Commercial Bank providing social inclusion with Digital Banking

The Commercial Bank of Ceylon PLC has witnessed phenomenal growth in the use of the bank’s Digital Banking services over the past three years, and now has arguably the largest proportion of customers using this channel among Sri Lankan banks. In this interview, the Bank’s Chief Information Officer Rohan Muttiah illustrates how the use of information technology is growing and evolving, and what is in store for the future. Following are excerpts:

Q: Banks are increasingly focusing on technology enabled products and services, and in Sri Lanka, Commercial Bank is a leader in this sphere. How successful is the transition from the traditional approach to technology-enabled banking services?

A: Technology-enabled banking and payments have been in use for many years, common examples being Automated Teller Machines (ATM), and credit and debit cards. However, the focus today is to use newer technology to support ‘anytime, anywhere’ customer banking, encompassing a wide array of services – something Commercial Bank has been very successful at. Over the past three years we have added more than 200,000 Mobile Banking customers and 110,000 Online Banking customers. The number of mobile banking customers alone has tripled over the past year.

Q: To what do you attribute this success?

A: The growth of mobile and online banking can be attributed to a combination of factors. Since 2009 the number of mobile data connections in the country has grown rapidly. The bank has also significantly improved its Digital services over the past three years. We have a new generation online banking system through which previously complex transactions can now be done with ease by both retail and corporate customers.

Our mobile banking apps for iOS and Android devices recognise the growth in Smartphone adoption fuelled by changing demographics and socio economic status, and lower handset prices. Our support for banking services that can be accessed through USSD extends ‘anytime, anywhere’ banking to even the most basic mobile phones used by more than 60% of our population. Our success has come from understanding changed customer needs and using consumer technology to meet these needs.

Q: Given that the role of technology in banking seems to be evolving rapidly, how does Commercial Bank deal with this?

A: Sometimes I reflect on the impact the introduction of the Abacus had all those centuries ago. Customer-friendly, accessible, low-cost, and efficient – Abacus did everything in its time that we still need to do, albeit faster and better today. While technology has always evolved rapidly, the big challenge for banks is the rapid rate of technology adoption by our customers that is allowing them to define how they want to be served. While keeping our approach to core infrastructure flexible so we can leverage cloud and ‘anywhere, anytime’ technologies, we give a lot of thought to how a customer wants to engage with us, and plan our technology investments accordingly.

Q: How much does the bank invest annually in technology?

A: Our investment varies each year depending on our plans. However, as a general rule, an organisation with similar revenue than us should look at a technology investment of between 3% and 8% of revenue each year, providing this allows it to reduce its overall cost: income ratio through cost reduction and new revenue.

Q: Is there a particular area of banking where technology is a key differentiator?

A: Banking and payments must be convenient and this is where technology must be a differentiator. Online and mobile channels allow customers to engage at their convenience. However these are now mature channels and customers expect them to be a real alternative to a branch, offering more sophisticated and complex transactions, all in a very secure and simple way.

In addition, traditional customer segments are becoming blurred and customers also tend to have multiple banking relationships – therefore, there is an urgent need to provide ‘personalisation’ so that a bank can retain a larger share of a customer’s wallet. This in turn requires a grasp of customer analytics, and investments in related technology and human resources.

Q: Are access to IT and IT literacy levels in Sri Lanka adequate for optimal use of the technology offered by the bank?

A: IT literacy in the country has continued to rise through Government, CSR, and NGO programs. Affordability of mobile handsets and connections has also made technology more accessible. In fact, a very large segment of users of our Digital channels is from outside the Western Province.

While these have played a big part in younger customers flocking to our Digital channels, we have also given a lot of thought to ‘consumerising’ banking technology by making it easy to use, so that older customers also benefit from ‘anytime, anywhere’ banking without the need for high IT literacy. When the bank conducted a campaign to promote mobile banking, the two highest numbers of enrolments were from Embilipitiya and Jaffna.

Q: Besides convenience, what other benefits does technology confer in banking?

A: From our customers’ point of view, the principal benefit of technology is convenience. Consequently this is also the prime motivator for Commercial Bank. However, the right choice of technology allows personalisation and operations efficiency translating to being able to anticipate customer needs and doing more with less. Also as we have demonstrated, right ‘size’ technology allows financial inclusion across the country and market expansion.

Q: Social, Mobile, Analytics, and Cloud – commonly referred to as SMAC – are being put forward as pillars that an organisation needs to align its technology to. What is Commercial Bank’s position?

A: SMAC has at times been trivialised with suggestions that it could be delivered through a non-technology agenda. This has had the unfortunate effect of SMAC being tarnished as hyperbole. SMAC, however, is an essential consideration for technology.

The global social media community is now larger than the population of China, and in Sri Lanka it is estimated at over two million. Similarly, mobile telephone penetration in Sri Lanka is close to 100% of the target market. It is also generally understood that the majority of users of both Social and Mobile are ‘Gen Y’ – our fastest growing customer segment. The combination of social and mobile therefore makes a compelling case for delivering banking and payments through these channels.

Analytics is the vehicle for ‘personalisation,’ the importance of which I already referred to. However while there is a wide choice of technology to support analytics, there is a dearth of knowledge on how to properly harness analytics to achieve desirable business objectives. The cloud underpins social, mobile, and analytics and is what makes ‘anytime, anywhere’ access easier. With the explosion in data created by customer behaviour, it is becoming harder to cost-effectively provision internal infrastructure and the cloud is a viable alternative.

While there are information security considerations that arise with the cloud, these are fundamentally not very different to what is already being faced – the exception to this is data sovereignty in the case of transnational cloud services. Commercial Bank is attuned to SMAC and adopts it at a speed and depth that is linked to business objectives.

Q: Is the entry of alternate providers such as telcos and technology start-ups in to the sphere of banking and payments a threat to banks?

A: SWIFT CEO Gottfried Liebrand said two years ago that what kept him awake at night metaphorically was the threat of disintermediation. This statement from such an august spokesperson is the strongest possible indication of the change taking place in banking and payments. While advances in technology have contributed towards this change, the rapid adoption of mobile technology along with its associated lifestyle by customers is what has accelerated the opportunity for disintermediation.

Q: Where do you see the biggest potential for disintermediation?

A: Convenience, lower cost, and novelty can encourage customers to seek alternatives. Mobile Payments is an area that affords higher convenience and consequently we have seen active involvement by telcos and their large captive customer bases. Overseas, crowd funding and peer-to-peer lending offer lower interest rates on loans as their low cost operating model is profitable with smaller interest rate spreads.

The novelty of ‘gamification’ in financial planning while at an early stage, provides an opportunity for the entry of aggregators. In summary, while disintermediation may pose some threat to revenue, it does not remove banks from the value chain. Ultimately, the threat of disintermediation is becoming a catalyst for banks to re-invent themselves.

Q: So, what then, is in the technology pipeline for Commercial Bank?

A: Commercial Bank has always been known for customer convenience and we use technology in an understated but effective way to deliver this. We have arguably the largest proportion of customers using Online and Mobile channels amongst Sri Lankan banks. Our concept of Automated Branches has received strong customer interest. Our ATM and Kiosk network continues to grow with the former being enjoyed by many customers of other banks as well. The introduction of a Payment Hub earlier this year was a first for South Asia, and offers importers and exporters unparalleled service.

We plan to leverage the National Payment Switch to extend our payment services geographically and to newer channels, and to also provide real-time inter-bank payments. We will continue to explore SMAC and adopt some of the disintermediation technologies that our customers want. In summary, our technology pipeline is all about our customers.