The Quickly And Quietly Growing World Of Voice-Assisted Health And Wellness
Share
Share
Share
Share
Print
Email
For most people, absently swiping through an Instagram feed, or flipping a light switch, or going to a doctor’s office don’t register as important events.
But for people with mobility issues, visual impairments or a host of medical concerns, those activities aren’t always simple, and can actually form huge quality of life roadblocks. For those customers, the advent of voice-controlled navigation aided by AI-powered voice assistants is about a lot more than adding convenience or fighting irritating frictions.
Instead, the technologies, even in their earliest development phases, look to have the potential to be a bulldozer to clear those roadblocks for millions of people nationwide.
The challenge for the various larger players in the voice assistant ecosystem is in meeting that demand – but it is a challenge that they seem enthusiastic to meet, particularly in the context of a larger move on the health and wellness sector as a whole.
Making Devices Accessible
The biggest news of the week when it comes to developing this specialty segment of the voice ecosystem comes out of the Google Accessibility team this week, which is working directly with those in the disability community to develop Voice Access.
Tied directly to the Google Voice assistant, the accessibility service is designed to make it easier for users to navigate a wider range of tasks via voice command instead of manual actions. It accomplishes that by letting users essentially translates a button push, page scroll or item selection into a voice command that Google Assistant can easily follow.
The navigability is basically achieved by giving each screen element a numeric assignment, such as “Click 8” or “Open 12.”
The app, according to early reviews, needs some refining and works far better in some applications than others. The program starts and stops easily – displaying the numeric targets on-screen only when being accessed through voice commands – and the numbers disappear when a user touches the screen and stay gone until the Google Assistant is woken again.
“After using this product for probably about 10 seconds, I think I’m falling in love with it,” Google Access early tester Stefanie Putnam noted. “You use your voice and you’re able to access the world. It has become a huge staple in my life.”
Putnam is a quadriplegic and a para-equestrian driver who had previously found tasks like taking photos, sending texts and composing emails “daunting.” According to Google, the service also has particularly strong applications for “individuals with Parkinson’s disease, multiple sclerosis, arthritis, spinal cord injury and more … Voice Access can also provide value to people who don’t have a disability — people juggling with groceries or in the middle of cooking.”
And while Google this week was working to build access to devices for patients (and everyone else), Amazon was also focusing on access, but of a different kind. Alexa is hoping to help more patients get to the doctor or make it easier to use technology to bring the doctor to the patient.
Connecting Patients to Care
Americans on average do not go to the doctor as often as they ought to, and according to reports, that tendency to under-solicit care costs the U.S. economy more than $150 billion per year.
But as of now, Amazon’s Alexa smart assistant is integrating with MediSprout, a health communications startup, to launch a platform for scheduling appointments.
The platform works by tapping into the MediSprout V2MD telehealth platform, which will now allow patients to access physicians’ calendars, book appointments and add those appointments both to their calendars and their doctors’ calendars via Alexa.
The system is also designed to make it easier to schedule follow-up appointments and prescription refills, as well as give patients a way to ask general health questions directly to their doctor.
“Major medical institutions and physicians are rapidly embracing advancements in telehealth that improve the quality of care by providing greater connections and flexibility in visits,” said Samant Virk, MD, founder and CEO of MediSprout. “V2MD by MediSprout is easy to implement on the physician side and widely adopted on the patient side, because it is simple to use and opens up a host of possibilities for different ways for patients to access care and for physicians to provide care going forward.”
Among those possibilities, according to Virk, is using Alexa devices with integrated cameras and screens as potential tools to allow patients to video appointments with their doctors – though he did not say when that option will be available to the general public.
This move follows rumors that emerged earlier this year that as part of its larger ambitions to disrupt the healthcare market, Amazon has built a team to focus on making its Alexa voice assistant more useful in the healthcare field.
According to an internal document obtained by CNBC, the division is called “health & wellness,” includes over a dozen people and is being led by Amazon veteran Rachel Jiang. Sources say that a key task of the team will be working through regulations and data privacy requirements laid out by HIPAA (the Health Insurance Portability and Accountability Act). The group is focusing on areas like diabetes management, care for mothers and infants and aging.
Amazon, thus far, has offered no official comments on those plans.
But earlier this year, the company announced a partnership with Berkshire Hathaway and JPMorgan Chase to create an independent company that will aim to fix the nation’s healthcare system, and last year they announced a partnership with drug manufacturer Merck for a competition where developers built Alexa “skills” to help people with diabetes manage their care. There have also been reports that the eCommerce giant is looking to get into pharmaceuticals.
And beyond what both firms have been announcing individually of late – they have also been making coordinated moves that suggest that their intention to make sure voice has a part to play in the future of healthcare actions.
