Proper handling of data paramount for digital aims

Considering the impact of ESG standards in the banking industry, what are the critical areas for banks to concentrate on, and how can they align with compliance while driving product innovation?

Hong Yea Chee, senior executive vice president for Customer Engagement at digital banking solutions provider Silverlake Axis

The first critical area of consideration is the infrastructure and the associated carbon footprint of banks. With technology giants like Amazon Web Services setting ambitious goals such as achieving a zero-carbon footprint for their data centres, banks can benefit immensely by transitioning their operations to such ESG-compliant cloud platforms. This mitigates their environmental impact and allows them to focus on core banking services.

The next vital aspect is the access to and standardisation of ESG data. Currently, the banking sector faces challenges in this domain as there is not a uniform standard for such data, in contrast to traditional credit data utilised for loans. However, with global initiatives underway, such as the platform introduced by the Monetary Authority of Singapore for standardised ESG data collection, banks are poised to access consistent and reliable data.

This is a significant step, as having a standardised set of data is instrumental for banks to innovate and offer ESG-compliant products effectively.

Lastly, the evolution of ESG-compliant products is pivotal. As banks secure access to reliable data, they are better positioned to introduce products catering to the ESG-conscious clientele.

For instance, the Commonwealth Bank of Australia’s innovative approach offers products that provide favourable interest rates to customers meeting certain criteria in home projects.

By diligently addressing infrastructure concerns, standardising ESG data, and innovating with new products, banks can seamlessly embed relevant principles into their operations and offerings, aligning with the values and demands of modern consumers.

How can banks adeptly steer their way through these complexities, and what are the challenges unbanked customers face?

Data privacy regulations are not new. We have dealt with them across various regions. The key lies in encryption, tokenisation, and proper contract handling to ensure customer data protection. Banks need to ensure that data used for marketing or cross-selling is approved by the customer. It’s about managing customer data with respect and transparency.

Many unbanked individuals have never set foot inside a bank or applied for a loan, largely because they don’t fit the traditional banking mould. The Central Bank of Ireland, for instance, encourages banks to find ways to serve this segment better. Often, these potential customers feel alienated by conventional banking systems, which offer standard products that might not cater to their needs.

For example, most banks provide auto loans as a standard product. But what happens when a customer cannot qualify for an auto loan? Recognising this gap, we introduced a product called the “title loan.” It’s a hybrid product combining aspects of term loans and revolving credit, designed specifically for those who can show proof of ownership over an asset, like a vehicle.

This product caters to a unique market segment. Many individuals use their vehicles for business, like delivering food or transporting people, but they can’t secure a loan through traditional means. They want to support their families, but often lack the banking resources to do so.

With digital transformation becoming an evident trend worldwide, how do you see its particular impact in regions like Vietnam?

In Vietnam, digital transformation in banking is pronounced due to a couple of distinctive factors. Firstly, Vietnam has a relatively younger population compared to other regions, making them more tech-savvy and open to new digital banking products.

Secondly, there’s a significant segment of unbanked customers who’ve never had the opportunity to use traditional banking services. It’s crucial to note that our focus isn’t solely on the younger tech-savvy population; we are equally keen on bringing the unbanked into the fold.

Furthermore, nowadays, the younger population rarely visits physical bank branches, pushing the industry towards a combination of physical and digital experiences. Another trend is embedded financial services, where banks offer their services directly within other platforms, like e-commerce sites. It’s more about providing banking services rather than banking as a traditional entity.

Data protection heads digital banking efforts Vietnamese authorities have been busy at work dismantling an illicit information network involving bank employees, as local lenders prioritise data protection and digital infrastructure for customer privacy and growth.

Vietnam banks support 'adopt and build' approach to digital transformation More than 55 per cent of chief information officers in Vietnam are more inclined to embrace an “adopt and build” approach in their digital banking transformation, above the Asia-Pacific average of 48 per cent.