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The evolution of the digital dinosaurs

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With new competitors arising daily – from fintechs and neobanks to embedded solutions, it’s getting harder to predict the future of banking. But one thing’s for sure, digital transformation is the key to our financial evolution. Join host Nina Mohanty as she chats with Harry Seip, Partner at McKinsey & Company Bangkok and Abhishek Chakravarty, Mambu APAC Regional Director about a new IDC whitepaper highlighting the benefits of a ‘multicore’ approach for Southeast Asian banks seeking rapid digital transformation.


Harry Seip

Harry Seip

Partner, Bangkok, McKinsey & Company

Harry leads McKinsey’s work on digital and analytics in Thailand. An expert at building core technology platforms and bringing innovative digital experiences to clients, he is trusted by organisations across industries and geographies. Harry has a deep understanding of digital-transformation journeys and has helped leading financial-services, retail, and telecommunications clients on a range of issues related to customer-journey design, core-system replacement, and agile capability building.

Abhishek Chakravarty

Abhishek Chakravarty

Regional Director, APAC Advisory & Strategy, Mambu

Abhishek is a management consultant with experience in transformation programs, digital strategy and product delivery. He is passionate about driving digital transformations in large corporations, helping clients build companies that customers love, and developing digital talent. He previously worked at McKinsey and has worked across multiple industries, including financial services, telecommunications and technology.


Nina [00:00:04] Hello there. Welcome to another episode of Architects of Change brought to You by Mambu, the cloud banking platform, to help you evolve your business. I'm your host, Nina Mohanty, founder of Bloom Money. Today we're discussing next level banking and how we digitally transform legacy core banking technology to become more efficient. This is our first regional episode of the series, and I'm super excited for it because we're travelling to Southeast Asia, where we will be discussing the topic with reference to a new APAC commissioned IDC whitepaper theme; Leveraging Digital Core Banking Systems: Next Level Banking. This new research highlights benefits of a multicore approach for Southeast Asian banks seeking rapid, low risk digital transformation, and throughout the episode we’ll be using this as a basis to explore how we can efficiently move forward whilst limiting risk. I'm delighted to say that joining me today to help explore this topic is Harry Seip, a partner at McKinsey and Co's Bangkok office, who leads the firm's digital and analytics work in Thailand. We're also joined by Abhishek Chakravarty, regional director of Mambu’s Advisory and Strategy Team at APAC. Welcome to you both. Harry, welcome. Let's start by outlining the current digital banking landscape in Southeast Asia. We've got to ask the question: is the region lagging behind other parts of Asia or other regions globally?

Harry [00:01:39] To get right to it, I don't think so at all. I think our Southeast Asia and being part of a bigger Asia is actually at the forefront of many of the digital innovations that are happening across the globe. And I would say that while maybe as a whole industry, you could still find very archaic business models in the banking and maybe very branch oriented set business models. We also have the future of banking right here in our countries near Thailand, Indonesia, Singapore and the other Southeast Asian countries. I can think of things that drive factors are proximity to Asia, and also the innovation of the consumer class here. Because if you look at here in Bangkok, on the PTS the Sky Train, you'll see that everybody has a mobile phone and everybody is playing on it and using it as a digital native.

Nina [00:02:37] Absolutely. I think that's a really interesting point there that you said about kind of having that access to digital right there in our hands. And in some ways, it often feels that Southeast Asia is even, dare I say, leapfrogging the rest of us. Abhi, why is it that the banks that are falling behind in digital transformation feel to be a bit reluctant to change? Is there any benefit right now that they have to sticking with legacy core banking? Or can banks just continue operating with their legacy core? What's going on here?

