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THE ROLE OF NEW TECHNOLOGY IN DEVELOPMENT OF MYANMAR’S BANKING INDUSTRY

U Htoo Htet Tay Za, Managing Director, AGD Bank

 

Myanmar’s economy is one of the fastest growing in Asia and presents a dynamic business environment for international investments and business. But it is not without its problems. High interest rates, fluctuation and instability of the local currency vs the dollar exchange rate can all present difficulties.

The lack of a centralized scoring system has led to problems with verifying credible candidates for access to finance options. With many companies indebted to banks and unable to repay their overdrafts this has led to high non-performing loan ratios. There is a real need for companies to agree a timetable to repay these loans, as this affected the long-term security of the banking system.

 

U Htoo Htet Tay Za

Opportunities provided by new technology

There are 53 million people in Myanmar and by 2030 and the smart phone user rate is constantly increasing. The digital technology sector in ASEAN could be worth up to US$625billion, which represents 8% of the region’s entire GDP. To reach this, our region must establish cohesive regulatory frameworks for the delivery of new services, which includes the development of Fintech.

Banks and financial institutions play a key role in the transformation in market economies. Fintech is largely an untapped market within the ASEAN region. This is where the financial sector should focus its opportunities and increase awareness and understanding of digital banking, e-commerce and online business.

 

Is cash still king?

In an economy where 99% of all estimated transactions are cash, the future of banking still lies in digital. Only 23% of adults have a bank account which presents some challenges to the finance industry in Myanmar. Branch penetration across all banks in Myanmar is less than 10 percent which equates to 3.8 branches per 100,000 people, with the global average a lot higher at 11.7 per 100,000.

However, smart phone penetration is at its highest rates, with an estimated 80% of adults having access to the internet. Data usage across the country on a par with more developed European countries. This leads to a strong shift towards the digitisation of products and services from banks throughout the country.

In countries such as China the increase of smart phone penetration has driven the requirement for more mobile payment options, and I’d see the development in Myanmar to be similar. Smart phones have opened new avenues of integration to financial services such as new apps and services.

Digital wallets and lifestyle mobile apps, like Onepay, are on the rise and enable the unbanked population to perform mobile transactions. Most banks in Myanmar are seeing the change and creating their own versions of e-wallets, such as KBZ Pay, MAB Mobile and Onepay supported by its banking partner AGD Bank.

Digital wallets offer a lot more security for their users, as there’s no need to carry large amounts of cash around. Mobile, or digital, wallets also help the unbanked population establish a credit rating in order to access finance. For example, AGD Bank use the data from their usage to establish credit scores for future use, or similar to use the data to cross-sell other banking products.

But retail businesses and merchants are benefitting too from the development in new technologies. Both electronic and physical merchants are now all accepting card payments through Visa, Mastercard, UnionPay or MPU. With applications like AGD Pay, the first QR payment application in Myanmar it has opened access to more access to mobile transactions.

The rise of new technologies in Myanmar has led to a new trend of mobile payments, with explosive growth of mobile and internet penetration that is making a huge impact on the financial services sector. Merchants will be able to offer users a secure and easy way to pay for goods and services as well the ability to add or withdraw cash to and from their e-wallet.

 

The future of banking  

Banking in Myanmar is constantly changing, and I expect this to continue in the future. It’s looking good and I predict that we’ll be seeing an increasing amount of the population gaining access to financing.

In June 2019, International banks were granted licences to begin retail banking in Myanmar, and whilst I don’t necessarily see International banks opening loads of branches as it’s a very long process to get the licence, I think they’ll start looking to local banks to start new partnerships.

Whilst the opening of International bank branches will present some competition for local banks, we don’t see it being with our retail customer base. Local banks have the knowledge and a solid branch base which benefits our customer relationships going forward.

The Myanmar banking system has always had the willingness to develop and invest in new technology and we’re already seen

AGD bank is already seeing a strong shift to the digitalisation of products and services and I expect this to continue for some time.

 

Banking

THE RISE OF CHALLENGER BANKS AND HOW LEGACY BANKS ARE TRYING TO KEEP UP

banks

Jean Van Vuuren, Regional VP for UK, Middle East and South Africa at Alfresco

 

The finance world has been going through major changes in the last decade and many banks have become technology companies in almost every way. From online banking and apps to track activity, to the closing of high street branches and the rise of online only banks, this is a global trend that has been hard to miss.