Joint Efforts
Last week, Amazon’s Alexa Fund and the Google Assistant Investment Program both announced investments in the same firm: a voice assistant developed specifically for patient care called Aiva.
Aiva specializes in making hands-free communication between patients and caregivers more seamless in two ways. It is designed to get to know its users and to meet certain types of requests for things like entertainment, information or reminders for calendar items. In that regard, it functions very much like Alexa or the Google Home Assistant.
Aiva is also programmed, however, to move more complex requests from a user directly to a care provider. Caregivers, meanwhile, can get alerts and requests sent directly to their phones, and can use the app to communicate with the patient.
Originally designed for use with in-patient care facilitates, the system now integrates with both Amazon Echo and Google Home devices, and has begun expanding into patients’ homes, and doctors’ offices.
The specific amount of the investment has not been disclosed. While this is the first time the Google Assistant Investments program has invested in healthcare, GV (formerly Google Ventures) is a long-time investor in the space.
“Google Assistant is already giving millions of people easier access to information, more entertainment options and better control over their environment,” Ilya Gelfenbeyn, lead of Google Assistant Investments, said in a statement. “It’s exciting to see Aiva pushing the technology even further, using voice to improve vital human interactions, like caregiving.”
And increasing numbers of consumers are catching on to all the ways voice technology can make their lives easier – at work, at home and at all the various touchpoints in between. But more quietly, voice technology is also developing even bigger things for some consumers and patients – both by making it easier to get the right access to outside care when they need it and also to access a better toolbox, so they can provide more self-care.
It is not quite as eye-catching, but probably necessary, considering that mobility problems are the leading cause of disability among citizens over the age of 65, according to the Census Bureau. The same survey also noted that about 40 percent of that demographic reports having at least one disability – and over the next few decades, much more of the consumer population will be over 65. Today, there are about 46 million in that demographic, and by the year 2060, that figure will double to over 98. People in that age group will make up 24 percent of the population, up from the 15 percent they represent today.
Accessibility – and the ability to use a mobile device or voice-activated speaker – as part of one’s healthcare management system may be a niche segment of the voice ecosystem today. But as use cases keep proliferating, it is beginning to look like voice-centric health and wellness might someday stand apart as a competitive ecosystem all its own.
And that someday might be sooner rather than later.
——————————–
Featured PYMNTS Study:
With eyes on lowering costs to improving cash flow, 85 percent of U.S. firms plan to make real-time payments integral to their operations within three years. However, some firms still feel technical barriers stand in the way. In the January 2020 Making Real-Time Payments A Reality Study, PYMNTS surveyed more than 500 financial executives to examine what it will take to channel RTP interest into real-world adoption. Here’s what we learned.
Share
Share
Share
Share
Print
Email
Taking the smart route to inclusive, sustainable and connected cities
A view of Gangding Station of the Guangzhou bus rapid transit system in China. Photo by: Benjamin / CC BY-NC
Organized efficiently, cities can be engines of economic growth. But poorly planned urbanization can have serious long-term consequences — leading to water shortages, skyrocketing rates of air pollution, gridlocked traffic and outbreaks of disease.
The challenges presented by rapid urbanization are even more complex in the “global south,” where cities are already struggling to cope with economic inequality, urban slums and inadequate sanitation, while facing additional pressure from rapid population growth.
To address these diverse and complex problems, stakeholders are increasingly looking to build “smart cities,” a city-planning concept that draws on new and existing technologies to make cities more efficient, inclusive and sustainable. But what exactly is a smart city, and how do stakeholders successfully implement one?
What makes a city ‘smart’?
According to Jean-Michel Huet, partner at technology consulting company BearingPoint, a smart city is a digital ecosystem within a city that enhances its livability, workability and sustainability.
“Smart cities are not limited to a certain territory, but instead are zones where technology and connectivity play a central part in infrastructure,” Huet said. “To address the issues of urbanization, sustainable development, technological needs, economic development, and offer a place to live, learn and work.”
Opinion: Digital revolution(s) — Cities on the frontline
As digital data becomes a key resource to build sustainable cities, all urban stakeholders need to adapt. Development actors must step up efforts to integrate this new paradigm and broker impactful and inclusive partnerships around urban data, write AFD's Gwenael Prie and Pierre-Arnaud Barthel in this guest column.
Inclusiveness is another key element of smart city, according to Philippe Orliange, director of strategy, partnerships, and communication at the French development agency, Agence Française de Développement.
“Smart cities are about changing the fabric of urban policy so that citizens are involved in the design of the city, so that policies address real needs, and are socially inclusive,” he said.
Sunil Dubey, senior advisor to Metropolis, the World Association of the Major Metropolises, takes the concept of inclusiveness one step further.
