Interviewed By Foo Boon Ping
In this Digital Reinvention Dialogue, the head of digital transformation at Krungthai Bank, Arapat Sangkharat, speaks about the importance of taking a holistic approach to change, prioritising people change as core of the effort and leveraging technology to impact business and customer outcomes
Krungthai Bank’s head of digital transformation, Arapat Sangkharat, has a long career of helping organisations reinvent themselves before he found himself in the current role of leading the digital change efforts at Thailand’s largest state-owned bank.
He had worked extensively in banking and management consulting in areas such as strategy and transformation, process re-engineering, risk management, merger, integration and divestiture, business and organization redesign, and technology implementation.
His 19-year career was spent mostly outside Thailand where he has worked in five countries and served over 20 financial services institutions across Asia and the United States.
Sangkharat returned to Thailand in 2014 to a short stint to lead the local financial services industry practice at Deloitte Consulting before joining Siam Commercial Bank to head it retail segment strategy and subsequently to Krungthai Bank which he describes as a unique bank that presented him the opportunity to serve the country and people.
He believes that banks should not be overly fixated on technologies to transform the organisations although they are critical tools that play an important role to enable change. It is people who ultimately bring about tangible changes and so it important to take a holistic approach.
He also sees fintechs as an immense opportunity for banks to strengthen themselves, to dramatically enhance customer experience and lower costs.
In 2019, Krungthai Bank rolled out an ambitious plan to roll out its digital banking platform, setting aside a THB 19 billion ($603.75 million) IT budget, that will help it acquire new customers and lower its cost to income ratio over three years. It had earlier launched a new version of the mobile banking app, Krungthai Next, which had increased user base by more than 2-fold to 10 million by the end of the year and maintained an active user ratio of at least 80%.
The following is the edited transcript of the interview
Foo Boon Ping (FBP): How would you define reinvention and what do you hope to achieve with Krungthai Bank’s digital transformation?
Arapat Sangkharat (AS): A lot of the work I did in the past, especially int the US, was around fixing organisations, from redefining a strategy to reengineering a process, consolidating operations, doing mergers and acquisitions, they are all part of transformation.
Since I moved back to Thailand five years ago, transformation has been the main focus. I did some of that with Siam Commercial Bank before I came to Krungthai Bank.
I moved to Krungthai Bank, partly because it is unique and a government bank. We have the mandate for Thailand, but we still have to make money, be a profitable company. I wanted to do something to effectively influence this country and help the people.
There are multiple people, because it is too big of a mandate, who are handling digital transformation. I focus on one part of it, internal, customer facing and mostly non-government related work. But I have visibility of what is going on across.
Attracting talents and transforming the way people work
FBP: What is the impact of COVID-19 on digital transformation?
AS: With COVID-19, we have tons of work for the government, the relief programme. Previously, it is depositing money into savings accounts or sending cheques. But these days, it is distributing money through online applications.
We also have to transform the more traditional side of banking, the lending side. And that comes with revamping new channels, a mobile channel for retail customers, to corporate, SME customers through internet banking.
In addition, our internal operations have to be upgraded. These days with all these fintechs and consortium partnerships, it gives you a different approach on how to fix “internal” internally.
We set aside THB19 billion ($603.75 million). The part that is concerning is you still have the same number of people to support BAU (business as usual) work. For transformation, there is a cap to how much capacity we can do. And one of the things that most banks may not have paid enough attention to is attracting talent, different types of talent to do digital transformation. Even if you attract 200 to 300 people to build a new team, transformation still requires interfacing with the existing BAUs. And it requires influencing existing people to move along, you cannot move by yourself.
I have said before COVID-19, if you want to transform an organisation, you have to transform the way people in an organisation work. It is getting to the basics, how to work in a meeting, how to work remotely?
Most banks and organisation have not changed the way they get things done internally. COVID, I believe may have provided a catalyst for organisations to wake up and say: “You know what, we don't need 20 people in the meeting room sitting around.”
It is initiating us to work more efficiently and to focus more on the way we work. And the most important of all, it is pushing a lot of the decision making down to a lower level because you have to, you can't do it all in the steering committee meeting.
Fintechs are made to be acquired, to make banks stronger and more customer-centric
FBP: How are the entry of new digital players and introduction of digital and open banking regulations driving transformation?
