(Nov 13): The digitalisation of society is advancing at a rapid pace. Amid this trend, Sumitomo Mitsui Financial Group (SMFG) is actively adopting new technologies and promoting digitalisation in various areas of its business.

The group’s core unit Sumitomo Mitsui Banking Corp, which employs more than 1,100 staff in Singapore, is guided by the same principle and dedicated to digitalisation, says Ryuji Nishisaki, head of Asia-Pacific at SMBC.

“Our digitalisation strategy is guided by our mission to provide services of greater value to our customers, as well as to create a conducive work environment that stimulates growth,” Nishisaki explains. “Digitalisation is driving the behaviour of our customers and the way businesses operate. Innovativeness is one of our core values, and we instil a culture of openness to new ideas and continuous improvement.”

Commited to digitalisation Digitalisation is not new to SMFG. In 2012, the group formed its first team (now called the IT Innovation Department) to carry out research in new services and their viability in commercialisation. The appointment of a chief digital innovation officer in March this year was an extension of SMFG’s commitment to digitalisation.

The CDIO’s role is to implement this strategy, which incorporates various technologies in four focus areas: enhancing the customer experience; generating new businesses; improving productivity and efficiency; and upgrading management infrastructure.

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In the area of enhancing customer experience and B2B platforms, SMBC has participated in several industry working groups and joint feasibility studies with other banks.

In February, SMBC and IBM Japan initiated a proof-of-concept to verify the applicability of blockchain technology to cross-border trade operations. The potential scope of application includes digitalisation of trade documents, secured exchange of such documents between parties in a cross-border trade transaction, and real-time information sharing among exporters, importers, forwarders, shipping companies and port authorities.

Trade finance is a significant part of SMBC’s business portfolio, which, along with project finance, comprises about 20% of overseas loans currently. “Transaction banking, including cash management and trade finance, is a critical enabler to our growth strategy in Asia,” says Nishisaki.

In July, SMBC announced it was collaborating with US venture capital firm Entrepreneurs Roundtable Accelerator to establish a fund backing fintech start-ups. This follows a move to launch a digital innovation lab in Silicon Valley, California in April.

Transformation from within To improve productivity and efficiency, the bank is collaborating with both fintech start-ups and established technology companies.

Biometric authentication and artificial intelligence (AI) are two areas of R&D with the potential to improve employee productivity on a large scale.

For example, in the area of biometrics, SMBC is collaborating with NEC Corp in the use of facial recognition technology to provide secure, cashless and cardless payment services at its branches in the future. The service has been tested in the cafeterias at SMBC’s head office, which has more than 1,000 employees, and won the Minister of Economy, Trade and Industry Award last month at CEATEC Japan 2017, Japan’s largest IT and electronics trade show.

In 2014, SMBC because the first Japanese bank to introduce AI to support call centre agents for internal enquiries. In 2016, the technology was expanded to cover enquiries from corporate clients by using natural language processing and machine learning to provide call agents with suggested answers.

Besides launching an AI chatbot in May for securities trading customers that was jointly developed with NTT Communications Corp and Accenture Japan, SMFG is also collaborating with Google to explore using AI for credit card fraud detection at Sumitomo Mitsui Card Co (SMCC), reducing the investigation load associated with transactions being flagged as suspicious by conventional means.

In September, SMBC and SMFG announced a collaboration with SAS Institute Japan, a data analytics and software company, to implement an intelligent anti-money laundering software powered by AI. The new AML transaction — monitoring infrastructure takes a risk-based approach, making it easier to manage alerts, test scenarios and comply with industry regulations.

SMBC recognises that having the flexibility to collaborate with a range of players is essential in the fintech ecosystem. As such, the company has started to evolve its systems architecture towards an integrated enterprise digital platform in Asia-Pacific and explore the feasibility of being “application programming interface [API]-friendly” in the long term. API stands for application programming interface, a set of rules and specifications followed by software programs to communicate with each other, and an interface between different software programs that facilitates their interaction.

“As we expand our footprint and product capabilities, we will need to integrate our IT and data management infrastructure, as well as enhance our business intelligence capabilities to help create new strategic business frontiers,” Nishisaki says.

Extending innovation beyond home turf Beyond Japan, SMBC works with affiliate financial institutions in Southeast Asian countries such as Indonesia, Cambodia and Vietnam to expand their retail business and deliver digital banking solutions based on SMBC’s existing technology. To this end, SMBC established the IT Innovation Department in Singapore earlier this year.

“With an advanced fintech community burgeoning with innovation and resources, Singapore is an ideal place to become a hub to pursue such activities,” Nishisaki says. “This is an added commitment to Singapore as our regional headquarters. Our long-term vision is to make Asia our second home market outside Japan. It is a testament of our confidence in this market. This is why we are excited to explore new avenues of collaboration at the Singapore FinTech Festival, particularly to develop digital retail banking in Asia.”

A lab team was set up in the innovation department to research and develop digital banking solutions.

For example, the innovation department led the bank’s effort in a collaboration with Indonesian bank Bank Tabungan Pensiunan Nasional (BTPN) to launch two digital banking platforms: “BTPN Wow!”, which enables the unbanked population to use banking services via low-cost mobile phones; and “Jenius”, which provides smartphone- based digital banking services to digitally savvy affluent customers.

The lab team also collaborates with SMBC’s other labs set up in other fintech start-up breeding grounds such as Tokyo and Silicon Valley to find solutions that will fulfil the needs of its customers, partners and its own business.

Highlights of SMBC’s digital transformation journey

2012 • Sets up project team to look into fintech in depth 2014 • Becomes first Japanese bank to introduce artificial intelligence (AI) to support call centre agents 2015 • Officially sets up IT Innovation Department 2016 • Expands AI capability to improve corporate customer service via natural language processing and machine learning to provide call agents with suggested answers 2017 • Initiates a proof-of-concept to verify the applicability of blockchain technology to cross-border trade operations with IBM Japan • Appoints chief digital innovation officer • Joins US Entrepreneurs Roundtable Accelerator to establish a fund backing fintech start-ups • Wins Minister of Economy, Trade and Industry Award at CEATEC Japan 2017 • Establishes the Asia Retail Innovation Department in Singapore and the SMFG Silicon Valley Digital Innovation Laboratory

This article appeared in Issue 805 (Nov 13) of The Edge Singapore.

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Smart bank: Sumitomo Mitsui Banking Corp’s digital journey

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