“Smart cities should be centered on the needs of local communities,” he said. “Everything in a smart city — technology, policies, infrastructure — works towards the goal of improving the lives of the people living there.”
Hyoung Gun Wang, a senior economist at the World Bank, added that smart cities must also be innovative — both in how they are administered and how they engage the public.
“Many people make a mistake of thinking that smart cities are about technology,” said Hyoung. “But smart cities are really about how local governments create collaborative, open partnerships among the public, the private sector and people, and apply technologies that make things more efficient and make city life better.”
‘Smart’ basics: Good governance and communication
Smart cities start with strong city governance, according to Dubey.
“City leaders need to have a strong vision, informed by what its residents actually need,” he said. “Without that, we can try to build a smart city, but they will never deliver the things the people really need.”
In order to realize this vision, city leaders must have the administrative power and financial backing to make key decisions for their city, without having to get approval from regional, state or national leaders.
“This is critical,” said Dubey, citing cases in India’s largest cities where the mayors are the political representatives of the people, but don’t have implementation power.
“They have to link up through several layers of bureaucracy to get approval, making it difficult to get anything done. Compare that to Guangzhou, China, where city leaders were able to build 600 kilometers of metro rail and bus rapid transit lines in 15 years. That sort of project is only possible when city leaders have profound powers of implementation.”
Once city leaders have the power and budgets to make major urban decisions, they must create systems that facilitate interdepartmental communication and collaboration.
“One of the biggest challenges facing city leaders in the developing world is getting their different departments to speak to each other,” said Dubey. “Often, they don’t, leading to wasteful redundancies.”
To facilitate such collaboration, BearingPoint’s Huet advocates that smart cities adopt information technology platforms that are adaptable, scalable and responsive, enabling city leaders to work with partners, embrace future technology and act fast, while maintaining the trust of its citizens.
Leveraging the power of innovation and technology
Leveraging context-appropriate technology is fundamental to the success of any smart city. Such technology can take many forms: from online platforms and programs that facilitate interdepartmental communication, to designing smartphone applications that map public transportation routes, to lamp-posts equipped with weather and emissions sensors.
The age of “big data” has also allowed city planners to collect citywide information on a scale previously unimaginable.
“Thanks to mobile data and internet revolutions, we now have the ability to collect large amounts of data in real time,” said World Bank’s Hyoung. “We can use this to learn more about the locations and needs of the most vulnerable people in a city, to inform public service providers to respond to real time needs, or uncover emerging problems before they turn into crises.”
Additionally, open data and citizen engagement through social media also promote accountable and transparent government and civil society, according to Hyoung.
“Smart city technology doesn’t necessarily need to be new to be effective, and in the ‘global south,’ the most effective solutions often involve innovative uses of existing technology.”
— Philippe Orliange, director of strategy, partnerships, and communication, Agence Française de Développement
“The applications are endless,” he said.
BearingPoint’s Huet believes that technology’s key role in smart cities begins with building “technopoles” — technological hubs that nurture innovative businesses, create employment, encourage education and training, and showcase a country’s strengths. For example, Egypt, Morocco and Tunisia have already built successful technopoles, demonstrating that “a technological revolution spreading across global south countries is seeing connectivity become a reality,” he said.
According to Huet, the success of smart cities also hinges on the monetization of city services, so that sustainable business models support the city’s ecosystem. Such monetization can range from installing paid parking meters, to collecting public macro-data — for example, car parking spaces, congestion, bins, energy and water use, satellite imagery, population density, and crime statistics — and converting it into useable information, accessible through commercial subscriptions.
Get development's most important headlines in your inbox every day.
Thanks for subscribing!
“To be successful, smart city ecosystems need more than a product,” he said. “They need monetization and orchestration platforms that are scalable so the cities can collaborate with partners and embrace future technology.”
But while technology is a fundamental component of any smart city, the best solutions aren’t always high tech.
According to AFD’s Orliange, technology should be seen as a tool — not a goal — of smart cities.
“The best applications of technology solve specific problems,” said Orliange. “Smart city technology doesn’t necessarily need to be new to be effective, and in the global south, the most effective solutions often involve innovative uses of existing technology.”
For example, in the cities of Jinzhong and Taiyuan in China, AFD was brought in as a consultant to create more efficient and sustainable urban heating systems. Due to low water pressure, water wasn’t heating. Rather than ripping out the pipes and installing a newer, more high-tech solution, AFD was able to install a simple pump system into the existing system that moved water more efficiently — instantly and inexpensively delivering hot water.
Planning inclusive spaces
Smart cities are responsive to the needs of their citizens, and require a high level of communication between the public and city leaders. This sort of citizen-led design is a cornerstone of any smart city, according to Orliange, who noted that the successful initiatives that AFD has been associated with — from relocating slum dwellers in Santo Domingo, Dominican Republic, to building public transportation systems in Medellín, Colombia — has been due to the high degree of dialogue with the people concerned.