Abhi [00:03:13] I think we first need to accept that there is a historical challenge here. A large scale technology transformations in the past have been seen as CIO killers, with challenges ranging from difficulty in articulating value to complex system integrator relationships to internal talent issues. So it comes with itself a broad range of issues. I think at some level, all banks are now thinking about how to make change happen. I think the difference lies in the aspiration, as well as the broader four-to-five year  goals that some of these organisations might have. And to the second part of your question. Is there a benefit sticking to legacy core banking technology? I think I'd be the first to admit that there's certainly a value in legacy core banking technology. Significant investments have been made by organisations to set up, run, customise these systems. However, as new technologies are becoming mainstream, cloud is becoming ubiquitous. It is really just a matter of time that every bank, every financial services player will have to think about next generation core or they would risk being overtaken by competitors.

Nina [00:04:23] Now that was interesting that you mention that in terms of appetite and forward thinking. So Harry, you know, there is this perhaps misconception you've already debunked. So are Southeast Asian banks actually more risk averse to digital change than other parts of the world? Or is that actually a fallacy? And I wonder if you can help us out by giving us some examples of the Southeast Asian success stories. What are the banks that are dominating the digital scene and who's doing it? Well, who can we give a gold star to over in South East Asia?

Harry [00:04:59] I think that Banks in Southeast Asia are experimenting a lot. I would not say they are risk adverse. And then in every market, you can find multiple banks that are trying, some of them that are having early traction. I think it's too early to say that there's one single winner or giving out gold stars, but I give the stars for the innovations that I see. If I look only here in Thailand there’s Kasikorn  Bank has been very active in finding out new business models that are digitally enabled by partnering with Grab, which is large riding company here, or LINE, which is our biggest messenger or WeChat equivalent that is very popular amongst the locals. But also, if you look at Indonesia, what's exciting to see is that a lot of incumbent banks like BRI have partnered with Alipay to provide for their acceptance of mobile payments for Chinese tourists. It's a very, I would say, at the avant garde of digital innovation in banking.

Nina [00:06:06] I'm really glad you gave those examples there, Harry, especially about Grab about Alipay I’ll even throw in LINE Pay, for example. There is a lot of contextual bits and pieces within the ecosystem that we often forget about, depending on where in the world we're sitting. And all of this kind of does trickle down to local culture, or maybe perhaps corporate culture. So Abhi within APAC more broadly. But also the Southeast Asian region. Do you think that culture plays a role in the confidence that banks are having in digital transformation or have certain countries been persuaded one way or another due to culture?

Abhi [00:06:49] Culture, I think, continues to play a role in how financial institutions approach digital transformation in different markets in APAC, and Southeast Asia are evolving at different rates. Regional similarities do exist, and Harry talked a little bit about that. But the local nuances are certainly very important right, especially when you think about the broader macro-economic factors. I think what tends to happen is these macro-economic factors tend to almost define which countries are moving a little faster while some I would say are one step behind while some are playing catch up, but at a broad level, I think to answer your question, I don't think there is a fundamental risk averse nature that exists in Southeast Asia that exists in these countries. I think that cultural differences are more attuned to how to approach these transformations. In some countries, you'll see there's a lot of digital speedboats being launched. Vietnam is a great example, but there's a lot of digital speed boats being launched. Some countries tend to take a more traditional rip and replace approach. I can imagine, you know, in Indonesia, for example, or even Singapore, there might be a tendency to kind of think a little bit in that manner. But again, it's hard to generalise. It's really become different banks and kind of, I would always say, the culture of the financial institution more than the culture of the country, that they say they're actually driving these decisions more than which country they belong to.

Nina [00:08:21] Well, I can assure you where I sit in London, we've got a cultural reluctance as well in this part of the world, but thank you for outlining that. And I love that the digital speed boats.

Harry [00:08:33] Maybe to add one thing on what Abhishek is saying, is that you see that every country is different in  Southeast Asia. And then there's less culture. It's also the context of the financial industry. There are some where you have hundreds of banks, literally, and some where the top four are 80 percent of all our banking revenue. And also, the regulator plays a big role in how risk averse or risk forwards banks are.