Despite the introduction of challenger banks to the industry, many of us still rely on large, traditional banks to keep our hard-earned money safe. So how do these institutions take inspiration from the new emerging banks and put it into practice whilst keeping themselves relevant to a society that is increasingly reliant on technology? And what is next in the wave of digital transformation for financial institutions?

 

Jean Van Vuuren

Using AI as part of the customer experience

Banks prioritising the customer experience has increased by leaps and bounds in the last 5-10 years, but it doesn’t just end with the launch of an app or the re-design of an online experience. The customer experience needs to be revisited regularly and continually play a core role in the adoption of the latest technology available.

For example, the future of AI in the banking world is very exciting and is completely transforming the customer experience. Voice banking, facial recognition and automated tellers can help create a completely personalised experience for each customer. Someone could walk into a high street bank, AI sensors at the door could use facial recognition to let the teller know who has arrived and they could automatically pull up all the information about their account without having to ask for their bank card or details.

As technology gets more sophisticated, this opens up possibilities for banks to focus on advising customers rather than spending time on transactions and processes.

 

Trusting the security of the cloud for confidential documents

The cloud has completely transformed the way in which we store information on our smartphones, computers and within the enterprise. However, as with any technology it comes with potential security risks. Trusting a third party with your data feels risky in most industries because you no longer feel in control of it, but banks are often trusted with our most precious data – not to mention our money. Therefore, maintaining confidentiality is of upmost importance to banks in order to maintain the trust of their customers.

Financial institutions should make sure that they are not relying on security embedded in cloud platforms to do the heavy lifting. Implementing governance services that provide security models, audit trails and regulate access – even internally, and confidently demonstrate that compliance is key for an industry with so much access to personal information. Whilst working in the cloud offers flexibility, it needs to be made secure with intelligent security classifications and automatic safeguarding of files and records as they are created.

This also brings up the issue of legacy platforms from a security and feasibility standpoint. Fund management companies find that legacy platforms are very expensive and not cloud ready. There is very little room for innovation and it is hard to adapt them to meet customer demands. Even if a fund management company has migrated to a Saas or Paas solution, quite often regulatory obligations and the potential dangers posed by hacking and data breaches mean that they sometimes go back to using an on-premises solution. Instead of backtracking, financial institutions should spend time to understand what the best cloud option for them would be and how they would implement it within the confines of governance and compliance.

 

Going paperless

Discussing going paperless in 2020 may seem like going back to the past, but for many financial institutions making the transition to fully paperless operations is still a work in progress. This is also a key area where challenger banks which have never had paper-based processes have an advantage, they don’t have to adapt simply because they were born paperless. There is also a new generation of consumers that embrace and often expect paperless banking.

While the Fintech industry is intrinsically paperless, banks are still adapting to phase out paper support, but this transition should be an integral part of updating the customer experience. The paperless movement involves moving from simply depositing checks via smartphone to a complete digital experience from end-to-end.

Going paperless also provides an added layer of security in accordance with a rising tide of regulations and government mandates. With digital records, automated management processes allow companies to set up rules around metadata to file records, put security procedures around them and also deleting personal information within retention regulations.

 

Keeping pace with challenger banks who are born of today’s technology

 In recent years, the introduction of technological advances such as digital ID verification, e-signature and risk analytics are transforming the way financial service providers interact with their customers. New challenger banks build whole systems in as few as two weeks and  automate as much as possible. By their very nature, challenger banks are pushing their competitors to be more agile and they are growing exponentially, something which the high-street banks had underestimated when they first entered the market. Created for the digital first generation, challenger banks won market share by putting customer-centric products at the heart of their business. They are also able to improve the product and the user experience quickly according to customer feedback.

Mobile banking innovators are completely disrupting the market and are increasingly leveraging these new technologies to fully digitise their processes, enabling them to deliver new and faster mobile services entirely tailored towards the needs of their customers.