What makes Medellín the poster-child of sustainable transport?
Once notorious for its drug cartels, the city of Medellín, Colombia, is now celebrated for fostering social inclusion through urban planning. So how did it come to be a leader in sustainable urban development? Devex got the inside track from Medellín Mayor Federico Gutiérrez Zuluaga.
“This dialogue is what fed the design and implementation of the policies,” he said, “and was clearly the reason behind its success. If you don’t have that communication from the very beginning, implementation can get messy.”
In the “global north,” meanwhile, cities increasingly rely on innovative uses of social media to interact with citizens — from targeted Twitter campaigns, to mobile surveys. In developing countries, however, most effective engagement campaigns still rely on in-person methods.
That’s where working with nongovernmental organizations can help. For example, when the city of Surat, in the Indian state of Gujarat, was devastated by an earthquake nine years ago, city planners approached NGOs with pre-existing community relationships, and armed them with laptops, mobile phones and GIS-mapping software. By going door-to-door in their respective communities, the NGOs collected mapping data from residents that was critical to successfully rebuilding the city.
“This sort of data is the lifeline of smart cities, and it can only be collected if the city is truly inclusive,” said Dubey. “Having data also helps make cities more inclusive and resilient. For example, thanks to the data we collected from residents in Surat, if another earthquake happens we can rebuild these buildings up to the last detail of their drainage pipe or façade.”
Building sustainable and resilient cities
Perhaps the biggest challenge to incorporating smart principles in developing countries relates to environmental sustainability: Currently, cities are responsible for generating more than 70 percent of global carbon dioxide emissions. Reducing that footprint is a problem that smart city stakeholders are still struggling to address.
“To begin to address cities’ environmental impact, a certain cultural shift is necessary,” said Dubey. “We have to start to change how people work, how they think about social mobility, how they engage with urban spaces.”
One way to reduce traffic, for example — and thus emissions — is to incentivize companies to encourage their employees to work from home a certain number of days per month, or to promote e-health solutions for certain types of prescriptions, reducing unnecessary hospital visits.
Dubey also encourages cities to refurbish existing spaces whenever possible, rather than demolishing and building new ones.
“The fact is we are running out of resources. We can’t keep building at the pace we are building now,” he said. “We have to start thinking about how to innovate the infrastructure we already have, and stop defaulting to always building new.”
Given the rapid pace of urbanization, building smarter cities is imperative if we are to comfortably accommodate the next generation. This requires a strong vision from city leaders, engaged citizens, effective partnerships, and the application of appropriate technological solutions and information sharing among global metropolises.
“Irrespective of whether cities are located in India, China, or Africa, cities have a lot of common issues they need to address, which is why we need to build a global network of cities,” said Dubey. “With more than 50 percent of humanity living in cities, the focus has to move from nations to the creation of smart cities.”
Over six weeks, Devex — along with our partners Agence Française de Développement, BearingPoint, UN-Habitat, and XII Metropolis World Congress — will explore what it takes to build a successful smart city, how climate resilient and environmentally friendly infrastructure and technologies are being implemented, and how actors in the global development community are working together toward common goals and engaging local communities in an inclusive way. Join us as we examine what it takes to create our smart cities of the future by tagging #SmartCities and @Devex.
Printing articles to share with others is a breach of our terms and conditions and copyright policy. Please use the sharing options on the left side of the article. Devex Pro subscribers may share up to 10 articles per month using the Pro share tool ( ).
How Asia’s banks fight back against disruption
The most compelling of all themes in Asian financial services in the last five years has been the incursion of tech-savvy non-banks into the payments space. The first mention of Ant Financial in Euromoney came in April 2015; WeChat, January 2014; Paytm, September 2016; and Go-Jek, March 2018. Now it feels like those names have been around for ever.
Over the last three years, we have sought to shed light on the models of these disruptors and have talked to the executives of, among others, Ant Financial, Go-Jek/Go-Pay, Paytm and Grab.
Through these interviews we have learned a great deal about the potency of an offering that reaches the previously unbanked, makes smart use of big data and makes a virtue of simplicity and access. Institutions like these, and in particular those from China, lead the world in this field. They have made cash all but redundant in their markets and are making a fair fist of doing something similar to retail banking.
It is a theme that has its clearest expression in China, which was custom-made for disruption. It has a large population, with a growing mass-affluent young middle class that has been underserved by the banking system; people who are comfortable doing anything on a smartphone, and quite accepting of the privacy compromises involved in big data; a regulatory environment that has been far more benign for fintechs than existing banks; a considerable need for financial inclusion among the previously unbanked; and escalating e-commerce growth.
