Disruptive technologies present opportunities for banks to transform

Nurdianah Md Nur

Sibos 2015 Singapore
Sibos 2015 Singapore. Credit: SWIFT

New technologies should not be thought as disruptors but tools that enable banks to transform, asserted finance leaders at the Swift International Banking Operations Seminar (Sibos) in Singapore last week.

"People talk about disruption, but the word to think of is transformation, which implies the incumbent can make a change," said Piyush Gupta, CEO of DBS Group Holdings. "The reality is that all of us have an opportunity to lead the transformation, to make a real change in the customer experience. There is no one in a better position to do this than we (ie. finance professionals) are."

Similar to other industries, the banking industry's existence seems to be threatened by the rise of non-bank competitors, whose existence and popularity are enabled by new technologies such as cloud computing. One such competitor is Chinese Internet giant Alibaba, whose payment platform Alipay today handles 80 million transactions daily. Another competitor is Tencent, which saw users of its WeChat mobile messenger sending 1 billion virtual red envelopes (ie. hongbao) on this year's lunar New Year's eve in February this year.

Despite the rise of these competitors, Gupta is optimistic that banks will not perish in future as consumers still trust banks to safeguard and process large sums of money. He added that banks are also "unmatched in their capability for customer data analytics and risk management."

Echoing Gupta's sentiment, SWIFT's CEO Gottfried Leibbrandt said, "I don't think banks will be extinct [in future]. The keyword is transformation, whether they can absorb the new technologies, and use them to add value to customers."

Blythe Masters, CEO of Digital Asset Holdings, urged banks to use new technologies to complement the old/traditional technologies to strengthen their infrastructure and better serve customers.

One of the new technologies that captured the interest of many banks recently is blockchain, which is the underlying technology of virtual currency bitcoin. Blockchain is a peer-to-peer technology that uses its distributed ledger and encryption capability to guarantee the provenance of every transaction. Blockchain could thus potentially eliminate the back-end processing of clearing a transaction (the traditional way), and provide a secure provable transaction in near real time.  This means that banks could spend less on their back-end processes, resulting in offering cheaper and faster services/transactions to their customers. 

"[The industry] has moved on to applying the technology to solve actual problems. But to me, what's interesting is that blockchain has forced us to rethink our entire value chain in a way we had never done before," said Leda Glyptis, Head of Bank of New York Mellon EMEA Innovation Centre.