The document discusses how financial institutions need to accelerate digital transformation to succeed in the new normal brought about by COVID-19. It summarizes the results of a survey of bank executives which found that data analytics, hyper-targeting of customers, empowering employees, partnerships, and open APIs will be key. It provides examples of digital platforms and services banks can offer, such as a cross-border mortgage platform and professional services portal, to capture opportunities in the Greater Bay Area. Technology giants are seen as potential disruptors and banks need to collaborate digitally to differentiate.

1. NAVIGATING
THE NEW NORMAL
Why accelerating end-to-end digitisation
is a must for financial services today
Barry Chan, Partner, FSS
September 2020

2. As the resulting impacts of COVID-19
continues to unfold across Hong Kong and
with expanded cross-border opportunities
presented by the opening up of Greater Bay
Area’s financial industry, IBM examines how
modern financial needs are being reshaped
and why banks need to accelerate their
journey to become a cognitive enterprise to
capture a greater share of wallet under
the ‘new normal’ of a reality today.
NAVIGATING THE NEW NORMAL

3. 3
WHY ACCELERATING
END-TO-END DIGITISATION IS A
MUST FOR FINANCIAL SERVICES TODAY

4. 4
Given the significance of year 2020, we are pleased to
present IBM’s first industry-focused report that
examines the business dynamics impacting Hong
Kong’s banking financial services landscape today.
This year, we review the general performance and
unique challenges faced by banks as a result of:
• greatened competition and convergence
• spread and resulting impacts of COVID-19
• lucrative yet uncertain prospects of the GBA
Navigating the New Normal will be key to keep and
continue healthy sustainable growth, especially with
profitability significantly hit and impacted today.
INTRODUCTION
online questionnaires
17
Traditional Banks
3
Virtual Banks
35
Snr. Banking Execs.
The survey was conducted through:
face-to-face private interviews
extensive academic research
mail correspondence

5. 5
WE LISTENED, WE DISCOVERED
IBM surveyed bank executives
expect the greatest value they
shall to derive from leveraging
customer data will be to define
their digital vision and strategy
67%
IBM’s Eight Enterprise-wide Strategic Imperatives Organised by Front, Middle and Back Office Capabilities
•Personal yet Scalable
Engagement Experiences
•Hyper-targeting and
Moment-Marketing
•Contextual Product and
Service Innovation
•Aligned & Technology
Empowered Workforce
•Adaptive Digital Architectures
with a Closed Feedback Loop
•Continuous Optimisation of
Business Platforms
•Insight Driven Responsive
Business Decisions
•Integrated Partner and
Alliance Ecosystem
Product and Service
Development
Back-end Operational
Efficiency
Customer Service and
Experience Support
Top three attributed barriers
hindering the progress are:
• Data Privacy Challenges
72%
• Legacy Systems & Data Silos
52%
• Internal Policies / Processes
68%

6. 6
The New Age of Hyper-Targeting
and Moment-Marketing
Whereas in the past, financial services approached customer personas in
broad generalisations to gain mass appeal in cost effective ways, our study
indicates that high-performing banks that are business-resistant and show
resiliency are leveraging data analytics, deep-learning and automation to
achieve scalable hyper-targeting and contextual moment-marketing.
Scalable Hyper-Targeting
• Demographic Profile
• Unmet needs and Future goals
• Behaviour, Attitudes and Usage
Contextual Moment-Marketing
• Time: Seasonality and Occassion
• Location: Channel and Ecosystem
• Lifestage: Marriage, First Child, Retirement
CUSTOMER SERVICE & EXPERIENCE SUPPORT

7. 7
Harnessing Cognitive Data Analytics To
Empower Employee and Expand Operations
of our surveyed banking
executive respondents claim
to make deeper investments
in technology solutions to
improve their conversion
model in the next 2-3 years
Required business outcomes don’t disappear in unprecedented times. Banks need
to maintain a healthy inflow of prospect customers while supporting frontline staff
to continuously convert leads into sales at scale and at speed.
Through real-time cognitive data analytics, banks can increase the success rate of
each sell-through occasion by directing and pre-empting frontline staff with the
most profitable yet relevant target customer to pitch to, relevant products to up sell
and cross sell and practical steps to approach based on personal preferences.
AI used to automate
basic functional tasks,
simple self-service needs
TODAY TOMORROW
AI to shape and influence
decisions, help frontline staff
better interpret customer wants
ALIGNED & TECHNOLOGY EMPOWERED WORKFORCE

8. 8
INTEGRATED PARTNER & ALLIANCE ECOSYSTEMS
In our study,
we discovered
As a
consequence,
75% of IBM’s surveyed banks
claim to utilise less than
30% of collected data
over 90% stated they relied
on external data sources to
practice deeper customer
engagement and up-selling
AGGREGATION

9. 9
The Customer to RM ratio profiles vary between different
banks but generally speaking the ratio is often skewed in
favour of the highest profit-generating customers.
Given that GBA’s market size is approximately 10 x that
of Hong Kong, it is expected that the workload of RMs will
significantly expand to respond to the exponential growth.
The dual goals of improving service while controlling staff
costs must be met through the provision of actionable
insights to accelerate success and automation for scale.
New or old.. Big or small..
BACK-END OPERATIONAL EFFICIENCY
Virtual and Traditional banks a like achieve
personalisation through a slow and manual
process with a heightened risk of human error