Not all of those attributes exist in other markets, but three of them – high populations with emerging affluence, comfort with and widespread use of the smartphone and high proportion of unbanked ready for financial inclusion – exist in India and Indonesia, the two other hotbeds of payments disruption.
It is the scale of these untapped markets, married with a newfound ability to reach them, that means Asia, not the US, leads the world in fintech.
So how have Asia’s banks responded?
February provided an informative example. That month UOB, an institution run by the third generation of the same family and noted for its caution and conservatism, followed through on plans for a digital bank and said it would open in Thailand, with an aim of collecting three to five million customers in the next five years as it rolls out to other Asean markets. It even has a funky name – TMRW, which you are meant to pronounce tomorrow – and it targets millennials who prefer to bank through their phones.
If dignified and proper UOB is doing this, then truly the moment has arrived when banking is taking on the tech threat en masse. But it shouldn’t be a surprise. Singaporean banks are perfect candidates for the use of digital disruption. They have highly sophisticated operations in their home base and are surrounded by markets with far higher populations but lower levels of banking penetration.
Wee Ee Cheong, chief executive of UOB, tells Euromoney in Singapore that he waited until all of the bank’s IT systems were centralized across the region before launching his new bank, so as to make the operation seamless.
“Because of that, it took me 14 months to launch a digital bank,” he says.
But he is very clear on the merit. “With the digital bank I can simplify my traditional banking operations,” he says.
A multinational client with operations in southeast Asia can now deal with UOB and have the same experience in Malaysia or Thailand as in Singapore, in cash management for example. Meanwhile there’s great potential for new consumer clients.
Why start in Thailand?
“First of all, it’s a big market,” says Wee. “Malaysia is our second-biggest market, but it is a little bit more established. The Thai consumer is quite tech savvy.”
After that, the digital bank will roll out in Indonesia and Vietnam, coming to Singapore last, the reasoning being that the bank already has well-established online operations and market share in Singapore.
“We want to use Thailand as a test,” Wee says. “If it is going well, we will use that to replicate some of its success in different countries.”
UOB has claimed – particularly Dennis Khoo, head of group retail digital – that it will be differentiated from other digital offerings because it will only seek good, remunerative clients. But how does one know who a good customer is?
Traditionally, Wee says, one would look at income tax records and so on. But now the bank is engaging with behavioural scientists.
“Especially in an emerging country, income tax may not be the only way of looking at it,” he says. “The underground economy is huge. We focus a lot on behaviour.”
UOB has tied up with AI and big data specialists in Israel and China to try to get the right people. It has given its Chinese data partner, Pintec, a trove of data on applicants UOB had previously rejected. “I said: ‘You look at it, see what you can get out of this,” says Wee. “It could be an opportunity lost for us.’”
There is something of a leap of faith.
“These are all unsecured credit, new generation – they have no money,” Wee adds. “We need to take certain risks. If they are successful in their career, hopefully they will migrate over” to more lucrative banking services.
Doing this without compromising UOB’s cherished standards of prudence and asset quality will be a challenging balancing act.
Disruption
In launching its digital bank, there is no question that UOB will have studied closely its big rival in Singapore, DBS. Few banks have nailed their colours to the tech mast as vividly as DBS. Chief executive Piyush Gupta is evangelical about the whole thing, having had an epiphany several years ago that his institution should be measuring itself against the likes of Amazon rather than other banks. Everything the bank has done in the last five years has had an element of digital disruption to it.
In particular, its attempt to build a digibank in India and then another in Indonesia, were fascinating first-mover experiments to watch. But have they worked?
“In Indonesia our strategy has been more successful,” says Gupta. “We learned from and modified our India strategy.
“In India, what we did was net-fishing. If you spoke English and had a smartphone, you were a potential customer.”
DBS’s data told the bank there were between 120 and 150 million people who fitted the description, but they weren’t all good customers.
“A lot of those people are kids from college who can just about afford the smartphone but don’t have a credit record,” says Gupta. “They don’t have the creditworthiness for me to lend to them and they don’t have enough money for me to take from them. You can add them, but it is very hard to monetize those kinds of people.”
Setting up in Indonesia a year later, DBS applied the lessons.
“You can see it in the numbers,” Gupta says. “In India, we have 2.3 million customers in two and a half years. In Indonesia we have 400,000. But that is deliberate. The 400,000 in Indonesia are far better customers.”
DBS gains from them in deposits and in lending, and has started unsecured lending based on a customer’s relationship with Indonesian wireless network provider Telkomsel.
“It’s working quite nicely,” says Gupta.
The bank has modified its India strategy, bringing customer acquisition down from 80,000 a month to 40,000 a month but with better customer profiles – balances on month zero (when they open the account) have tripled and so have lending rates.