Nina [00:09:04] Absolutely. So I want to start from the very beginning, and I think we need to lay down some foundations. So let's outline the facts when it comes to digital transformation. What do we actually mean when we talk about digital transformation? And why exactly do banks and customers need it? And I'm going to widen this. I don't want to just talk about retail banking, but perhaps also business banking. Why does it matter? What digital transformation matter in Southeast Asia?

Abhi [00:09:38] Look, every bank is either moving or are beginning to move on digital in a big way, but the questions are on what to do and how to do it. And that, that is really the definition for me on digital transformation. It's really a culmination of actions that banks and financial institutions are doing to make themselves more customer-first. To find ways to use technology to drive top line and bottom-line impact to drive structural cost efficiencies today to set up initiatives which drive value to shareholders and to the consumers of those banks. So when you really talk about digital transformation, then it can feel like it means so many different things. But it really almost boils down to the what and how of how to become more customer centric and how to drive immediate value for my organisation. That is how I would encompass digital transformation.

Nina [00:10:39] Now I'm glad that you said that Abhi about being customer centric because I think I want to zoom in on that. Forgive me, I am a product lover at heart, and so I'm always thinking about the end customer and the jobs to be done. So, Harry, I wonder, can you outline for us what are the benefits for customers? Maybe we'll start there and then we'll think about the banks and what the benefits for the banks are. What are the benefits for customers?

Harry [00:11:07]  I think that, as much benefits for customers as requirements that customers have that banks need to adapt to. Because it is a fact that if you wake up in Thailand, Indonesia, Singapore or Philippines, you are now expected that you can press a button and the car appears. If you're hungry that you go on an app and you’ll be fed. And a lot of services, a lot of entertainment, everything is becoming instant, real time, pay as you go. These innovations that consumer tech companies that are driven companies and hardware and software are driven. So customers want that also from their financial institutions, they don't want to go to branch. They don't want to fill in very long forms with information that they already have. So that's part of the gauntlet being thrown, and for CEOs of banks, this is both an opportunity as well as a trap. And so the trap, of course, is if you don't move, maybe not today because we are still on a regulated industry, but definitely down the road there will be no place or no value for the customer, and they will vote with their feet. But it's also an opportunity, and we published a programme around what are the five imperatives for CEOs of banks that really want to become digital looking at. And number one is really starting with that customer and re-imagining what the value can be, what you can bring, if you were just to imagine what we could do, given that we jump to the digital first. And now it's also a lot about building the engine about how to attract talent, that might go to a Google or a Meta or a raft in there. How do I internalise these kind of rules to live by? Data first, technology as a core or engineering as a core principle instead of in a basement somewhere with IT and then really be more faster and build for speed. That's the fourth thing. And the fifth one, which is that it's not only consumers, it's also how do we create adoption in the enterprise? With our enterprise customers, it's not only the app and mobile consumers that drive towards digital transformation.

Nina [00:13:28] I really like that. You said that customers will vote with their feet. And I think we see that now today more than ever across the world, but definitely in Southeast Asia, where you've got banks that are starting to move forward and you've got these digital upstarts that have come up. So there's more options than ever. So there's options for customers. We've kind of touched on a few these topics already. I'm going to lay them out for you both and then we'll jump into it. The first we touched on was, you know, continue with legacy core. Everyone loves a bit of COBOL. The second could be to replace Legacy Core with digital core. And think of that as a rip and replace replace model, right? Just take it out completely. Check it out and replace it with something new. And then, of course, there's the last option that which is lower risk and this faster multi-core approach where you can maintain your legacy core for the really important functions, you know, the back office situations and slowly replace with digital core over time. So I'm going to go ahead and go straight to you, Harry. You know, of the three options, can you tell us a little bit about how you're thinking about this?

