Gear for challenges, banks told SUC

Gear for challenges, banks told


SUCHEERA PINIJPARAKARN
THE NATION May 18, 2016 1:00 am
TO COPE with falling interest rates, digital disruption and regulatory burdens over the next one to three years, bank CEOs have to work more on intensive efficiency and embrace digital banking if they want to preserve profitability.

The challenges were the focus of the Global CEO Roundtable held recently in Italy, which Vorapak Tanyawong, president of Krungthai Bank, attended as the representative of Thai banks.

Vorapak shared with Thai media last week what the global bankers discussed regarding the challenges in doing business.

For Thailand, the regulatory burden is not a worry because Thai banks learned their lesson from the economic crisis in the past.

However, banks in the European Union expect the regulatory environment will put more pressure on them besides the first two challenges.

The CEO participants looked at the downtrend of interest rates as a barrier to their profitability, as several countries have embraced negative interest rates to fuel their economies.

In Thailand, recently, major banks cut loan interest rates in an attempt to help ease the financial burden on SMEs and retail customers, which have been suffering from the economic slowdown.

The interest rate cut will impact banks' profitability this quarter, according to brokerages and local bankers.

The global bankers said they have to improve their efficiency and manage operating costs to continue generating profits.

Vorapak said the operating cost of acquiring customers should be reduced by using technology.

Using technology comes with both stress and opportunity, opening the door to financial technology (fintech) providers.

The global banks said fintech will touch four areas - payment, card products, investment products and account management.

"Earlier, bankers looked at three areas to be affected by the arrival of fintech. But today, account management by fintech is something we're becoming aware of," he said.

Data analytics is the key for banks to adjust to cover customers in the four areas. They will use digital banking as the channel to access customers, he said.

KTB should take note of what the global banks discussed, so it will move strongly to digital banking.

Transactions will be made more outside traditional branches. Branches will be used for giving financial advice to customers.

KTB in the short term has no plan to prune its branches but will relocate those in Bangkok to the provinces because consumers in Bangkok have grown familiar with using digital banking.

It is not easy for KTB to quickly move to digital banking and realise quick revenue from it because the bank doesn't have as much talent as fintech vendors.

KTB will consider easing its loan approval conditions next quarter after tightening them last quarter to tackle non-performing loans.