At present, the domestic economy has entered a new stage of development, and the traditional corporate business of banks is gradually becoming saturated. Traditional banks are facing very limited service capabilities for individual customers and small and micro enterprises, small service coverage at physical outlets, poor customer experience, and difficulty in acquiring customers Major development pain points. Major banks urgently need to break through traditional business models, change their ways of thinking, increase technological innovation, in order to meet customer needs with better products and services, and strive to achieve digital transformation of banks.
There is no unified definition of bank digital transformation, but it is generally believed that banks use big data, cloud computing, artificial intelligence, blockchain and other digital technologies to promote banks to transform their business models, organizational structures, corporate culture and other reform measures. The purpose is to pursue New sources of income, new products and services, and new business models will eventually become digital banks.
The digital transformation of banks can be carried out from the three dimensions of enhancing competitiveness, reducing operating and risk costs, and building new business models.
01 Improve competitiveness
Creating the ultimate customer experience is very important to enhance the competitiveness of banks, which is reflected in every aspect of customer service. Provide customers with fast online card opening, optimize the credit investigation process; build smart outlets, and launch smart form filling, smart teller machines, face recognition, remote review and other services. In addition, things like smart apps and smart customers are the basic requirements for digital transformation of banks. Through voice assistants, biometrics, human-machine collaboration and other technologies, providing differentiated services that match the precise needs of customers is also an important means to improve user experience.
Nowadays, the competition faced by banks is not only horizontal competition, but also challenges from fast-rising financial technology giants . Banks must use the latest financial technology to launch innovative products and services to enhance customer experience. Ping An Bank’s Photon Payment and China Merchants Bank’s Lightning Loan are good examples.
In addition to the digitization of business processes, banks must also fully transform their digital operations. Establish a one-stop big data analysis platform to centrally manage and utilize the business data of the whole bank. Build the management cockpit, grasp the bank's operating status in real time, and make timely decision-making adjustments. Grassroots employees should cultivate data analysis thinking, master the use of self-service analysis tools, and provide customers with more personalized services.
02 Reduce costs and risks
Let's take the annual report data of a bank as an example. Operating costs account for 32% of the bank's total costs and risk costs account for 15%. Both of these costs can be focused on reduction. With the help of technologies such as imaging, smart devices, and Al, building a "light front desk, large and medium desk" model can reduce operating costs. Centralized management of operations in the middle and Taiwan, China Merchants Bank reduced its employees by 7,000 in 2016, and reduced retail business costs by 33%. The front desk was optimized through measures such as closing traditional outlets, making online intelligence, building new outlets, and developing digital channels. For example, ICBC closed 301 business outlets in 2017 and increased year by year. In 2017, Bank of China launched 11,245 smart counters, and China Merchants Bank built coffee bar outlets.
From 2014 to 2018, the overall non-performing loan ratio of the Chinese banking industry soared from 1.25% to 1.86%. In 2017, the net profit of China's banking industry was 1.75 trillion yuan, and new non-performing loans were 200 billion yuan, which was equivalent to eating up 12% of profits. In 2017, affected by the continuous sharp increase in the NPL ratio, the growth rate of net profit also slowed from the long-term double-digit rate to 6%. Therefore, big data technology must be used to improve the risk management capabilities of the three stages before, during and after the loan, and reduce risk losses . For example, China Merchants Bank uses a big data platform to build real-time risk control capabilities to intercept fraudulent transactions in four application scenarios: anti-fraud for card transactions, post-loan monitoring and management, anti-money laundering, and personal or corporate credit ratings. Just launched in 2016, it intercepted more than 30 million fraudulent transactions.
03 Building a new business model
Some traditional banks abroad have established sub-brands to explore new financial development models. Brazil’s BRADESCO Bank’s customer base is mainly wealthy and large companies, who are not sensitive to digital experience. Banks need to maintain a large number of physical outlets and personnel costs, and costs account for 37% of operating expenses, and it is difficult to launch competitive products. In 2017, BRADESCO launched its sub-brand "BRADESCO NEXT" for 60 million millennials. These customer groups have high requirements for digital experience. BRADESCO NEXT provides pure online services without physical outlets. Compared with BRADESCO, the cost is lower and it can provide more competitive products. BRADESCO NEXT has been launched in 8 months and has grown to 350,000 users, increasing by 3,000 users every day. In addition to BRADESCO NEXT, Atom from Spain and Hello from France are all specially established sub-brands. It has become a trend for traditional banks to open independent digital banks, which is worth learning from domestic banks.
Banks take the initiative to turn into an open banking platform, connect the ecosystem and customers, and take the initiative in the competition and cooperation with financial technology companies. Industrial Bank launched an ecological strategy to build an open banking platform to connect banks with business and life ecological partners. At present, 24 new platform customers have been added, 165,700 ecological partners have been connected, the transaction volume of innovative products has reached 65,247,400, and the cumulative transaction amount has been 41.423 billion yuan.
In addition to the three dimensions mentioned above, the most important and most difficult aspect of bank digital transformation is the change of consciousness and culture . Compared with financial technology companies, traditional commercial banks have a large gap in digital talent reserves and corporate culture, and they need to continuously absorb talents according to their digital transformation goals. And through the integration of internal structures and systems, the entire organization will cultivate a sense of digital transformation.
Digital transformation of banks is the general trend, and traditional commercial banks will continue to embark on the road of transformation. How to recognize their own shortcomings and grasp the direction and strategy of transformation will be the key to future success.
As an important "smart base" indispensable in the digital transformation of banks, Sematic software will provide bank customers with a one-stop big data application analysis platform to help the banking industry strengthen its technological capabilities and accelerate smart upgrades. Fast forward to digital operations!