10. 10
LOOKING INTO THE FUTURE
The small scale of the Hong Kong market puts a significant limitation on achieving
ambitious growth through the cultivation of local ecosystem partnerships.
Meanwhile the development of the GBA initiative and the WMC scheme offers an
attractive proposition for growth through lateral cross-industry partnerships.
Capturing Growth in the Greater Bay Area
Banks must leverage
digitally-enabled
collaboration
to differentiate and
extend their unique
brand value beyond
standard financial
products and services.
of the IBM surveyed banking
executives indicate OpenAPI
as the most relevant technology
across their digital transformation
journey in the next 2-3 years
81%

11. 11
Capturing Growth in the Greater Bay Area
of the IBM surveyed banking
executives indicate OpenAPI
as the most relevant technology
across their digital transformation
journey in the next 2-3 years
81%
LOOKING INTO THE FUTURE

12. 12
respondents of the IBM survey
believe tech giants will lead the
disruption in the banking industry
Virtual Banks
Small & Medium
Large Traditional
Innovation is inbuilt to the Virtual Bank business model,
but few possess the adequate resources necessary to enter
the market on their own. Penetrating critical masses through
large external platform partnerships is key to future growth.
Leverage strong local network of GBA business partners
to build industry-specific digital collaborations that are agile
and fully-integrated with the core banking service platform
to strengthen overall value proposition to Hong Kong SMEs.
Capitalise on the credibility, trust and aspiration people
have for international brands to steer and accelerate the
exposure of cross-industry innovations on the global stage
bypassing internal challenges met with large corporations .
RECOMMENDED PLATFORM POSITIONS FOR DIFFERENT-SIZED PLAYERS
Digitally Enabled Collaboration is Critical

13. 13
POTENTIAL BUSINESS MODEL POWERED BY API - PERSONAL WEALTH MANAGEMENT
Cross-border Mortgage Platform
Recent years has seen a renewed interest in Hong Kong property purchases among
Chinese investors as a wealth management strategy to diversify their assets portfolio.
Tomorrow,
Banks must scale up and speed up its cross-border mortgage
application to capture a share of the the GBA investor’s wallet:
Lowered cross-border
barriers to entry for
increased revenues,
reducing process
cost per customer
Host a “Cross-Border Mortgages Platform” connecting
customers, banks and third-party service professionals
Digitalise the mortgage application process end to end, and
enable real-time integration for all participating parties
Build business alliances with local banks at key GBA cities

14. 14
POTENTIAL BUSINESS MODEL POWERED BY API - SME SERVICES ECOSYSTEM
GBA Professional Services Portal for SMEs
• Build a one-stop knowledge ‘marketplace’ and drive thought
leadership across cross-border and international trade
matters
• Offer highly customised search methods to match the specific
requirements of SMEs, such as industry type and target markets
• Connect SMEs with certified professional service providers in
both Hong Kong and Mainland jurisdictions (e.g. legal
specialists)
• Frequent curated newsfeed on both the GBA and international
markets to keep SMEs connected with latest market movements
HKTDC Research. “GBA Enterprises Tackle Challenges by Leveraging International Services.” May 2020.
There is every reason to expect a growing compelling demand for a Professional Services Portal
to support Hong Kong SMEs enter the GBA, and vice versa - bringing new benefits to business
users:
Hong Kong’s 340,000 SMEs, impacted
by the global economic downturn are now
quickly re-adjusting their market strategy
and tapping into China for future growth.
Similarly, 50% of Mainland SMEs
considered Hong Kong to be the most
important services platform for “going
out” into international markets.

15. 15
respondents of the IBM survey
believe tech giants will lead the
disruption in the banking industry
Virtual Banks
Small & Medium
Large Traditional
Innovation is inbuilt to the Virtual Bank business model,
but few possess the adequate resources necessary to enter
the market on their own. Penetrating critical masses through
large external platform partnerships is key to future growth.
Leverage strong local network of GBA business partners
to build industry-specific digital collaborations that are agile
and fully-integrated with the core banking service platform
to strengthen overall value proposition to Hong Kong SMEs.
Capitalise on the credibility, trust and aspiration people
have for international brands to steer and accelerate the
exposure of cross-industry innovations on the global stage
bypassing internal challenges met with large corporations .
RECOMMENDED PLATFORM POSITIONS FOR DIFFERENT-SIZED PLAYERS
Digitally Enabled Collaboration is Critical

16. 16
NAVIGATING THE NEW NORMAL
CONTACT US
Eric Ma
Digital Strategy & iX Leader,
Global Business Services
eric.ch.ma@hk1.ibm.com
+852-28257265
Patrick Cheung
Strategy & Experience Design Practice Lead,
Global Business Services
cwcheung@hk1.ibm.com
+852-28256676
Barry Chan
Partner, Banking & Financial Services,
Global Business Services
chanbym@hk1.ibm.com
+852-28256828
Mimi Poon
Client Director, Banking & Financial Services,
IBM Global Markets
poonmimi@hk1.ibm.com
+852-28256676