 

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Banking

HOW EMBRACING COLLABORATION CAN DRIVE INNOVATION FOR SMALLER BANKS AND BUILDING SOCIETIES

SMALLER BANKS

– Simon Healy

 

Consumer demand for digital banking products is high. As recent Unisys research shows, half of potential customers say the freedom to open and manage accounts online is a key driver of choice – while a third want a mobile app. So, if banks want to keep attracting and retaining customers, digital has to be on the agenda.

Unfortunately, smaller banks and building societies are facing some serious challenges when it comes to delivering the necessary level of digital innovation. At the same time, competition in the banking sector is fierce, increasing the pressure even further. Something has to change.

 

Understanding the competition

Digital-first neobanks have taken the market by storm in recent years, reimagining how current accounts function and offering innovative services through app-only banking. Customer expectation around digital banking has broadly risen as a result, with these capabilities felt to be a ‘standard’, rather than something that sets a bank apart.

Well-established high street banks – most of whom have a significant number of customers, as well as deeper pockets than your average building society – are also investing heavily in digital capabilities. And all the while, non-bank brands are circling the sector, with many big-name retail technology players expecting to enter the market over the next few years.

Combined, this places serious pressure on building societies and smaller banks, many of whom have limited investment budgets, a smaller pool of innovation resource, and a historical reliance on manual processes.

 

The value of trust

But – as Unisys research reveals – it’s not all doom and gloom for these institutions. While smaller banks and building societies might not have the large investment pots or the internal resource to accelerate digital innovation, they do seem to have strong reserves of customer trust to build on. In the building society sector, for example, nine out of 10 current customers still expect to be a building society customer in the next five years, citing trust in the brand as a key driver.

Meanwhile, customers are more likely to want a digital account offering from a building society than a neobank, highlighting a clear opportunity for building societies to seize – if only they can find the digital fuel to drive their innovation forward.

 

Embracing Open Banking to drive innovation

Once upon a time, product innovation in the banking sector was an inward-looking and investment-heavy process. But now, with the introduction of Open Banking, that could change. Over 60% of consumers who know what Open Banking is believe it’s key to attracting new customers. And with its introduction, there’s a real opportunity for smaller players to develop their products in a new way, delivering fresh customer experiences by integrating with other providers and technologies.

The beauty of this approach is that better customer service (and a broader product offering) can be achieved by collaborating and integrating with other providers, rather than developing the technology in house. As such, smaller banks and building societies won’t be restrained by their limited budgets – instead, they can simply focus on delivering the products their customers need, and the high-quality services they expect.

Although we’ve only seen fairly limited account aggregation so far, this could be taken much further in order to drive significant customer revenues. For example, Open Banking can provide the framework and the safe transmission of data for Embedded Banking, in which banking services are an integrated part of a broader customer service journey.

Most consumers already have some experience of this – just think about how payments function seamlessly in a service like Uber. But this functionality could be pushed much further. Applied in the right way, consumers could be granted the ability to take out a car loan as part of their search for the perfect vehicle. They could even secure a mortgage with minimal hassle during an integrated, online house purchase.

The appeal of this is clear. Embedding banking could significantly reduce friction and empower customers to receive the services they want, where they want them, and how they want them. And this could serve as a valuable distribution opportunity for banks and Building Societies struggling to find the investments needed to keep up with the digital innovators.

 

Exploring the possibilities of collaborative harmony

It’s an exciting opportunity that doesn’t only apply to personal finance: Unisys research shows that consumers would like to see building societies offer more business banking products. With an Embedded Banking approach, businesses could benefit from the ability to access an integrated bank account and accountancy solution, for example. It’s an area smaller banks and building societies could seek to develop.

Of course, this requires a degree of collaborative harmony, with different organisations working in tandem. Yet the general sense in the industry does seem to be a move towards this, in recognition of the fact that outcomes can be improved across the industry by taking a collaborative approach. Ultimately, nearly all financial services know that digital transformation is a vital undertaking to remain competitive – and this can be achieved more effectively by working in tandem with one another.

However, this isn’t a one-off assessment – smaller banks and building societies should keep one eye on the horizon, and reflect on how emerging capabilities like Open and Embedded Banking can help to ensure they don’t lose ground in the future. Customer sentiment is clear, and it’s apparent that consumers want smaller banks and societies to do well – it’s simply a case of embracing the right digital drivers to succeed.

 

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