With new players constantly entering the fray in the fintech space, traditional banks are feeling the crunch.
At the Money20/20 conference yesterday (13 Mar), several banking industry leaders warned that they need to “transform or die”, or “risk being usurped by big technology companies”.
DBS Group CEO Piyush Gupta said that it is “very easy to see a world where [banks could] just wind up being an infrastructure and being the dump pipe”.
Mr Derek White, the global head of consumer and client solutions for banking group BBVA, also shared that he expected the 20,000 banks worldwide to shrink to just a “few thousands” in the near future, and down to merely “dozens” in time to come.
“The battle between ‘big tech’ companies and banks require firms to ask themselves how ‘smart’ the interactions are, and not their volume or frequency,” White added.
Perhaps this was partially in reference to ride-hailing giant Grab’s launch of Grab Financial, which announced that it is set to provide loan and insurance services “for the unbanked majority of consumers and small businesses in Southeast Asia”.
These services are on top of its existing fintech products, payment system GrabPay, rewards system GrabRewards, and GrabBenefits for drivers.
The fintech ambition of Grab coincides with what Mr Prateek Roongta, managing director of the Boston Consulting Group and speaker at the forum, stated – that “a lot of those companies which started off providing non-financial services found ‘great opportunity’ to launch digital payments”.
“These [companies] have disrupted the banks in financial services space and banks are losing rapidly.”
Banks which will not rise up to this challenge really risk losing first the payments accounts, then the transactions and eventually the customer base.
Head of global product development at Citi, Mr Sanjeev Mehra, also noted that banks have been “losing” the battle so far, as they become more inward than customer-focused over the years.
United Overseas Bank managing director Dennis Khoo added that even with the treasure trove of data that some banks have, “they tend to be bureaucratic and siloed”.
The main takeaway was that to have a chance at winning, banks need to start engaging more meaningfully with consumers, and “tapping the trust which they have build up with customers over the years”.
OCBC Bank Looks To Being ‘AI First’
And it looks like OCBC Bank has found that fighting chance with artificial intelligence (AI).
With an initial investment of S$10 million over 3 years, OCBC Bank stated in a press release that it is the first bank in Singapore to establish an AI unit to strategically develop in-house AI capabilities.
The pioneering team consists of three data scientists, and is led by Singaporean Mr Ken Wong.
The unit’s aim is to drive adoption of AI across banking services such as wealth advisory and loans financing.
They plan to “[give customers] access to banking services through natural user interfaces that are seamless and convenient, as well as targeted and tailored products and services that are contextually relevant, driven by machine learning”.
The AI unit is based within OCBC Bank’s Fintech and Innovation Group, The Open Vault at OCBC (TOV), and it will serve as a ‘test bed’ for all new AI technologies, demonstrating the feasibility of new technology before it is integrated into the bank’s existing systems.
Said Mr Wong, “With the set-up of our very own AI lab, we are able to experiment for the first time with deep learning neural networks and graphics processing units, which are heavily used in the gaming industry and hardly used in banking.”
Added Mr Pranav Seth, Head of E-Business, Business Transformation and Fintech and Innovation Group. “The time to act on AI is now!”
AI is going to break the Internet and be bigger than the mobile revolution. We want to be at the forefront of this new age of banking.
Leveraging On OCBC’s Data Sandbox And APIs
Experimentation is their game, and the unit will be leveraging on the bank’s data sandbox and application programme interfaces (APIs) to experiment with real-life anonymous customer data in a secure environment.
They are also experimenting with natural language and speech processing technologies.
Using research and technology from the Agency for Science, Technology and Research (A*STAR), the unit is developing AI technology that can recognise and understand local accents accurately, such as the Singaporean accent.
If successful, the technology could be used to create chatbot services that can respond to customers using voice messaging, and enable customers to fill in banking forms digitally simply by having a phone conversation with their relationship manager.
They will also work with Amazon Web Services (AWS) DeepLens, the world’s first deep learning video camera for developers.
Using AWS Professional Services consulting and training, AI technology can be created to provide a more personalised experience to OCBC customers by leveraging facial recognition technology, and could be deployed at bank branches or ATMs.
Finally, the AI Lab will serve as a “specialised training centre to further develop the data science skills of data analysts and technologists within the bank”.
Internal hackathons will also be organised to “extract new ideas from OCBC Bank employees across different banking divisions”.