Treasury Today Country Profiles in association with Citi

Self-service banking

Human hand shaking a robotic hand

Banks are increasingly offering consumers ways to carry out banking activities without the need for human interaction. In the world of corporate banking, development may be less advanced – but banks across the region are increasingly turning their attention to the opportunities and benefits of a self-service model, from a reduction in paper to greater transparency and enhanced decision making.

The rise of digital channels is transforming the way in which banking services are provided. Around the world, banks are exploring the use of self-service models to support customers in carrying out banking activities without the need for human interaction, from in-branch self-service machines to chatbots which can issue financial advice.

As with many innovations in banking, development has so far been focused on the consumer experience, with corporate banking lagging behind. But with banks in Asia increasingly asking how they can offer their corporate clients a self-service experience, what are the most significant areas of development and how could corporates benefit?

From bricks and mortar to chatbots

The concept of self-service banking has been around for some time – at least in the retail banking domain. Simply put, self-service means that people can carry out activities themselves, without the need for human interaction. ATMs are an early facilitator of this model, but more recently the rise of online banking platforms and mobile apps has provided greater opportunities for people to withdraw cash, check their account balances and send transactions without ever having to set foot in a bricks-and-mortar branch.

Notable developments in this area include the arrival of chatbots, which can perform tasks such as initiating transactions and providing financial advice. Bank of America Merrill Lynch, for example, is developing a digital assistant called Erica which uses artificial intelligence and predictive analytics to interact with customers via voice or text message and make recommendations about customers’ finances. In Asia, meanwhile, DBS has rolled out a chatbot called POSB digibank Virtual Assistant on Facebook Messenger. The service currently provides basic information about the bank’s products and services but work is underway to include services such as bill payments.

As self-service models become more common, banks are finding there is less need for the physical branches that have been necessary in the past. Between 2015 and 2016, Bank of America Merrill Lynch, Citi and J.P. Morgan closed a total of 389 branches across America. In Asia, meanwhile, Citi has announced that it will close 80% of its branches in South Korea as part of its move to digitisation, with around 800 workers to be redeployed to “non-face-to-face” channels. However, this trend is not consistent across all markets: HSBC has announced it will close 62 branches in the UK this year, but that it has no plans to close branches in Hong Kong.

Even when banks do retain their physical branches, many are exploring opportunities to enhance these with elements of self-service, for example by introducing self-service machines which allow customers to perform their own teller transactions. As well as enabling customers to withdraw funds, such machines can also be used to pay in cheques, make payments and manage direct debits. These developments are enabling banks to readjust the roles of staff within their branches, with a greater proportion focused on providing financial advice instead of carrying out transactional activities.

In other cases, cardless ATMs are being introduced which enable people to withdraw cash using their smartphones. Meanwhile, POSB last year piloted a video teller machine (VTM) which allows people to carry out a range of banking activities and carry out live video chats with staff. VTMs have now been installed at nine locations in Singapore.

The rise of corporate self-service banking

As consumers begin to benefit from these developments, a number of factors are combining to make self-service a higher priority in the corporate banking arena too. “People are talking about self-service banking now for a number of reasons,” says Francyn Stuckey, Head of Payments & Cash Management at ANZ. “The maturity of the technology is one. Banks have invested a lot in their key systems – you’ve got clearing systems moving to XML and becoming more data rich; you’ve got APIs and apps, so technology has moved on very quickly.”

At the same time, Stuckey notes that with millennials coming up through the workforce and consumerisation hitting a critical mass, buying and servicing behaviour is also evolving. “Another consideration is how competitive the space is,” she says. “Whether it is the fintechs coming in and looking for opportunities to disrupt, or partner banks keeping up with increasing pressures in terms of regulation and cybercrime, everybody is looking for that opportunity to serve their client in a way that is better, more convenient – and ideally more cost effective.”