AS: A lot of the transformation in the last few years have been initiated through fear. That is the wrong way to approach it. All these fintechs and startups present an opportunity. I don't think banks need to be afraid of some of those coming over just because they have a different cost or business model. I draw upon what I had seen in the US. The behemoth players, Goldman Sachs, Citigroup, JP Morgan, are buying up all these fintechs to make themselves stronger. Fintechs don't have the money, they could keep raising money, but in reality, they are made to be acquired.
I look at them as huge opportunities to make banks stronger. And having more competition is good because it is waking up banking to make sure we are more customer centric.
In the last several years I've seen among central banks and Bank of Thailand, the push to be more digital than even banks themselves. They are preparing for digital banking licences. The people there are really committed to transforming the banking landscape. The central banks will be a great advocate.
FBP: Talk about your priorities, for example, transforming the branch, using technology for collection and reducing nonperforming loan (NPL). How do you change the core, even as you invest in the future?
AS: There are too many priorities and it is probably the same with any other bank. The key is we cannot spread ourselves too thin. You cannot win everything. Regardless of how many consultants and new people, talents you hire, we are still dependent on the core people in technology and operations, who to an extent constrain how we move forward. There needs to be more focus. We talk about being agile but it does not help if you have too many things on your plate.
I did work to transform the branch network. It's an opportunity to reimagine how to make the branch more cost effective, instead of being a huge cost centre, to be a revenue centre. There is potential to save billions of baht per year just by doing some simple things.
With COVID, most of the corporate sector are in a lot of pain. It is not hard to imagine that we are going to have a huge tidal wave of NPLs coming. We have to get ahead of that curve. Some of that priorities should be shifted towards preparing for that but it doesn't mean that it is happening, there are too many priorities.
FBP: What is your vision for Krungthai Bank as you reinvent it?
AS: My focus now is to help a very specific part of the business, like global transaction services that touch the corporate and small medium enterprise (SME) segments through a complete redesign of our internet banking. For example, being able to do trade finance and FX online and improving our inward outward remittance through partnership with fintechs. To make sure that instead of taking two days that we take hours or within one day, and at a cheaper rate.
Trade finance, lending, digital supply chain, bringing that to the forefront. There is an overall strategy of how we're connecting the dots. It is really one piece of trying to win in the corporate and SME segment, increasing loan volume, managing NPLs, getting more fee revenue, using technology to make it more efficient and delivering a better customer experience for our clients.
FBP: What are your thoughts on an open architecture cloud-based technology platform?
AS: My view on open architecture, application programming interface (API), blockchain, and other technology buzzwords, is they are tools of the future to improve how we market, sell and service customers and clients. And they are tools I want to use. For instance, we talked about trade financing, it is a very document driven business with so many players involved, from the freight forwarder to shipper to the corresponding banks. It is a huge mess with hundreds, thousands of bunches of paper.
The solution is to build a consortium with blockchain to make sure that the digital ledger has the single version of truth. I do not focus on the technology part. They are all needed but on how do you leverage it. For example, artificial intelligence (AI) can be applied, it is an application tool, and most people do not have that same perception or understanding of what AI is.
Robotic process automation (RPA), machine learning and AI are different stages of technology advancement. I make sure that on the business side, can we use them to generate more revenue? Can we lower costs? Can we keep our clients happier through better experience?
FBP: How much of the bank is digital today, how much of the processing is automated?
For most banks, not just Krungthai Bank, it is not enough. When we compare where banks are relative to the new players, we are not anywhere near where we should be. You could walk into a branch, they are still very paper based. Most people want to go paperless, it is just one of the benefits of digitisation. But that should not be the driving factor in digitising. I was focusing on reimagining what the branch is supposed to be. Before, it was just a transaction centre, the question is: “Should we even be doing some of those transactions, what do we want of the branch of the future? Do we need that many?”
Many tend to either forget or need to be reminded that digital transformation means it will require technology to accomplish your business goals. But you will need to change the organisation structure, processes, policies, too.
Transformation in itself is holistic and the biggest component many firms tend to forget is the change in people. People is always the key that makes or breaks a lot of the transformation effort.
FBP: Data capability and infrastructure is a key part of being digital, what are you doing on that front?
Krungthai Bank like any bank in Thailand is pushing to build the big data capability with a data lake, putting all the data in one place, cleansing, extracting and using it. This is what other banks such as Siam Commercial Bank have been doing in the last few years. We are trying very hard to catch up.
The key is if you have a data lake, how do you use the data? Even without data lake, we have tons of data. The question is you have data before and you did not use it. And now you're going to put all data together, if you don't know how to use it again, then what's the point?