Harry [00:14:45] I see it more as a continuum. So these are three options, there's probably a fourth and fifth option in there. And for me, it would be really coming back to starting; what is the value that they're trying to capture, because rip and replace sounds very sexy or easy and simple in a way. But there are, of course, realities in terms of cost that you've already invested, cost that you have to do to achieve that and the real risks that are there. So if I was a CEO that really wanted to say, I'm an incumbant bank, but I have a 20 year old core and this is the reality of many banks in Southeast Asia. What do I want to achieve there? I want to create value by my existing customers because I feel what they need to have this new experience. So how do I build a new plane while flying the existing plane and then you get more in, I would say, hollowing out the core and trying to replace little bits with more modern pieces, specifically at the front end, trying to replace some of the old, clunky pieces and put them separate so that you can approach them one by one. And I’m making it sound much simpler than it is. But if I say, well, this set of customers they are, for better or worse content with the services we can bring them today because it's a certain segment or a certain expectation or lack of expectation. But I want to be relevant for maybe a younger generation that would never even consider my old bank that it might be better to just start a new company and build from the ground up and let it grow up by itself, which has its own pros and cons. Imagine you have to feed both of these companies.

Nina [00:16:39] Yeah, and that's the latter half that you talked about. I've heard it referred to as kind of a greenfield project. Is that a fair kind of name that we can give it to? Giving it space to kind of grow or spin out on its own? Would you agree with that?

Harry [00:16:56] And green field is a term that I would use as if there was nothing before right - as opposed to brownfield as trying to update  what you have.

Nina [00:17:04] Yes, absolutely. And we've kind of talk through that spectrum. Abhi Do you agree with Harry in terms of that being a spectrum or the different approaches that we can take here?

Harry [00:17:15] Yeah. And I certainly agree that it's important to start with why you want to do something right. So having a very clear strategy in mind as to where you want to be and then using that to then it just sort of decide what you want to do. And also, I think, agree with Harry when he says that it's a spectrum and you don't necessarily have to pick one option, especially if you're a large enough bank, you could possibly go down both option one and option two, in a way you could say I do want to launch a greenfield venture where I can try a completely new digital core, but I also want to incrementally, over time, take a more steady approach to changing my existing core. The one thing that I do want to see, Nina, is that I actually feel that continuing with the legacy core is a stopgap measure, and it's probably the least effective option, in my opinion, because more and more consumers today, even some of those consumers that you've had for a while are increasingly expecting speed, convenience, customisation, seamless integration with other financial applications that they use, even the ones where they’ve probably been  with the same bank for 40 years. I think the expectation has risen over the last five years. What you expect from a bank has risen. And while it's not impossible, I think it is certainly challenging for banks to continue operating on a legacy core without sacrificing some parts, right? Either sacrificing the customer experience or potentially not sacrificing customer experience but introducing a high amount of cost to actually continue operating on that core. You mentioned COBOL making one change on a 25 year old core banking system. That could maybe take months, and the testing could take months. So while I think it is not something that you almost need to say, no, I need to change today, but I think it is important to have a roadmap for change, and that roadmap could be five years, right? That's fine. But as long as there is a roadmap and as long as you have a clear plan on how you're going to get rid of your technically bad debt, the migration might take a slow and steady approach that's perfectly fine. And that, in a way is a little bit the multi-core approach, right? At least in my opinion, that's one of the ways that you could approach that problem.

Nina [00:19:39] And for context, you know, when we talk about COBOL and core infrastructure, we're talking about, you know, having to pull people out of retirement to have to go be able to change those, those core systems. So I wanted to dig into what you said just then about multicore systems, and I think it's the perfect time to just quickly discuss the headlines from that APAC commissioned IDC white paper, and it's called Leveraging Digital Core Banking Systems: Next-Level Banking. So do you feel, Harry, that this ties in with the general outlook that you're seeing across APAC more broadly?