Is he stuck with the bad customers?
“Well, they don’t cost you anything,” he says. “The cost to acquire them is $10 a customer. About half of the customers I don’t think will be productive, so you could argue we blew up the acquisition cost because we spent $10 million acquiring customers we will never be able to monetize. But the marginal cost is pretty much zero, they sit on the server.”
You’ve got to experiment. Every time you conduct an experiment, you learn something new
- Piyush Gupta, DBS
Getting digital customers in these markets to be profitable means moving them up from deposits (although in Indonesia, where the bank can earn 7% to 8% from investing in government bonds, it can make a 5% spread on the deposits it takes in).
“The key thing that makes me confident today is that the lending capability in both countries has now taken off,” says Gupta.
The bank uses data-driven algorithmic credit underwriting models and as a consequence has been lending out about $4 million a month in both countries where the digi model operates.
“And these are high ticket loans,” says Gupta. “As we build that out with the liability base, you really start making money.”
Selling mutual funds and insurance products is next.
Asked about other banks launching regional digital models with a stated aim of just getting the best customers, Gupta says: “We’ve learned so much in the last three years about customer selection. In the old days there was a relationship manager in the branch: you could see what the guy looked like, knew what his income was. Now, you’ve got to think very differently – what digital channels do I market through?”
He was struck by the Silicon Valley principle of ‘fail fast’: “You’ve got to experiment. Every time you conduct an experiment, you learn something new.”
Challenge
The leading banks in every important market in Asia can point to innovation in technology. Most say that they see fintechs as a challenge but also a potential partner. Again, Singapore is a leader here – in November DBS announced a tie-up with Go-Jek as UOB did the same with Grab – but a similar ‘if you can’t beat them join them’ theme is emerging in the rest of the region.
“In the bigger picture, in the long run, yes we see them [fintechs] as a threat,” says Kartika Wirjoatmodjo, chief executive of Mandiri, in Jakarta. “They are very effective in acquiring new customers in the millennial segments,” where people tend not to want a bank account but an e-wallet. “That worries me: the understanding of financial products among the new generation starts with an e-wallet, not a bank.”
But Wirjoatmodjo also sees an opportunity for collaboration with fintechs in such an unbanked market. He says he has met with founders Anthony Tan at Grab and Nadiem Makarim at Go-Jek to talk about potential ties.
To get rolling in this area, Mandiri set up a venture capital group three years ago, which has “already hopefully invested in some of the new unicorns of Indonesia” and is part of a new peer-to-peer business focusing on micro lending at the village level.
That worries me: the understanding of financial products among the new generation starts with an e-wallet, not a bank
- Kartika Wirjoatmodjo, Mandiri Bank
Mandiri is one of six banks and state-owned enterprises jointly setting up a fintech company, starting with a QR code payment service called Link Aja. The project brings together Mandiri, BNI, BRI and BTN on the banking side, with Telkom Indonesia and the state oil and gas company Pertamina.
Once operational, the payments service will accommodate foreign systems like Alipay if they want to come in.
“Go-Jek has rides, food delivery; I don’t have those kinds of things,” says Wirjoatmodjo. “But payment collaboration with different companies give us quite a strong basic-needs use case.”
Wirjoatmodjo also wants his hiring mix to change.
“We hope that in the next few years we will have 1,000 to 2,000 people entirely as digital bank staff.” He’s not yet reducing branches.
“As CASA [current and savings account ratio] is still growing, as long as we don’t add more branches, efficiency is still good,” he says. “Probably three years from now when people start opening savings in wallets, we have to start reducing. But the inflexion point is then.”
The bank seems ready for it; 70% of its 38,000 employees are under the age of 35.
Transformation
At Bank Central Asia in Indonesia, president director Jahja Setiaatmadja says the role of non-banks in payments “is a daily discussion.” BCA has launched numerous internet and mobile banking services of its own, under the premise: “Our vision is to be always by your side.”
“We believe that digital transformation is changing the whole industry, as well as customers’ consumption habits,” Setiaatmadja says.
Indonesia is also one of the places with the highest hopes that technology can help to bring about financial inclusion. Agus Martowardojo, former finance minister and central bank governor of Indonesia, says that in that country financial inclusion has improved from 36% to 44% of the population in the last few years.
“That means that 56% of Indonesian adults still don’t have access to financial institutions,” he says.
Dgitalization, including fintech initiatives, represents the best shot of reaching them.
CIMB, like the Singaporean banks, has reached the conclusion that: “Either we get disrupted or we disrupt ourselves,” as Zafrul Aziz, group chief executive, puts it. He is trebling tech investment in 2019 and is aware of a considerable staffing challenge.
