IT Offshoring for Banking Industry: What You Need to Take Note?

Due to a new analysis by the Australian Banking Association, customers in the Asia-Pacific area are expected to shift their use of online banking and the prevalence of digital payments over traditional methods of payment. This has driven BFSI businesses to transform their operations and deliver consistent user-centric experiences while improving cost & compliance.

Despite years of digital investment, many banks often face difficulties in reducing their overhead costs, enhancing operational efficiencies, and improving their services. As a result, offshoring of business functions has now become an essential aspect of banking operations. In this article, KMS Solutions will analyse the customers’ insights and technology trends the bank should adopt to stay competitive and grow business.

Customer Insights

1. Australia 

In Australia, consumers are found to be continuously inclined to consider fintech, with 69% of them believing that having the latest technology is a crucial factor when selecting a bank for financial products or services.

KMS Solutions' Digital Banking Report also indicates that with an average rating of 63.6%, mobile banking applications have become a prevalent selection among other banking service channels, with the highest customer satisfaction.

Moreover, the quality that users here rated “more essential” when choosing mobile banking app are: 

• Low fees & charges
• Competitive interest rates
• Most up-to-date technology
• Speed and efficiency of problem handling
• Speed and efficiency of transactions.

2. Singapore 

Singapore, arguably now Asia’s largest financial hub, has been for years at the forefront of promoting a digitally-enabled lifestyle for its citizens with digital banking adoption. 

The industry report shows that 81% of Singaporean consumers have chosen mobile apps as the key method of accessing banking services, with  77% admitting they require a better online experience from their banking service providers.

In today's digital age, customers have become accustomed to hyper-personalised and convenient experiences in various aspects of their lives and expect the same from their banks. Among them, the young age groups are generally more comfortable with the trade-off between privacy and personalisation, while the older generation hardly shares their data. 

As the fraudulent online activity was on the rise in Singapore recently, In 2022, the Monetary Authority of Singapore (MAS) and the Association of Banks in Singapore (ABS) also announced additional measures to further safeguard customers from digital banking scams.

3. Vietnam

The proportion of Vietnamese consumers using digital banking at least once a month doubled between 2017 and 2021 (from 41% to 82%) is anticipated to increase continuously in 2023. This may come from the great potential of the market, fierce competition between banks & financial institutions, as well as changes in the younger generation’s behaviour. 

The Consumer Payment Attitudes Study of Visa indicates that 66% of Vietnam customers choose to buy things via applications or websites, and 68% choose online payment before delivery. As e-commerce continues to grow massively and online payment has crept into every corner of life, Vietnamese banks will need to concentrate more on providing different ways of completing transactions, especially through mobile apps.

Having the same issue in Singapore, the rise of digital interaction has led to the emergence of fraudsters in the digital ecosystem, necessitating Vietnamese banking organisations to enhance their security capabilities.

Banks and Their Common Challenges

In the APAC region, the banking industry is undergoing a radical shift. New technologies, evolving consumer expectations, and other factors are pressing the entire banking industry to transform. However, incumbent banks that are not experienced may find challenges in modernising an aging IT system to incorporate cutting-edge digital advances. 

1. Cybersecurity Risks are Rising

With 67% of Australians rated ensuring data privacy as one of the top aspects when choosing a financial service provider, and 61% of Vietnamese app users considered security features as extremely important, necessitating banks to enhance their security capabilities. 

Besides, the rise of digital interaction has led to the emergence of fraudsters and cybersecurity in the digital ecosystem. Thus, in order to prevent data breaches, phishing scams, and other dangers, banks must make sure that their systems are safe and secure. This requires investing in cutting-edge cybersecurity tools like multi-factor authentication, encryption, and real-time network activity monitoring.

2. Lack of Interoperability and Integration between Systems

Different functions such as accounting, customer relationship management, and loan processing often use different systems. When banks concentrate on digital offers, there may be inefficiencies and difficulties in integrating data across systems. 

