcement, in half of these requests, the customer was seeking information about spending categories and budgets; another 30% concerned past banking transactions. Other mobile banking services performed using voice included locating ATMs, paying bills and changing banking PINs.

The new voice-activated banking service, which was developed and trained over 13 months, is called the OCBC Banking Assistant. It “lives” in the OCBC Mobile Banking app. The customer speaks to the assistant as if conversing with a human teller — and the requested banking task gets done.

In February last year, OCBC was the first bank in Singapore to enable its customers to do their day-to-day banking and make cashless payments using voice commands. The banking group’s retail customers were able to check their bank account balances, outstanding credit card balances and details, as well as make instant e-payments to friends and family — using Siri, Apple’s virtual assistant. In Singapore, e-payments can be made instantly to any bank account in Singapore using the mobile phone through PayNow, the city state’s peer-to-peer funds transfer service that enables fund transfers using mobile or NRIC numbers.

Digital transformation

For OCBC, digital transformation is not about becoming a digital bank or simply introducing digital banking. It is about digitalisation for both customers and employees. The banks’ digital strategic framework is an integral part of OCBC’s overall corporate strategy.

Seth is quick to draw a distinction between a digital organisation and a traditional one. A traditional organisation works in silos, he says, whereas a digital one has a lot more cohesiveness and cooperation across the different departments.

“Let’s say I’m [creating] a home loan product. The number of people who need to be involved within the bank, across departments, is huge. To be effective, we need to find ways that cut down silos, and work very closely together as one team even though we’re in different departments, to create functional, digital, business solutions. We are delivering value to customers faster and that’s fundamental to any digital organisation,” Seth explains. He likens this organisational structure to streaming services such as Netflix and Spotify. “This is how Spotify operates. We are changing the way we work to deliver our services.”

According to Seth, key performance indicators of those in management all the way to the teller is determined by “an obsession with the customer”. The bank has invested in customer insights research and is now using technology to achieve the objective of customer-centric products and services.

“Everyone — all 29,000 staff — is trained and sent to compulsory courses to make sure his or her job is upskilled,” Seth says, adding that not a single job has been lost through teller reduction. The group’s skills development is to ensure all staff are digitally savvy and data-ready. He adds that the bank is working with universities to create courses to upskill staff for this purpose.

New technologies, collaborations

In July, OCBC and Union Bank of Philippines successfully piloted an overseas remittance using blockchain. Blockchain and distributed ledger technology are digital systems for recording the transaction of assets in which the transactions and their details are recorded in multiple places at the same time. Because of this, blockchain and DLT are immutable. This is the ability of a blockchain ledger to remain unchanged, unaltered and indelible.

“Our philosophy is to take a ring-side seat,” Seth says, referring to the numerous use cases of blockchain.

“Payments are just a small piece of blockchain. The larger piece is around assets and information sharing and how that is done in a trusted manner. We foresee that when assets get converted into blockchain, a payment mechanism will be needed to make sure that everything works efficiently. If you ask me now, is there a massive application of blockchain for Singa­pore peer-to-peer payments? The answer is no, because the current system is so efficient. But, in cross-border payments, there could be potential for blockchain.”

Blockchain has been mentioned as a technology that can assist in trade financing, because it would reduce issues of fraud. Then again, Seth says the adoption of blockchain in trade finance requires scale and that many participants work on the same platform. “The adoption of blockchain in trade finance is still some years away because some of the processes in banking would need to be changed. But OCBC is ready because we are keeping pace with the development of the network. We are working with partners and experimenting with the technology.”

The bank’s “technology stack” has been modernising, Seth says. It has created micro services, which enable layering on top of the core banking system. “You can break down services into very small parts and reuse them again and again,” Seth says. It is like creating internal an application programming interface (API) so that, next time, when the bank has to develop something new for the app, there is no need to go to the back-end to change the technology.

“Everything happens in the middle layer and this is a very important technology piece called micro services, which we’ve invested heavily in,” Seth adds. The integration with partners is done using the bank’s APIs. OCBC OneAdviser Home, a property portal, is an example of partnerships using the bank’s APIs.

Further disruption

Seth identifies three main disruptors in the future. The first, of course, are the new banking licences — two digital full licences and three digital wholesale licences — to be awarded in mid-2020. The second is the payment network and the third, open banking.

In September last year, the Monetary Authority of Singapore announced that fintechs and other non-bank financial institutions would be granted access to the FAST network for real-time payments. This was a major step towards making the local payments system open, accessible and competitive, MAS had said. Although the likes of Grab have muscled in on e-wallets and other transactions, the local banks have held their own. For instance, OCBC’s deposits were up 4.5% y-o-y as at Sept 30 to $300 billion, and its loans for the year are up 2% y-o-y to $263 billion.

Next year, open banking comes into force. Here, the customer is allowed to decide whether he or she wants to share information from one financial institution to another. “If I bank with OCBC, and I want to share this with Bank X, I can give the consent to share my information from OCBC to Bank X,” Seth says. “It opens up a host of opportunities, and threats. When I’m talking about all these financial and lifestyle insights, I know Singaporeans are multi-banked. If I get information from all the banks, the amount of richness of insights I can deliver to you is incredible.

“The downside of this is that if you are not providing cutting-edge services and others are, customers are more likely to switch banks. Open banking just pushes us to be at the top of our game.”

Seth declines to comment on the Bloomberg news report that OCBC is partnering Keppel Corp and Validus Holdings to apply for one of the new digital banking licences, but acknowledges that the local banking sector is “hyper competitive”.

In countries such as the UK, virtual banks have taken decent market share using “price play” and caused friction within the banking system. That is, the challenger banks offer cheap loans and higher interest rates for deposits. Some observers say the challenger banks offer ease of transactions.

“If you look at our interfaces and the journeys that we are creating, the nucleus of the design, we are world-class. We are battle-ready for any challengers from Day 1,” Seth says.

OCBC’s digital transformation bears fruit

1.            OCBC Pay Anyone payments app allows customers to send money to anyone and make NETS QR purchases for a daily limit of $1,000:

•             Number of users grew 80% y-o-y in October; and

•             2½ times increase in transactions since 2018.

2.            Instant account application/opening (since integration with MyInfo):

•             One-in-three OCBC 360 accounts now acquired digitally;

•             One-in-four of all OCBC accounts now acquired digitally; and

•             Credit cards acquired digitally increased 3½ times.

3.            Seventy-five per cent of digitally active customers bank on mobile (“digitally active” refers to customers who have used a digital channel in the last three months).

4.            Close to 70% of financial transactions are done on the mobile phone (financial transactions involve movement of money, not just service requests).

5.            Emma, OCBC’s home and renovation loans chatbot, received close to 200,000 queries and disbursed $230 million in loans since April 2017.