“If you look at the skill sets that we have today I must admit, to be frank with you, it’s not the right mix of digitally savvy people to ensure the success of Forward23,” he says, referring to the bank’s five-year strategy announced in March. “If we look at the 3D-skilled people – that’s data, digital and disruption – they are about 5% of our 35,000 working population today. By 2023, it should be 15%. So we need to either re-skill our staff or get people from outside.”
CIMB has tried to develop innovation in Malaysia – it has a venture partnership division, an easy-pay touch card called Touch ’n Go and is the biggest e-wallet player in the country – but perhaps the most interesting thing it is doing is the digital bank it launched in the Philippines in January 2019. It recalls DBS’s India digibank: a testing ground for new ideas. Is it?
“It is exactly that, a test case for us in the Philippines and Vietnam, because we are not a big incumbent and they are new markets for us,” says Zafrul. “In the Philippines you can do video KYC [know-your-customer checks], so you don’t need a branch network.”
For one thing, the playing field is not level yet... It is very hard to compete with somebody who is willing to lose money
- Nestor Tan, BDO Unibank
In another echo of DBS’s first efforts in India, he says: “Our target in the Philippines today is to acquire customers rather than just looking at the profit numbers. There is a period when you need to invest in any new startup.”
In the Philippines – which many foreign banks see as fertile ground for launching digital initiatives – Nestor Tan, chief executive of BDO Unibank, says he sees fintechs “as an opportunity and a chance for partnership.”
For him, fintechs can be competitors, service providers and a source of new technology and expertise; two of the three strike him as an opportunity for banks.
But it’s not all good.
“The e-wallet segment is the one that gives us the competition we’re afraid of,” Tan says. “For one thing, the playing field is not level yet. Second, they play by different rules financially. A lot of them are startups with venture capital money where the metrics may not be plain profitability – oftentimes it’s around market share, coverage, subscribers. It is very hard to compete with somebody who is willing to lose money.”
He recalls a central banker putting it like this: fintechs are knocking on the doors of the regulators saying: ‘Let us in,’ and the banks are knocking on the same door from the inside saying: ‘Let us out.’
“Somewhere around the middle, the playing field will level off,” says Tan.
Daniel Wu, president of CTBC in Taiwan, says: “A traditional financial institution has to embrace technology. It’s an opportunity to change.”
Every bank makes statements like this, but for Wu in practical terms it means that the old 20-80 rule – “where you can only serve 20% of your clients well to make 80% of the money” – no longer applies since tech allows them to reach the other 80% in other ways. “It’s the group of people you are supposed to serve, but in the past the problem was the cost.”
He says that the advent of robo-advisers means banks can help people with far lower levels of wealth.
CTBC says it is a mobile and internet banking leader in Taiwan in terms of number of users.
“To us, technology is number one to reduce your costs, shorten processes, reduce paper, be more efficient,” says Wu.
But the bank is not alone in this view and it is interesting that when Line (an extraordinary social media story in Taiwan, within 21 million users in a population of 23 million) set up an internet bank, CTBC could not get more than a 5% stake, despite existing partnerships with a business called LinePay through which CTBC got two million applicants in two years.
“We very much want to be the biggest player together with them, but it is only the beginning,” says Wu.
Wu points to Korea, where internet play KakaoBank has been a huge success, but its attempt to build a mobile bank, K Bank, has been impeded by an attempt to raise W150 billion ($131 million) that attracted only one-fifth of the targeted amount.
This was partly because of banking laws that limit the maximum stake ownership of a non-financial business to 10%, because of which K Bank’s ownership is spread across 20 different companies. (KakaoBank’s main shareholder is Korea Investment & Securities; other shareholders in K Bank include Woori Bank and NH Investment & Securities.)
Wu finds this somewhat fluid shareholder structure instructive. He thinks that over time the opportunity will come up for CTBC to increase its stake in the Line bank.
“If it doesn’t make money for three years, will everyone follow for the cash injections? “ he asks. “Probably not; it depends if you have deep pockets. The final round of shareholders will be very largely different.”
Financial inclusion
No country has tried as hard as India to make technology an agent of financial inclusion. The Aadhaar national card system, the most extraordinary biometric scheme ever attempted with one billion domestic users, is linked to a Unified Payments Interface (UPI) open to all banks, fintechs and licensed telcos.
“It is transformative,” says Uday Kotak, chief executive of Kotak Mahindra, whose bank has coined the somewhat awkward term ‘phygital’ to describe its own combination of a digital and physical presence. “Aadhaar is a unique Indian proposition, which is a game changer.”
Aadhaar and tech have brought a lot more competition into financial services from fintechs such as Paytm and some of the telcos.
“My view is that, thanks to Aadhaar, it’s a level playing field,” says Kotak.