Harry [00:20:19] I think this debate what to do with our current legacy and what to do with the rising expectations and the opportunities out there is a debate I have weekly in boardrooms, with CTO’s and CEO’s. My view on it is that the white paper lays out quite well all the different options to choose from and what you need to lay over that, and Abhishek was also referring to that is the why, where the value’s coming back. And then you would see that a really a multi core setup is temporary at best. And so it is a stopgap and you create technical debt. And as long as you're very clear about that and can give it a value. And ultimately the kind of profit and loss assessment that can be a very good reason to keep with some legacy and that might not be the nicest answer to consumers at the time, but it might be the best answer from a total system picture. I think if you really are wanting to be a multi core bank for a long time and then either you have multiple business models and it's more like a holding or you're not being very clear around what technical bank you have and what tough choices you need to make. And that's a dangerous position for me.

Nina [00:21:52] I love that. So Harry is really challenging us all right now to look at ourselves in the mirror and ask ourselves, What exactly are we trying to do here? And Abhi, you've talked about the why often, so, you know, pulling from the paper. Would you agree with Harry as well that we've kind of presented everyone with a few a la carte options for us to think through that you just touched on any other comments there?

Abhi [00:22:19] Yeah, I actually agree with Harry that it's very easy to do the multi-core option badly. In fact, it's much harder to do it right than to do it badly. And what I mean by that is you could say, Oh, let me take the risk averse option and I’ll do both, and you could you could almost put yourself in the position of having multiple business models of not knowing where you are to invest the time, the effort, you know, senior leadership time. Is it to kind of start moving things over to this new code or to focus on, you know, reducing debt in your existing core, you could actually be in the whole gambit of issues. So what I always suggest CIOs, CTOs CEOs to do is one, you need to have a good reason to do multi-core. Two, you have to have a very good plan to do it well, and three you need to think about the user experience that you are providing to our customers and how can you actually in some ways use them? I think our approach to move your customers along the customer experience value chain. Right? Maybe I set an example, right? So one example of thinking about multi-core could be; once your new code is set up, all the new products that you launch are all digital first products that you launch them on the new digital core and then you almost find a way to work with your customers to say that you can move some of the old legacy products that you have onto the new core by kind of switching over to the new digital products. And yes, that requires customer education, that requires you to spend time with customers, but it requires you to be creative. This is a great design problem to solve, right? I can imagine design leaders in some of these financial institutions thinking this is a tricky but interesting problem. So, finding ways to do this and it's critical that you that you have the; Why am I doing this until it's ready? Because it is a question that executives are asked, and they will continue to be asked if they go down the approach of multi-core. It comes with its own set of challenges. Nothing is ever easy. I have had to move some of my customers and it is challenging, that is an understatement, right? And it does require again extreme planning. It does require thinking about multiple failsafe options.

Nina [00:24:43] Yes, I think Big Bank sounds a lot better than in actual practise.

Abhi [00:24:50] Exactly. And sometimes it can take you months to get it right. In fact, years, if you want to get it right, sometimes it takes longer to migrate. And by the time you finish the migration, what you've migrated on is very out of date. So it is it is really important to think about how you will do it. But it all starts with just like Harry said, it all starts with the why. What are you trying to achieve? Why do you want to do something and then use that as the basis to make these decisions.

Nina [00:25:16] When I first moved to the U.K., I learnt a delightful phrase where people often say all the gear and no idea, and it works better if you've got a British accent. But I think that is a useful phrase in this particular instance, because what we're talking about is the context of this digital transformation, right? You can have all the gear, you can have the top notch, top of the line, everything. But the context really, really matters. The why? The reason that you're doing it. Why are you doing it for the business? Why are you doing it for your customers? Obviously matters just as much. So just to close out, Harry, I wanted to ask you before we go, what are your expectations for digital transformation across Southeast Asia for this year in 2022? And what are the trends that you're looking forward to watching?

