Banks need to keep up with tech-driven changes in the industry

THE former Citigroup Inc CEO, Vikram Pandit, said recently that new technologies such as artificial intelligence (AI) could result in a 30 per cent cut in banking jobs over the next five years. AI and robotics are indeed reducing the need for staff in many back-office roles. The adoption of AI is not just resulting in staff reductions, it is also changing traditional processes and systems within financial services. Looking ahead, AI will become an integral part of risk management and credit assessment, among other functions.

There are already fledging alliances between incumbent financial services companies and technology providers for using robotics and AI to streamline operations, reduce costs and mitigate risks. With customers expecting services anytime, anywhere, via mobile devices, AI-led systems and processes are making it easier and safer for banks to offer their various products through multiple channels in a secure and seamless manner. A good example of this is DBS Bank's mobile-led bank in Indonesia, digibank. It has in its core technologies such as biometrics and AI, which allow it to run as a paperless bank. But AI is just one example of the rapid ingress of technologies into the financial services industry. Others such as blockchain are transforming the traditional accounting technique of using ledgers by creating what is known as distributed ledgers which are more efficient and secure.

One result of new technology-driven processes has been that the traditional advantage enjoyed by incumbents in terms of operating cost and scale are becoming less of a competitive edge. A Deloitte study notes that companies are working with other organisations to explore new technologies to accelerate the commoditisation of their cost bases so they can preserve margins and focus on more promising strategies. Deloitte adds that between cost-sharing with peers and the use of industry-standard tools, the financial services value chain will flatten. In response, the industry will pay greater attention to partnerships and the overall ecosystem. Disruption is also making it possible for technology-centric companies, also called fintechs, to offer products and services which used to be the purview of traditional banks. Virtually all types of financial activities, be it plain banking and payments to wealth management, are being reimagined by fintechs, many of which have received massive venture capital investments.