OPINION: Winning Through A Superior Digital Experience – Why Is It Important For Cambodian Banks?
Views and opinions expressed in guest writer opinion pieces are those of the author(s) and do not necessarily reflect the official position(s) of B2B Cambodia.
All banks have almost similar products and need superior customer experience as a lever to differentiate their offerings. Globally, this has led to a quest for a superlative digital experience, with rapid advances in data-driven artificial intelligence (AI) aiding the ability to hyper-personalise servicing.
Data and digital services, especially mobile banking, have become even more critical in an emerging market as they enable distribution, a prerequisite for financial inclusion.
Are Cambodian Banks Embracing Digital Services?
In this context, Cambodian banks should broadly evaluate the digital experience models that have led to this trend. On the contrary, some recent articles in the media indicate that Cambodian banks’ customer experience efforts may need to be revised as the query resolution units are under capacity. While this opinion does not underplay the role of humans in providing customer experience, it argues that incrementing capacity alone may be suboptimal.
An analysis of twenty Cambodian banks’ balance sheets to evaluate the importance of digital services and the result of increasing physical infrastructure, such as branches, led to this conclusion. The 2022 balance sheets are available through the National Bank of Cambodia website and were used for this analysis.
The factors considered were:
- Mobile capabilities
- New account opening on digital channels
- The spend on smart branches
- The number of branches
- The link to the Cambodian online payment network
My study analysed two key metrics in the context of these factors.
- Growth in operating revenues between 2022 and 2021, and
- Operating expense ratio (excluding depreciation)
Two of the twenty Cambodian banks were microfinance, and one was a speciality bank. The banks were also categorised by size, with assets greater than USD $750 million as large banks and with less than that as smaller banks.
Of the 20 banks, 12 had asset sizes greater than USD $750 Million while eight were less than that. Canadia, ABA, Cambodia Post, and Chip Mong are typical examples of large banks considered in this study. The smaller banks considered included Alpha Commercial and AEON, among others.
The findings of the analysis are as follows:
- For Large banks (assets greater than USD $750 million), the operating expense ratio was in the mid-20 per cent for banks that had implemented a high mobility solution, enabled online new account openings, and offered payment capability.
- For small banks, they had limited digital capabilities and indicated an operating expense ratio between 40-55 per cent.
- There is an optimal set of capabilities, and overengineering these also leads to inefficiency. Cases to highlight are.
- Cambodian banks with provincial branches, or with more branches than those of larger banks, indicated a much higher operating expense ratio. In one case, it was in the 70s. Clearly, a higher number of touchpoints may help improve the customer experience but not the banks’ efficiency.
- Overengineering digital capabilities or investing in technology like virtual ATMs without the balance sheet size also led to efficiency losses.
- Even for the two microfinance deposit-taking institutions that were analysed in the study, digital capabilities helped drive efficiency.
- Cambodian banks constantly updating their digital experience had a high year-on-year operating revenue growth of more than 20 per cent.
Thus, Cambodian banks will need to invest in building or acquiring capabilities for digital customer experience, yet we know that some of these banks may need higher investments to spend capital on these.
High capital expenditure would be especially a challenge for the smaller banks. Luckily, there are alternatives that will help these banks acquire these capabilities without spending large amounts of capital. Two such solutions are.
- Leverage artificial intelligence (AI) to train systems on the optimal level of the digital infrastructure build that will optimise customer experience while ensuring that bank efficiency is not compromised.
- Multiple software-as-a-service alternatives may fit the need to enable these capabilities without a sizable capital expenditure.
The larger banks with operating efficiencies in the mid-20 per cent range would also need to invest in digital journeys, and they would do well to consider the advice above.
Large urban centres in Cambodia have been their growth engines, and rapid provincial growth would require digital capabilities. I have built the case for provincial expansion in my previous article.
About The Author: Dr. Ashish Kakar has over 20 years of financial services experience managing large strategy, business, technology, and transformation regional roles across Asian & European markets. He now leads financial services research for an Asia Pacific financial services global consulting firm with a focus on strategy, risk management, AI, transformation, resiliency, and lending.