Banks focused on digitalisation and innovation capabilities will be rewarded, KPMG and WeBank jointly report

Banks focused on digitalisation and innovation...

Forward-looking “OPTICS” framework introduced to guide banks through innovation

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Success for banks will increasingly be defined by their ability to innovate and to be digitalised, smart and open, according to a joint report by KPMG and WeBank which offers a new evaluation framework to analyse future banks’ business models and the capabilities they need to meet future challenges.

The report, titled OPTICS: Defining “future banks”, summarises the leading practices of banks in and outside China, and provides a new evaluation system to guide future banks through their innovation development. While established evaluation models tend to focus more on robustness and risk than innovation, this new system, “OPTICS”, categorises future banks’ capabilities into six dimensions: Organisation, Product and Service, Technology, Information and Data, Calibre, and Spend. These capabilities interact and work together, enabling banks to coordinate their various assets; research and reorganise; explore, identify and seize opportunities; and support digital, smart and open operations.

“The skills and attributes needed for success in the banking sector are changing, with a bank’s level of innovation becoming a pivotal factor. This is where the OPTICS system fits in,” says James O’Callaghan, Partner, Head of Technology Consulting, Hong Kong, KPMG China. “The OPTICS system provides a more forward-looking framework, as well as valuable insight into a bank’s capacity for innovation. The system also enables banks to become more scenario-based and more effectively tailor products and services to customer needs. This is particularly important as the next generation of customers will have different banking needs and preferences.”

With the COVID-19 outbreak prompting banks to accelerate their efforts in the areas of online operations and digitalisation, banking industry leaders are now either starting, or should be starting, to consider what future banks and their business models will look like, what capability they should have to meet future challenges, and how they can reshape their organisations to build these capabilities. Those able to rise to the challenge will ultimately achieve success, according to the report.

Paul McSheaffrey, Partner, Head of Banking and Capital Markets, Hong Kong, KPMG China, says: “The banks that do not truly pursue innovation will slowly but surely find themselves in a position where they are no longer competitive or relevant, with a shrinking market share and customer base. The banks that truly embrace innovation – aided by the OPTICS system – are likely to emerge as the market leading banks of the future.”

As banks accelerate their digitalisation transformation initiatives, they should also consider adopting technologies such as regulatory technology (Regtech) across their front, middle and back offices to improve efficiency, the report suggests. With Regtech helping to automate many traditionally manual processes, this should enable banks’ senior management to focus more of their time and effort on their innovation strategy and capabilities.

Terence Fong, Partner, Head of Chinese Banks, Hong Kong, KPMG China, says: “Banks’ innovation aspirations must be supported by the right infrastructure, technology and data strategy – and related technical capabilities – to ensure that they are able to effectively implement their innovation strategy.”

 

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About KPMG China

KPMG member firms and its affiliates operating in mainland China, Hong Kong and Macau are collectively referred to as “KPMG China”. KPMG China is based in 27 offices across 25 cities with around 12,000 partners and staff in Beijing, Changsha, Chengdu, Chongqing, Foshan, Fuzhou, Guangzhou, Haikou, Hangzhou, Hefei, Jinan, Nanjing, Ningbo, Qingdao, Shanghai, Shenyang, Shenzhen, Suzhou, Tianjin, Wuhan, Xiamen, Xi’an, Zhengzhou, Hong Kong SAR and Macau SAR.  Working collaboratively across all these offices, KPMG China can deploy experienced professionals efficiently, wherever our client is located.

KPMG is a global network of professional services firms providing Audit, Tax and Advisory services. We operate in 147 countries and territories and have more than 219,000 people working in member firms around the world. The independent member firms of the KPMG global organisation are affiliated with KPMG International Limited ("KPMG International"), a private English company limited by guarantee. KPMG International and its related entities do not provide services to clients. Each KPMG firm is a legally distinct and separate entity and describes itself as such.

In 1992, KPMG became the first international accounting network to be granted a joint venture licence in mainland China. KPMG was also the first among the Big Four in mainland China to convert from a joint venture to a special general partnership, as of 1 August 2012. Additionally, the Hong Kong firm can trace its origins to 1945. This early commitment to this market, together with an unwavering focus on quality, has been the foundation for accumulated industry experience, and is reflected in KPMG’s appointment for multidisciplinary services (including audit, tax and advisory) by some of China’s most prestigious companies.

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