Moreover, the data that are recorded in mobile apps and those recorded manually at branches can be mismatched. To address this challenge, banks need to consider some data analytics solutions allowing for seamless data exchange and real-time data analysis. Adapting to technology trends such as big data will help them revolutionise how banks operate and serve users.

3. Keep Up with User Expectations

In this digital world, users often demand quick, convenient, and personalised banking services. With the ever-changing customer expectations for digital financial services, businesses in the BFSI sector are in a hurry to diversify their operations and strive to execute a digital transformation ecosystem. 

To meet those expectations, organisations must embrace digital transformation and invest in technologies such as mobile banking apps, chatbots, and AI-powered services. Adopting technology trends can help banks provide seamless customer experience across multiple touch points.

4. Skill Shortages

The fast-paced technological changes require businesses to acquire a highly skilled development team who can understand and implement new technologies. However, there is a shortage of skilled IT professionals in the banking industry. Banks may deal with this issue by investing in training and development programs for their existing staff. It’s worth noticing that expanding an internal team with qualified skills is much more costly than hiring offshored team.

Technology Trends in the Banking Industry

The evolving customer expectations have led to the race to implement emerging technologies in banks and financial institutions. In this new banking landscape, what influences the users’ choices and keeps them retaining is the gap between banks that are fast to innovate meaningfully and those that are trailing behind. Thus, leveraging advanced technologies to ensure a convenient experience, boost efficiency, and enhance security is what banks should strive for.

Based on KMS Solutions’ experience assisting corporations worldwide to digitalise and optimise mobile banking applications, here are the top trending technologies that banks should consider:

1. Modern Cloud-based

Banks in the APAC region are required to move to cloud-based infrastructure and become data-driven due to the rising competition from new cloud-native technology players, and demand from customers for digital-first, intelligent services. 

With cloud-native, banks can lower maintenance and operating costs as they rely less on hardware. Moreover, cloud-core banking systems assist in building an environment conducive to agile and resilient product development, testing and launch, leading to quicker software updates and monthly releases. They also enable financial institutions to scale their processes up or down rapidly, allowing firms to optimise costs and respond to changes in customer demand and transaction volume.

2. Double down on AI & Machine Learning

The most prevalent implementation of AI and ML in banking is chatbot adoption. Such bots can send timely notifications for transactional updates, payment reminders, banking information, and more. The year ahead will see an increased use of smart bots. Nevertheless, AI and ML are anticipated to be employed differently in mobile banking: empowering next-level predictive personalisation.  

Additionally, AI can bring sensitive and individualised credit score assessments based on additional real-time factors, such as the current income level, employment opportunities, and potential earning ability. This can help banks make more informed lending decisions and offer better loan terms to their users. 

3. More Innovative Banking App Features

As customer preferences for digital payments are becoming increasingly popular, banks are working on expanding the range of payment options in mobile banking apps. This can mean deploying QR coding payment, integrating e-wallet, and implementing Buy-Now-Pay-Later (BNPL) services. 

In Australia, Singapore and Vietnam, BNPL has evolved into widespread popularity, especially among young generation customers. In the near future, experts expect more banking institutions to introduce credit card-linked BNPL services for young generation consumers.

Explore the key technology trends that Banks and FIs should consider: 2023 Digital Banking Market Report

How KMS Solutions Can Help?

KMS Solutions is working with our banking customers and global partners to help navigate and accelerate the digital transformation to deliver banks’ priorities and ambitions. Our banking solutions will guide you through the 4 main focuses:

• Customer Experience: Provide users with experiences that are tuned into their digital lifestyles by leveraging analytics.
• Operational Excellence: Boost productivity, drive down costs and maximise ROI with the help of KMS Solutions' offshored development team.
• Banking Reinvention: Adapt quickly to the technology trends and help develop innovative business models to deliver new banking services.
• Reliability and Compliance: Security commitment will continue to be the fundamentals of KMS Solutions' offers.

Contact us for your offshore project!