To Raghuram Rajan, former governor of the Reserve Bank of India, whose tenure coincided with the launch of Aadhaar and the UPI, Aadhaar fits with one of his academic themes, expressed in his book ‘The Third Pillar’: that communities have to be strengthened in order to avoid inequality.
“The whole notion people sometimes have is that in this modern world it’s an absolutely dumb idea to try and preserve communities,” he says.
What is important for society is to adapt to technological change by using it to offset the worst effects of technology itself
- Raghuram Rajan
While technology encourages virtual communities – Facebook is the clearest example – it can also strengthen things locally in the real world, he argues.
“Tech allows both services at a distance and work at a distance,” he says. “You don’t have to go into the cities to have the same kind of credit information associated with you as in the past. You don’t need to be near a bank. A lot more can be collected through your unique ID and your business in a village can help build a history.”
Rajan has argued that: “Technology-induced inequality and human-induced inequality have built on each other.”
But, he says, tech can also be a tool of inclusion: “I think it does both, and what is important for society is to adapt to technological change by using it to offset the worst effects of technology itself.”
Technology makes markets work better, which tends to enhance the returns to those who have the skills the market wants, increasing inequality, he argues. “But on the other hand, there are many ways that technology, by reducing the transaction costs of doing business, can allow you to provide services for the very poor.”
Aadhaar and the UPI, as Euromoney has argued before in an interview with its architect Nandan Nilekani, have no equivalent anywhere else: an infrastructure built by the public sector and intended to be truly interoperable.
“That’s very important,” says Rajan. “It gives operators an incentive to invest in improving their technology, knowing they will not be held up by the bridge owner,” meaning the underlying infrastructure.
There is another, perhaps surprising, voice arguing for the state to take the lead in digital development. Joseph Yam, former governor of the Hong Kong Monetary Authority, thinks the application of technology in the delivery of financial services is a good thing, provided the risks involved can be properly managed.
But he thinks that, conceptually: “Money is the role of the central bank: you print money, you produce cash in order to facilitate transactions. So if that medium can be digitalized, then should you actually be leaving that role to the market?”
He thinks there is a role for the state to offer everybody a digital wallet.
“If there is a winner among this proliferation of digital payment mechanisms – Alipay or WeChat Pay or whatever – you still have to get involved, because that winner will be in a position to create money and the central bank will need to control that.”
In particular, it is the linkages between systems that concern him. “The risk of one particular system will be transferred to another system if they are linked.”
Fee compression
There is no question that the epicentre of techdisruption is China. But are its domestic banks too late? Have they already let Tencent’s WeChat and Alibaba’s Ant Financial take the market?
“Technology is fundamentally changing the banking business,” says Sun Yu, vice-president at Bank of China.
Domestically, that means being active across retail, financial institutions and corporate customers.
“We have no ambitions to be a retail bank in Western countries,” he says.
“But for corporate clients – either Chinese corporates going global or foreign local corporates doing China-related business – we want to be their main bank that can provide almost anything.”
Bank of China has a centralized IT team of nearly 10,000 people and clearly wants to do a lot in-house.
“And we work closely with other companies,” says Sun. “There is a clear link in interest between business and banking technology.
“For example, we cooperate in some projects with Tencent. Yes, we may compete in some areas, but there are many in which we do not and can gain mutual benefits through cooperation.”
For the internationals in China the lead will come from head office on tech initiatives, but there is plenty they can learn here.
“China is going to show the world the way for electronic payments,” says Jin Su, co-president for Asia Pacific at Bank of America.
“A year ago, China had 50 times the volume of electronic payments the US has. Young kids don’t use cash. What does this mean for the banking system? And as it becomes more sophisticated and digitized in China, what does it mean for Asia and potentially the world?”
One thing it clearly means is fee compression.
“Those payments that used to go through the banks got charged a fee on that,” says Su.
Doing it through Alipay or Tencent eliminates the middleman and creates pressure on fees.
Different international banks approach the challenge in different ways. Citi, for example, stands out for its range of partnerships with local fintechs; former regional chief executive Francisco Aristeguieta spoke frequently of the bank’s desire to embed itself in the ecosystem of its clients’ lives.
He has recently taken a new job as head of international operations at State Street.
Those banks that don’t have big consumer businesses will nevertheless try to bring consumer ideas – simplicity and ease of access – to institutional client needs in, for example, cash management or trade finance.
Joydeep Sengupta, co-head of fixed income, currencies and commodities for Asia at BAML, says one initiative even allows institutional investors, among other things, to trade FX transactions on their phones.
The need to innovate is particularly pressing in this part of the world.
“In Asia, you’ve seen a lot of things jump straight to digital,” he says. “It’s coming.”
Comments
Post a Comment