Siam Commercial Bank is building a “hub” for cross-border payments, connecting its Thailand business with other Southeast Asian banks.
It is part of the bank’s drive to use technology to transform the business model to remain competitive, says CTO Colin Dinn. “We really have to be aggressive,” he said. “In my view, in five to eight years, banks as they exist today will be irrelevant to customers, because there will be a product [e.g., a Google or a Facebook] between us.”
In July, 2017, SCB pioneered a remittance corridor to Japan’s SBI Remit, the country’s largest money transmitter, using xCurrent, a blockchain technology developed by Ripple.
SCB is now working with Ripple to roll out a series of other corridors within Southeast Asia, to create a “hub”. Explains Dinn:
“We want to offer our capabilities not just into Thailand [via remittances] but across the region. We are building a hub; we want to partner with other organizations and create a new ecosystem around the technology that we’ve built.” Eventually, SCB wants the hub to partner with other players beyond Southeast Asia.
Partnering with Ripple
Dinn says the bank is doing more with Ripple because the vendor moves fast and collaborates closely to come up with new ideas and implementations.
Learning the tech from providers like Ripple was one thing but innovating the business model has proven the bigger challenge.
“Doing payments is easy when everything goes right,” he said. “The reality hits when things go wrong.” SCB began its Ripple experiment within a regulatory sandbox operated by Bank of Thailand, which has given BoT a front-row seat on how the tech works and whether it’s serving Thai consumers.
The extension of xCurrent is a result of the business starting to show value to SCB. The bank will begin making it available to SMEs, not just consumers, and Dinn thinks corporate clients will also use it. Companies are looking at a range of new technologies to get more control over their financing arrangements and pricing.
Business model: work in progress
The bank has yet to work out a business model for blockchain-based payments. The initial use case hasn’t been about price, but speed: transfers from SBI Remit take seconds, versus the days required through SWIFT’s network; even within Thailand, getting money from Bangkok to rural areas can take days.
That generates convenience that users appreciate, and will come to take for granted. It generates user data that the bank can use to create new products.
Dinn says his preferred buzzword to describe what the new business model entails is “intent-tricity” rather than “customer-centricity”. “We can have a holistic view in order to sell a product,” he said, “but do we understand that person’s intent, so we can sell them the right product at the right time?”
And the emerging world of the Internet of Things poses an opportunity, if banks develop the right platform, experience and partnerships. Otherwise, the future looks bleak: as home appliances get connected to, say, retailers, the fridge orders milk when supplies run out. “Where’s the bank in that transaction?” Dinn wondered.
But for now the bank isn’t adjusting its fees. Dinn says over time, pricing models will change, but how is not yet clear. And payments are not “freeware”, as he put it.
Brad Garlinghouse, asked this question by DigFin at Ripple’s recent annual conference, answered with a question of his own: “When you send a message on WhatsApp, is it free?”
The implication being that companies invested a lot of money in building that communications infrastructure, which shows up in consumer bills for buying devices and subscription plans, as well as providing platforms with behavioral data.
Garlinghouse said, “Payments will end up feeling like they’re free.”
SCB’s Dinn says that in the short term, layering on more payments corridors is not a SWIFT replacement. He hopes that by connecting with regions or segments that are currently underserved by banks. But eventually this will create a multiplier effect. Critical mass will have been reached once winning new flows doesn’t depend on a new tech outlay or partnership; it will just be consumed.
KYC in seconds
Siam Commercial Bank’s digital banking arm is using digital technology to radically improve onboarding SMEs. It has rolled out a new app that enables small business owners to create an account in real time, with no paperwork. The account lets customers manage their cash, make payments, borrow, and trade foreign exchange.
SCB was able to do this by accessing government data sources to pre-populate an application form. Using government data, the bank illustrates the connections among the company’s chief executive, authorized directors and shareholders. This creates a diagram its computers read to understand the shareholder structure and any cross-shareholdings.
This is now automated and takes less than a minute to process, giving the bank the ability to quickly onboard customers – a process that otherwise takes weeks, with multiple visits to bank branches and lots of paperwork.
The customer must still visit the bank one time to sign the final documents activating their account. But relationship managers will now have all of this information ready, so they are prepared to speak with customers about any business needs, discuss whether the business requires additional accounts, and so on.
SCB says it has now set up accounts for 30,000 business customers in Thailand this way.