Adapt or die fighting the giants

Adapt or die fighting the giants

Local banks must quickly transform to deal with customers' digital demands or face extinction, says SCB's Thana Thienachariya.

Mr Thana says consumer patience is low; everything has to be right now. PORNPROM SATRABHAYA
Mr Thana says consumer patience is low; everything has to be right now. PORNPROM SATRABHAYA

Thai banks have one to two years to adapt to the disruptive digital platform, which is changing the way people spend, live and make payments, as they face a do-or-die scenario regarding technology, warns Siam Commercial Bank's (SCB) chief marketing officer Thana Thienachariya.

"I'm not that worried about fintech [financial technology] startups as banks can afford to buy them when they grow up a bit, but we cannot do so for digital giants because they are bigger than banks. If we don't have a big enough base of digitally engaged consumers, we will lose our competitive edge. This is a winner-takes-all game. Non-bank firms have entered the payment service arena such as Apple Pay and Samsung Pay as they want banks to be subordinates," he told Bangkok Post.

NON-BANK COMPETITION

Digital giants such as Line, Wongnai, Uber and Joox now offer chat, taxi services and music apps, but could turn their sights to mobile banking if regulations allow them to do so as their services are partly related to paying for services, he said.

"Digital giants are awesome potential competitors for banks, as they have a large number of users. For example, Line has 36-40 million users, Wongnai has 5-6 million and Joox has 10 million," said Mr Thana. SCB is the country's second-largest mobile banking service provider after Kasikornbank (KBank) with 4 million SCB Easy users.

SCB, the country's third-largest lender by assets, aims for 8 million users next year of its mobile banking app to stake its claim in the digital banking segment, he said.

Consumer behaviour has changed substantially since the advent of social media, forcing banks to hop on the digital bandwagon.

"Consumer patience is very low. Everything has to be right now. Banks have gradually adapted to the change but customer requirements keep changing quickly over the past three to four years. Customers have forced us to speed up our digitisation processes, ending the age of analogue and carbon copy forms. Banks must seek ways to help customers complete transactions right now," said Mr Thana.

He said local banks still have time to digitally transform as they have ample profits to reinvest to create a banking platform. Customers still trust banks, though Facebook, Google and Line are gaining more trust, said Mr Thana.

A Burnmark Report from October 2016 said Facebook and Google have earned a higher level of consumer trust from Americans than banks. The report stated confidence in banks was at a low level in Europe and the US, at 24% in Italy, 33% in the UK and France, and 37% in the US. Asians still have high confidence in banks, and Thai banks scored the highest confidence level in the region at 89%.

SCB is among the first movers in fintech as it attempts to fend off disruptive competitors that are putting banks worldwide on the firing line.

"We don't know if what we are changing is right or wrong as technology changes rapidly. We don't know from our output if the change is correct, but improving the infrastructure creates immunity by allowing more changes to be made quickly. When a storm lashes out, we can be like a tree that bends in the wind," he said.

The banking payment business is expected to see the most disruption from the rise of the digital platform, while lending has not yet felt the pinch because regulations hamper non-bank digital players from entering the market, said Mr Thana.

BUILDING RELATIONSHIPS

As all operators can use the same technology, building relationships is crucial to maintaining a customer base. SCB has set its sights on becoming the most admired bank in Thailand, he said.

To serve customer demand, SCB wants its mobile app to go beyond daily banking, facilitating customers searching and paying for movies, concerts, restaurants and even donations.

"SCB wants customers to have a bond with us, so we must revamp our mobile banking app to become more of a lifestyle partner. We will deliver services that apply to whatever lifestyles are related to payment transactions," said Mr Thana.

QR CODE PAYMENT

The bank is trying to lead the way on new technologies, including quick response (QR) code payment, which is among the innovative technologies to be introduced soon.

SCB and KBank were both permitted to experiment with their QR code payment systems in the Bank of Thailand's regulatory sandbox. Both are expected to exit the sandbox by the end of this month before commercially rolling out the service in the final two months of the year.

All banks can offer QR code payment, but those that strike a chord will win the battle, he said.

For example, SCB has launched a Chatuchak guide app that will pinpoint and lead smartphone users to shops that have what they are looking for in the market. The app will also flash discounts to stimulate spending and feature online marketplaces in the future, said Mr Thana.

He believes QR code payment will take off in Thailand because it requires a single barcode that allows payment at different banking networks and is simple to use.

Cash merchants, including taxi drivers and street vendors, are the bank's main targets for QR code payment, said Mr Thana. SCB aims for 200,000 merchants using the service by the end of this year.

"We want a 20% market share of the total merchants that accept QR code payment," he said.

Arthid Nanthawithaya, SCB president and chief executive, said last week cash transaction volumes at its brick-and-mortar branches are projected to be halved by the end of next year. Branch activity accounts for 20% of the bank's overall transactions, with the rest coming from electronic and digital channels.

He said SCB set a digital infrastructure investment budget of 40 billion baht for this year, of which 4 billion was for mobile banking development.

Even though the number of transactions at branches are falling, branches are still necessary and SCB will only shutter those with low traffic, said Mr Thana.

The bank will reduce the number of low-value transactions such as balance enquiries at physical branches by offering such services on its mobile banking app and SCB Express -- automated branches that aim to build up relationships with customers.

SCB Express is one of four new branch models the bank is using for future growth. The other three are business centre, investment centre and service centre.

Branches located in wealthy communities such as Bangkok's Thong Lor will be turned into investment centres, he said.

The first service centre branch will be inaugurated at CentralWorld this year, said Mr Thana. These are meant to be one-stop service centres to deal with any customer problem.

The Bank of Thailand reported SCB had the largest branch network with 1,171 across the country as of August, followed by Bangkok Bank at 1,164, Krungthai Bank at 1,144 and KBank at 1,050.

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