Manoj Dugar, Head of Core Cash Management Product, Asia Pacific, Treasury Services at J.P. Morgan adds that cross-border expansion is another factor driving development in this area. “As corporates expand their operations especially across borders, they are increasingly looking to connect seamlessly with banking partners for their cash management requirements and self-service banking provides a great platform towards this goal,” he adds.

“Other factors driving the trend include the increased need for transparency, end-to-end visibility and information on straight through processing for transactions, as well as the demand for unified banking access as more corporates adopt a more centralised cash management model via shared services centres and treasury centres.”

Which services?

As Dugar points out, there are some key differences between corporate and retail banking which may affect the development of self-service offerings. “For one, clearly corporates and retail differ significantly in both volume and type of transactions,” he says. “Also, there is a large number of unbanked retail clients across Asia Pacific, particularly in the developing markets, which contributes to a difference in channels and requirements.”

So what does self-service actually include? “Some things are obvious, like how can I click into a transaction and see the details,” says ANZ’s Stuckey. “In other cases, it’s about asking whether things are really intuitive to customers, not just to the bank. It’s also important to ask how many clicks it takes to get through a process and whether people stop before getting the information they wanted.”

Dugar says that he sees three types of self-service model emerging: robust real-time decision-making support through analytics and decision-making tools, superior front-end platform for information flow and visibility of transaction and the development of search and investigation modules to digitise query resolution.

Where J.P. Morgan is concerned, Dugar says the bank is continuing to invest heavily to provide innovative solutions for its clients. “As a leader in cash management technology and the digitisation of treasury solutions, we are very active in providing self-service banking solutions,” he says, explaining that the bank’s key offering in this space is the J.P. Morgan ACCESS Online portal which “integrates the services needed to manage cash balances, liquidity structures, daily transactions and information, instantly.”

Dugar adds that as well as being accessible on mobile, the platform also houses the banks new virtual branch solution which was launched in India in 2015 and which has since gone live in Indonesia, Thailand and China. The virtual branches remove the need for physical visits to traditional bank branches and reduce manual intervention. The platform comprises a suite of banking services that can be accessed from desktops and mobile devices, including digital document submission, initiating and approving transactions online and visibility over cross-border transactions.

Tearing up paper

Damian Glendinning, Treasurer at Lenovo, argues that when discussing these developments, a key question is why paper continues to be used in banking transactions. “Here, we come to an unresolved problem which is, frankly, shameful: the continued use of paper in corporate banking,” he says. “For trade transactions (letters of credit, in particular), we continue to use paper. For know your customer (KYC), paper is, again, often required.”

According to Glendinning, this is often the case because country legislation often does not provide a sufficiently clear legal environment for the use of electronic documents. “Unfortunately, it is also often due to the conservatism of many treasurers,” he observes. “In many emerging markets, another obstacle is often the requirement for a paper receipt or chop, which is often driven by the tax system.”

Glendinning adds, “the sooner we can all get off this addiction to a medium which is not only less efficient, but also less secure, the better.” He notes that banks have made the effort to go electronic in consumer banking “because the economics of doing so are overwhelming: it clearly makes no sense to employ staff to carry out a high volume of low value transactions.” However, in the corporate space the economics are different. “The average value of each transaction is significantly higher, so the overhead of using people and paper is much smaller as a percentage – and the tendency of the client to demand a personalised service is much higher.”

That said, banks are taking steps to get paper out of the system. As Stuckey explains, in order for banks to provide a proper self-service experience they first need to lay the groundwork. “The work that banks have been doing with their core systems – plus building out XML and adopting APIs – means that systems are starting to connect together better,” she says.

According to Stuckey, an important element of this is dematerialisation. Whereas in the past there has been a push to get people off paper and onto online systems, this is becoming more structured: “In our business we are very systematically going through and finding out where the paper is, why it is used and whether it needs to be there.”

However, sometime this requires a certain amount of rewiring. Stuckey points out that banks may need to address not only legacy systems but also legacy regulations. “In one case, where we want to remove some paper that our clients fundamentally have told us they don’t want, regulations require us to send it. It’s about trying to work back and find out how to get that portion of the regulation or the payment code changed.”

