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OCBC embraces the latest open race for customers

CEO Samuel Tsien is navigating the sea change with stout-heartedness as he ensures OCBC stands ready against the tide of disruption.

Mr Tsien finds the threat from technology to be overstated as he is able to see emerging opportunities from technology.

LIKE many of its peers in the banking industry, OCBC is navigating through sea change brought on by technology, with issues such as data usage now coming to the forefront.

OCBC's chief executive officer Samuel Tsien, 64, is facing it with stout-heartedness, with the banking veteran keen to ensure that the bank - formed in 1932 from the merger of three local lenders - stands ready against the tide of disruption.

Indeed, it was during the bank's Investor Day in September last year that Mr Tsien sounded a rallying call, noting that what worries him most is that the bank stands still, and "ignores the indicators in the market".

"We can no longer define the future by extrapolating the past. We have to revamp ourselves along the way," he had told analysts and reporters then.

Towards transparency

Speaking more recently to The Business Times, Mr Tsien - who won the Singapore Business Awards' Outstanding Chief Executive Officer Of The Year 2018 - says that banks, including OCBC, should be open to having customers switch providers, and in doing so, allow customers to take their own data along with them.

This comes as regulators here are due to get banks and other large firms to allow their customers to port over their data to a competing firm easily, allowing customers to effectively switch service providers in favour of a better offer.

For banks, this movement towards transparency is part of a broader global trend known as Open Banking, where regulators are keen to have banking consumers move easily among banks and fintechs.

Such changes have added to the complexity of Mr Tsien's deliberations as CEO, he tells BT. "There is a basic question of whether we should encourage this or not. From my perspective, I think we should allow that to happen because in the new era, the customer owns the data. And therefore, we should respect that ownership," he says.

"Open Banking is currently seen as a threat, (because) you may open up your customer franchise, allow the customers to move around, and there's more transparency for the customers to know whether you are charging too much. But we have to accept that this competitive pressure will come anyway, with or without Open Banking as a concept."

But he also points out that regulators have not fully clarified how banks should segregate data, such that if banks have gathered insight on customers' behaviour on an aggregated basis, should banks be obliged to turn that over to competitors?

"The bank also needs to protect its own competitiveness. There are certain pieces of information which could be derived from customers' behaviour with us, and we capture that data, as a behaviour for that segment that the customer belongs to. I think that data should belong to the bank," says Mr Tsien.

"I don't think regulations have caught on to that yet. Even in Europe, where Open Banking was promoted stronger than that in Asia, there are still a lot of conflicting regulations on what is allowed, and how do you classify that data. But I think that is an evolving process. The basic direction is that the customer wishes to have the freedom to utilise the data and to move the data, and I think we should respect that."

This also opens up a broader question of how banks today are reviewing the competition at bay from new developments in the digital front. Mr Tsien is notably stoic about the pressures ahead that come from greater consumer transparency.

Levels of competition

"It is part and parcel of the operating environment that we're in. We will always be subject to more competitive pressures coming in. Twenty years ago, where interest rates were highly regulated, it was almost a guaranteed profit for the bank. Later, everyone was free to quote (a rate). So this is yet another level of competition that those in the banking industry should expect to have."

Once not too long ago, there were also seeming threats from fintech companies that, in their earlier anti-bank iteration, were snarling about replacing incumbents in entirety. But again, Mr Tsien has stuck to his early assessment that fintechs would become partners of banks, which still command the customer base and regulatory expertise that most startups do not have.

"When the word 'fintech' was mentioned about five years ago. . . most of the talk was that the fintechs would be a threat to the banks. I've always maintained the fact that we should embrace the fintech companies, and not treat them as a threat. Five years later, you see that most of the fintech companies are actually working with the bank. They have not displaced the banks, they have not replaced the banks," says Mr Tsien.

"Culturally, fintech companies have also helped the banks to grow. . . Because they grew up in a non-regulated environment, their focus is on how to deliver the solution. And along the way, they will manage the risk. The banks will enter into this by first saying, 'what is the risk'? And then you find the solution. So we have modified ourselves as well."

The better use of technology has translated to new services for the banks' customers. For example, there are fresh ways that OCBC, as an SME (small and medium enterprises) bank, is using technology to help the SMEs expand.

The bank has introduced a business dashboard, powered by a fintech, that allows SMEs access to modelling software that look at the SMEs' accounting, cashflow, and hiring figures. These help SMEs take themselves to the next level. Mr Tsien points out that SMEs that had closed down were not necessarily starved of credit, but included firms that failed to develop their business to expand their reach and scale.

On the digital front, OCBC sees most potential in Indonesia, as the bank looks to use digital banking to target 10 per cent of the 45 million people in the emerging affluent segment there. It aims to reach at least one million customers over the next three years with its service.

Potential from Indonesia

OCBC NISP - the bank's Indonesia arm - is targeting to make up to 90 per cent of its existing branch functionalities available on its ONe Mobile application. At OCBC's update during its Investor Day, it said fee income via transactions on the ONe Mobile app had risen by 46 per cent from a year ago.

Already, digital customers at the group level, defined as those who have used Internet or mobile banking at least once in three months, now bring in higher revenues compared to non-digital ones. This stands at about two times more for the consumer segment, and three times more for the SME segment.

At present, about 48 per cent and 60 per cent of OCBC's consumer and SME customers respectively are digital customers. The group is targeting to lift these ratios up to 60 per cent and 70 per cent respectively at steady state, across all core markets.

With the emerging opportunities due from technology, it may explain why Mr Tsien finds the threat from technology to be overstated.

"I always take the view that human judgement cannot be replicated immediately by AI (artificial intelligence). We make decisions by building on other decisions, as the second and third derivatives. By the time you reach the fifteenth derivative, I don't think the AI can catch up."

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