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Banks Must Gear Up for Upcoming Data-Intensive Era, Experts Say

Changing customer expectations, the rise of big techs, and COVID-19 are accelerating banks’ digital transformation, forcing them to upgrade their infrastructure to meet the requirements of the data-intensive era, experts said.

At the Huawei APAC FSI Data Storage Summit virtual event, experts from Huawei and China Construction Bank Asia discussed the need for the financial services industry to respond rapidly to the long-lasting market changes that have been brought in by COVID-19. These not only include rising demand for contactless and remote services, but also includes changing working conditions.

During a panel discussion on the future of banking, Johnny Chung, general manager and head of the fintech division at China Construction Bank Asia, and Chen Kun Te, former CIO at China Merchants Bank, now chief digital transformation officer of the financial services industry (FSI) of Enterprise BG at Huawei, said that the pandemic has forced the adoption of new ways of working, possibly leading to permanent changes in the work life.

“I don’t think it’s going to be a short-term [situation] and [that it will ever go] back to [how it was prior to the pandemic],” Kun Te said. “We will need to live with the virus and content with it. We need to redesign our business, and treat this as the new normal.”

“As a financial institutions, we need to build a robust infrastructure to allow the business to become more agile so you can adapt to the new market and changes.”

COVID-19 has also changed the way people buy and transact, fueling Asia’s e-commerce boom and pushing digital payments usage to new highs. According to a May 2020 Nikkei report, e-commerce retailers across the region have seen explosive sales growth since the beginning of the pandemic crisis, with Singapore-based platform Shopee witnessing its gross merchandise value jumping 74.3% for the first quarter.

In Southeast Asia, about 49% of urban consumers who are commercial bank customers already use e-wallets but the Boston Consulting Group (BCG) expects the proportion to reach 84% by 2025 on the back of COVID-19.

These changes are bringing tremendous opportunities for banks across the region to accelerate that digital transformation and embrace new technologies, the panelists said.

Setting the foundation for the new normal

In the new normal induced by the pandemic, data will be critical for banks to succeed, enabling them not only to optimize processes, but also serve customer better, Kun Te said.

“In digital transformation, the key is data … When you collect all this data, the challenge for the bank now is ‘how can we turn the data a single, united, unique data, into one digital ID’” to better understand and serve their customers, he said. “The second thing is, ‘how can we [use this data to] empower every department of our organization … and improve business operation’.”

What has made bigtechs so successful, Kun Te said, is their ability to collect and leverage on so-called hot data. Hot data refers to data that needs to be accessed quickly and frequently, and which is often used for quick decision making.

These companies have mastered the domain which has enabled them to understand swiftly what a customer needs in a particular situation, in a particular context.

“Internet companies use very often hot data. Hot data is very important [to understand customers],” Kun Te said. “Usually, banks cannot use hot data very well, at least from my experience.”

There’s also a need to go beyond just transactional data and infiltrate all aspects of customers’ digital journey.

“As a bank, we generally focus on transaction data … but in the digital world, there are so many alternative data, for example from mobile devices,” Kun Te said. “Where do customers spend their money? Where do they go online? Banks can gather a lot of information from customers’ digital journey,” Kun Te said.

But with consumers’ lives increasingly moving to the digital space, as well as the arrival of 5G, banks are now faced with the urgency to upgrade their tech infrastructure to prepare for this new reality.

“Banks’ digital transformation is bringing in huge amount of data,” said Daniel Zhou, president of Cloud & AI BG for the Asia Pacific region at Huawei.

“From Huawei’s point of view, what we want to make sure is that banks can keep both reliability and performance, in terms of data processing. We always focus on providing end-to-end solutions and offerings 24/7 continuous data processing for our customers.”

In recent times, Huawei launched a new product line called OceanStor, which aims to help carriers and enterprises cope with the explosive growth of mass data in the 5G era.

The OceanStor offering includes an array of products such as the OceanStor Dorado all-flash storage, OceanStor distributed storage, and automated data management system (DMS) for full data lifecycle. These solutions were designed to enable high performance levels, support large capacity and act as the foundation for new capabilities and technologies such as VR/AR, 4K/8K video, artificial intelligence (AI), and more.

The OceanStor storage solutions have been rather successful so far, with the business witnessing a global growth rate “beyond the 40% range,” Peter Zhou, President, Data Storage & Intelligent Vision Product Line, Huawei, said during the virtual summit. “In the Chinese market, in terms of market share, we are number one.”

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