Raja Teh Maimunah: Competition is No Longer from the Bank Next Door

Technology companies are keeping many banking chiefs up at night.

Take e-commerce giants Alibaba and Amazon, for example. The tech behemoths are increasingly moving in on some of the most profitable parts of the banking value chain.

Alibaba’s financial wallet Alipay, with over 400 million users, accounts for approximately half of online transactions in China. Amazon, meanwhile, has been providing loans for small and medium-sized companies.

Japan’s largest e-commerce site Rakuten’s credit card unit is leading volume transactions in the country, citing its rewards program as the biggest growth driver.

“My competition today is no longer the bank next door. It can be anybody. It can be the tech giants, it can be the telco companies. So, most of the banks in the country are setting up their own digital teams,” says Raja Teh.

“It’s a good start, but I honestly don’t know how it will fare because we think differently from the fintech companies – their entire product development is driven by customer experience. Whereas we are driven by product development in itself.”

Not just making use of their massive customer base, non-banking ‘platform’ companies, as described by McKinsey in a 2017 report, are blurring traditional boundaries.

These companies bridge the value chain of various industries and create ecosystems that will not only help reduce cost, increase convenience but also provide new experiences for consumers.

“A bank rarely comes out to do something with customer journey in mind. We come out with a product, a mortgage product or a SME business loan. So that’s a huge paradigm shift already from having to think from the customer experience.”

“What is encouraging, though, is that every decent bank I know in this country has already started that journey of (digital) evolution.”

“In order to survive, the bank must become a technology company. And collaborate with, for example, a telco. Because nothing works without connectivity in the digital world. However, banks and telcos are typically very big and not very agile, with huge investments in legacy systems. So, both are being disrupted heavily by people from outside their industries.”

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Podcast of the interview: