Cambodia: Banks warned against complacency

Cambodian banks have reaped great success via strong economic growth and high gross interest assets, but that has also resulted in complacency, which makes it imperative for commercial banks to adjust in the face of increased competition from incoming fintech companies. This according to Michael Lor Chee Leng, Senior Advisor to the EMFA, a not-for-proft organisation with over 3,300 retail financial services companies as members that helps development via dialogue.

“Most banks are generally complacent, especially if they are enjoying 5 to 7 percent gross interest assets, but they are also not sitting patiently to be overtaken by fintech firms,” added Lor in a discussion with Khmer Times.

Michael, Canadia Bank Plc’s former chief executive officer (CEO), also holds several advisory roles in financial and technology firms across the region and has served stints as the managing  director of Singapore-based DBS Bank and Worldwide Director for banking solutions at Hewlett Packard.

He said Cambodian fintech firms offering monoline services such as e-wallets do not pose an immediate threat to commercial banks because clients require additional services such as mortgages and insurance.

“The market will be defined by the demands of Cambodians. The Kingdom’s young population – many of whom are below 30 – are generally more impatient, value convenience and lack brand loyalty,” he said. “Because of that, traditional banks still have an advantage given the fact that the Kingdom’s growing affluence will have young people demanding financial services in the future,”

Michael stressed that banks still have the upper hand over the short- to medium-term, but must leverage their existing strengths, particularly using data and analytics better to understand customer behaviour and needs for long-term success.

“For example, I bought a car in Malaysia a couple of years ago and paid the deposit with my credit card. Logically, the bank should have known that I bought a car. However, no one from my bank called me to offer me a car loan or insurance on it. I think this is indicative of banks having an innate advantage with data, but being unable to analyse and act on it.

“Fintechs may be nimble but they do not have the banks’ financial strength  or advantages yet to be leveraged, especially access to banking customer transaction data,” he stressed.

Michael added that banks should eventually adopt open application programming interfaces (APIs) into their mobile services to foster greater collaboration rather than competition in the space. APIs allow digital platforms to integrate and offer unified services.

For example, Ria Money Transfers services on the Advanced Bank of Asia (ABA) mobile application and Wing transfers on Cambodia’s Foreign Trade Bank (FTB), use APIs to allow services to be offered on their respective banking platforms.

“This would allow for greater financial solutions to be built into banks’ capabilities so that commercial banks can plug fintech solutions into their platforms and foster greater connectivity and a higher level of service that is easier to use,” he said.

“Eventually, fintechs and commercial banks will be more collaborative than confrontational. And we are going to see a lot of banks and fintechs working together. Already, you see that with the platforms of JP Morgan, Citigroup and DBS, among many others. There is a lot of collaboration with fintech companies because some of these firms provide fantastic monoline solutions,” Michael added.