According to the iPrice report on “The Biggest eCommerce Websites and Apps in Southeast Asia – Q1 2019”, there are more than 350 million internet users in Southeast Asia (Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam). E-commerce is the fastest growing sector in the internet economy, reaching US$23 billion in 2018 and expected to exceed $100 billion in gross merchandise value by 2025.

Multiple aspects of disruption are impacting banks: One out of three millennials are open to switching banks in 90 days, and 33 percent of millennials believe that they do not need banks.

Financial institutions are starting to lose customers as people switch to nonbank channels and sources. Consumers can borrow money from alternative sources like lending clubs and through peer-to-peer (P2P) lending, while banking products and services are being unbundled for better consumer options and experiences with single-service providers. Deposits and payments are unbundled as consumers utilize third-party payment solutions like PayPal.

Financial companies are also struggling with differentiation as consumers compare products online, where they have greater transparency.

Consumers can compare different banking products via online aggregators like iMoney. Banks are losing brand awareness, since consumers can access financial services without knowing the provider’s identity. Consumers can take out microloans via social platforms like WeChat and Weilidai. Banking and financial institutions today are initiating and managing transactions from end to end, typically at the risk of their own capital.

Banks have two sources of income: net interest income (NIM) and fee income. NIM is derived from the spread between borrower and lender. Fee income is derived from banks acting as a trusted intermediary platform. NIM activities are more difficult to disrupt, but fee income activities are vulnerable to disruption.

Financial institutions may either play an increasingly intermediary role with less at stake, or be just one node in a network. This evolution will be driven by P2P transactions, enabled by partnerships between financial services companies and a new breed of fintech companies. We have already witnessed this today, with P2P lending platforms often partnering with traditional banks.

Leadership can be the solution to problems or their cause. An organization cannot transform before their leaders do. One definition of transformational leadership says that this kind of leadership emphasizes satisfying basic needs and meeting higher desires by inspiring followers to provide newer solutions and create a better workplace.

Today‘s global business environments involve a high level of uncertainty, and organizations will increasingly need more and better leaders to lead them. Transformational leaders may be more innovative and creative, but some type of leadership is necessary to lead a global organization.

Transformational leadership consists of four dimensions: idealized influence, individualized consideration, intellectual stimulation and inspirational motivation. Transformational leaders are visionary leaders that attempt to develop a shared, inspiring vision for the future.

A leader plays a critical role in guiding organizations toward shifting to the creation of new services and products. Leaders also contribute to new products and services to meet dynamic market needs, through higher expectations and stimulation for new and strategic opportunities to meet the needs of customers in the marketplace.

Many executives look to their IT departments to improve efficiency and to facilitate game-changing innovation, while somehow also lowering costs and continuing to support legacy systems. Meanwhile, fintech start-ups are encroaching upon established markets, leading with customer-friendly solutions developed from the ground up and unencumbered by legacy systems.

Customers have had their expectations set by other industries; they are now demanding better services, seamless experiences regardless of channel and more value for their money.

Regulators are demanding more from the industry too, and have started to adopt new technologies that will revolutionize their ability to collect and analyze information. And the pace of change shows no signs of slowing.

Transformation is no longer an event. It is an ongoing phenomenon that banking and financial companies must be ready for and for which they must nurture business readiness. They need to balance the goals of “business as usual” and transformation at the same time.

Banking and financial companies need to help their leaders adopt a new mindset to lead the transformation and help their staff unlock the potential of new ways of working and emerging capabilities, such as data science and analytics, human-centered design and design thinking, risk and governance in a digital world, future communication skills, agile and entrepreneurial thinking, and digital world awareness.

Leaders also should reshape employee experiences and journeys through employee portals, professional development and the evolving paradigm in employee rewards.

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The writer is senior vice president–Syariah and MSME Academy head at CIMB Niaga Indonesia. The views expressed here are his own.

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