Barriers to adoption

While self-service banking may have much to offer corporate clients, there are also some factors which may hinder development and uptake. David Blair, an independent treasury consultant based in Singapore, points out that self-service can be limited by KYC and anti-money laundering (AML) concerns, although he thinks this is “over done” in many cases. “Once the legal entity is known and verified, why not allow self-service for opening new accounts?” he asks.

Blair adds that cross-branch consistency is another issue: “To enable meaningful self-service for multinational corporations requires a consistent back end across bank branches, which is not common in today’s banks.” And he notes that corporates need to be comfortable with the internal control implications of self-service, with many effectively relying on banks’ manual procedures in order to enforce their corporate policies.

According to Blair, other possible obstacles include the opacity of bank pricing. “If complex products are available on self-service platforms, banks will have to show some kind of pricing,” he explains. “Since banks like to be very creative in their pricing, this will be a quandary for them.” He also points out that in some cases, banks may feel the set-up of more complex products cannot safely be left to users.

At the same time, regulatory considerations may hinder development in this area. “From a regulatory perspective, some markets like China, Thailand and Malaysia still require physical documents for certain transactions, creating challenges for self-service banking which by definition should allow users to perform banking transactions whenever they like,” says J.P. Morgan’s Dugar. “Also, certain general banking services like direct debit transaction and account opening still require wet signatures.”

Transparency is another possible concern. Dugar points out that the clearing infrastructure doesn’t always capture all the information about an underlying transaction, which can result in challenges in terms of straight through reconciliation.

However, these issues may not be insurmountable. For one thing, regulatory initiatives in some markets may help to transform the cash management industry. “China, for instance, has introduced new rules for electronic submission of supporting documents for foreign currency cross-border merchandise transactions,” says Dugar. “India, meanwhile, has moved to digitise certain sections of its cross-border payments infrastructure.”

In addition, Dugar notes that initiatives such as SWIFT global payments innovation (gpi) will significantly improve the customer experience in cross-border payments by increasing the speed, transparency and end-to-end tracking of payments. “Electronic Bank Account Management, or eBAM, is another solution which seeks to unify banks and digitise account management workflow,” he observes.

The way forward

As this area develops, Stuckey points out that it is important to make sure that self-service is actually serving the customer, and not just serving the bank. “I don’t think the two are mutually exclusive,” she adds. “If I’m running a treasury application, I want information when I need it – I don’t want to have to reach out to someone in another system. So it’s convenient for them that I can access the information, and it’s convenient for me.”

As such, the way in which banks display information to customers has evolved over time, with a growing focus on design based thinking. Stuckey notes that in the past, banks tended to create dashboards and fill up all the available space. “Now there is much more of a bite size mentality,” she comments. “I don’t need to see all the payment screen – I may want just the first line, which is balance trends, and I can click in as needed.” This requires banks to have an accurate understanding of how clients use technology and what they want to be able to achieve, rather than providing more information for information’s sake, and more than people can feasibly digest.

While there are a number of obstacles to overcome, the benefits of self-service banking are considerable – and more is to come. Dugar predicts that this area will become increasingly sophisticated as digitisation continues to transform the cash management industry and platforms become more mobile.

“Corporates will start behaving like consumers, expecting real time information at their fingertips, and banks will have to continuously innovate to meet their needs,” he says. “The use of emerging technologies like blockchain, which increases transparency, is expected to boost the adoption of self-service banking.”

Nevertheless, it is also important to be aware that self-service has its limits: the complexity of certain products and services means there will always come a point at which the need for human interaction becomes essential. As Stuckey points out, “if I’m doing a simple transaction I’m very happy with a chatbot, but if I’m doing something more complex I probably want to talk to a human.”

The goal, then, is to achieve the right balance. “It’s important to highlight that even as self-service banking reduces the need for physical interaction, face to face communication remains critical in maintaining client relationships,” Dugar concludes. “The key would be to maintain the right balance of digital versus in-person interaction.”

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