Harry [00:26:13] It's a very exciting time, and that's where, you know, hopefully rounding out a corner that has been very tough for our lives and livelihoods. Everybody is excited to how we build bank better. I think number one, and that is coming back and my message of starting with the why and where the value is, a lot of the value is around ecosystems. So how do you reimagine what a bank or a financial services company can be, not only within the walls or within your network of branches, but really across our company boundaries, and then how do you collaborate and how do you create value chains and deliver something to their customer and ecosystem manner that continues to be the driving force of financial innovation and digital transformation in Thailand and Indonesia and Singapore, and in the whole of Southeast Asia. And secondly, of course, all banks need to look out to where can we innovate, right? And I think traditional retail or consumer finance has been where a lot of the action has been payments, in Asia. I’m excited to see maybe not in 2022, but in the next year wealth management coming online, if you will, in digital SME. I think there are a lot of opportunities there and even in CIB in corporate banking. And then the third trend that I see is under the hood, the technology, the multicore aspects that we were discussing, and I see really frontrunner banks that have built this kind of data technology first mindset and talent base, frankly, being able to pull off much more impressive transformation by looking, for instance, how totput data separate from even this whole notion of is there core or not? Some banks are even you know kind of going against, should we have a core? Maybe it's not about the core. It's about a collection of microservices. Wow. Or how Amazon would work to bypass it. And I think there's a lot of interesting elements have been there.

NIna [00:28:39] wow, we've got a fourth option now. Core-less oh my goodness, Abhi, lastly but not least, what are you looking forward to when we think about digital transformation for the year ahead? What is exciting you? What are the trends that you are watching and what should our listeners be looking out for?

Abhi [00:28:58] You know, I think broadly, I see three things which is  going to hit the banks hard in 2022 and really sort of what I call a hot topic on the minds of executive teams in banks. So first one isy what Harry actually mentioned, first one which is transforming the backbone of the banks to technology that is accelerating cloud banking, right, moving to a public cloud? How do we think about operating model transformation using AI across the value chain? So everything to do with technology to really transform the backbone of these banks? Number two is innovation. I won’t spend a lot of time on this, but this could mean anything from embedded finance to SME lending to digitisation of questions of financial management to how individual consumers like you and me think about investments. So all of these are really around innovation and products and services. And I think the third one is really just preparing for disruptions, right? This could be like this whole ESG challenge, which is really coming up right, like everybody is talking about. It is an extremely important topic.

Nina [00:30:10] Brilliant. While I have learnt so much from both of you. Thank you both so much for joining us today, and I'm so thrilled to be able to have virtually joined you in Southeast Asia. Next time, we'll have to come to Bangkok or Singapore and visit you in person to further discuss. Thank you for joining us today on Architects of Change.

Abhi [00:30:34] Thank you. It is lovely to be here.

Harry [00:30:35] Thank you very much. And that was a great pleasure.

Nina  [00:30:37] My mind is absolutely racing after that conversation with Harry and Abi, and I'm glad that we got to touch on legacy core banking and talk about the fact that it's not something that needs to necessarily happen overnight. You know, we discussed the different options that banks have on the table, and it is a bit like having an ala carte menu. There's different options that are sticking to legacy core. There is rip and replace models and of course, the very, very Alamodome style of multicore approach. And I think the most important thing that we've learnt is that it is a spectrum and you can choose in between and you can mix and match and you can really make something wonderful off the back of that. We've heard from our conversation that there is evidence that multi-core approaches can actually work. So if you're a legacy core bank that's listening in and you're contemplating evolving digitally, we hope this podcast episode has been useful. If you'd like to read the APAC commissioned IDC whitepaper Leveraging Digital Core Banking Systems: Next-Level Banking , please visit . I want to thank both of my guests today Harry Seip and Abhi Chakravarty. If you wish to follow more of Harry's work, please head to and for more information on Abhi's work with Mambu and with the wider APAC region, please connect with him by going to . For more Mambu podcasts, head to wherever you get your podcasts. I've been your host, Nina Mohanty. See you next time.

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