It is not going to transform the data landscape. In a real transformation, you would have to make data available to anyone in the organisation, at their fingertips without having to go to the data warehouse, without having to run programs to get the data, that's why you have Tableau pulling data. It's also about being sure that data is turned to information, information to knowledge. In many organisations those links are not quite there yet.
The board and senior management understand the importance of it. They need to rationalise and focus more, otherwise we are spreading ourselves too thin.
FBP: And what drives you? What performance metrics are most important to you in terms of informing you where your transformation initiatives are achieving?
AS: My unit is project based. We do not own the profit and loss (P&L) or segments. Our job is to help different departments, segments, units transform their business. When we initiate a project, our KPIs will be based on that project goal. If that project goal is to build a new platform, revamp internet banking, then one of the KPIs would definitely have to be increase in customer acquisition, increase in transaction traffic, increase in the services being used. It depends on the project itself.
The most important KPI for me on a personal level is the pride we take in what we do. And when we get things done, we see real change happen very visibly. That is really how we measure our success, at least within the team. We do something great and it comes out. We are very happy because if we do a great job it will meet all the financial metrics and what have you.
Compared to where it was a few years, we had a retail mobile app that had 3 million customers, but most of them were not active. The new one is already approaching 10 million users. That team did a very good job of not just creating a new app, but acquiring more customers who are active.
If you were to go to a low counter, it used to take literally 20 - 25 minutes or more to open a savings account, it's a pain. We designed and launched a new onboarding app that can essentially do it in seven minutes. And it can be done remotely, so we can take this app somewhere upcountry and open accounts there in seven minutes with no paper. Those are examples, they are not just improving customer service, making us more efficient, but also lowering a lot of costs.
FBP: With reinvention comes risk. From your experience throughout your career, how have they changed you, and the institutions that you have led, what's one professional risk you're proud of taking? And how are you teaching the people in your bank about taking risk and failure?
AS: Because we're doing something new. The biggest part is not about changing technology, it is changing people. So, transformation efforts often fail. Success is hard to achieve. That in itself is a huge risk. When I was in consulting for over a decade, it was project based but the scope for each project was narrower. It is not a complete end-to-end transformation, which means that if you work within scope, it is most likely to be successful.
When you are part of the organisation, it is a lot harder but there is a huge upside that you are going to be there from beginning to end. But on the risk side, it is hard to do. It is a lot more headache to try to transform from inside. But I do think there is a huge upside on a personal level and a professional level.
We execute, conceptualise, design and work with technology development and with the business unit to launch and make sure we achieve our KPI, almost like a business owner. You are involved with everything to make sure at the end of the day you make more money, or at least you are keeping customers happy.
Turning skeptics into advocates
FBP: What are some of your proudest achievements?
AS: I have a pretty small team of a little over 20. Part of that is because it's hard for me to find people who have the same DNA, mindset and toughness.
I really liked this quote of Steve Jobs: “A small team of A players can run circles around a big team of B and C players”. When I hired people and they were concerned about how do we transform with such a small team in a bank with 25,000 people. And I gave that quote and explained that our job here is not to act like we are smarter than the rest of the organisation, that we are more innovative.
Part of transformation is about getting the rest of organisation to see what you see. And it has moved a whole organisation forward, it's a true partnership. And we have to recognise that the organisation has been around and successful for decades because it is doing something right.
The biggest accomplishment with 20 plus people is we have gotten so much more done at significantly smaller budgets. More importantly, we won over many people who thought that transformation cannot be done.
We can raise the bar in the organisation higher. We started getting and building a lot of key supporters. And that's the true KPI, when the skeptics convert into advocates, that we are doing a pretty good job.
FBP: Finally, what personal advice do you have for people who are getting into this transformation business?
AS: Don't fall for all the buzzwords. In order to be successful, you have to really love what you do. And it's not about jumping in because it is a cool thing. It is not easy work. We enjoy not just seeing change but doing something that is truly impactful on a companywide level.
And it is not just a think tank to throw ideas at other people and point fingers, watch management. It is a lot of hands on work in the frontline and late nights. You are going to get a lot of pushbacks and resistance. That's 50% of the work. You have to take some of that pain but that's endurable.
That journey doesn't end. Every company has been transforming since the first day. It is going to keep going, it doesn't stop.
FBP: Thank you so much for speaking with us.
June 30, 2020
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