Samjong KPMG "Banks Must Secure Survival Competitiveness Through Digital Transformation"

Presenting the '5 Major Mega Trends' Leading the Future of Banking Industry

[Asia Economy Reporter Minji Lee] As the management environment surrounding the banking industry rapidly changes, there is a growing outlook that the existing banking business model, which relies on product-centered branch sales capabilities, will no longer be sustainable. In this context, five mega trends that will determine the future of the banking industry have been presented.

On the 7th, Samjong KPMG released a report titled "The Digital Revolution Unfolding in the Banking Industry and the Future of Financial Hegemony," identifying the trends that will lead the future of the banking industry facing waves of change as ▲bank platformization ▲value chain unbundling and re-bundling ▲expansion of partnerships ▲full-scale adoption of AI in banking ▲expansion of data-driven services.

The report stated that the European General Data Protection Regulation (GDPR) and the Payment Services Directive 2 (PSD2) have triggered changes in the global financial landscape by promoting data openness in banks. Accordingly, the need for bank platform businesses that build digital ecosystems based on data opened through open APIs is expanding.

It also analyzed that within the bank value chain, fintech companies specialize in providing specific and single services, leading to unbundling where the bank’s value chain is replaced and encroached upon. Following this, a re-bundling phenomenon has begun, where the optimal financial services recognized by consumers are integrated around a single platform.

Furthermore, as the financial environment rapidly changes, the necessity for cooperation between banks and big tech and fintech companies is increasing. It is expected that partnerships will become a major trend within the banking industry. With the adoption of artificial intelligence (AI), banks are anticipated to expand differentiated business strategies centered on AI, beyond cost reduction and work automation.

Lastly, with the full-scale implementation of open banking and the commercialization of artificial intelligence and machine learning, personalized and customized financial services based on customer data analysis will expand. In the long term, all financial services provided by banks are expected to transform into forms that interact with customers.

Samjong KPMG selected Goldman Sachs, BBVA, and Leumi Bank as global banks leading digital transformation. Among them, Goldman Sachs launched the retail digital loan platform ‘Marcus’ in 2016 and succeeded in securing $46 billion in deposits, $4.7 billion in loan assets, and 4 million customers as of May 2019. Goldman Sachs is expanding its online retail financial business by extending Marcus into a comprehensive financial investment platform through M&A and partnerships.

The report urged domestic banks to seek change and innovation through digital transformation and to use digital transformation as momentum to strengthen financial capabilities and secure future competitiveness. It emphasized that banks must acquire the capability to provide new value to customers based on data, beyond merely offering products and services. Additionally, banks should actively explore ways to generate future revenue by utilizing open APIs, focusing on proactively activating and advancing API-based open platforms.

Moreover, it suggested expanding strategic and functional partnerships to enhance competitiveness and continuously exploring potential partnerships that can maximize synergy not only with the fintech industry but also in non-financial sectors. Regarding offline channels such as branches, it explained that rather than uniform downsizing, they need to transform into channels that strengthen customer relationships. Online channels should be simplified focusing on functionality and convenience to enhance customer experience. In particular, it recommended that bank digital channels be integrated around key functions, and that one-stop services linking services from other financial sectors outside the bank should be the goal of banking re-bundling.

Jang Jisoo, Vice President and Head of Financial Consulting at Samjong KPMG, emphasized, “With the full-scale implementation of MyData businesses in 2021, banks will inevitably face competition from large big tech and ICT companies. Therefore, to secure competitiveness and achieve successful digital transformation, banks must introduce new management and organizational operation systems suitable for the digital era.”

This content was produced with the assistance of AI translation services.