Innovative Banking Challenges in ASEAN-5 Countries and Their Effects on Cost-Income Reduction
Main Article Content
Abstract
Marx-Schumpeter-Christensen parallelism posits that the need for prudent innovation management poses business challenges. By contrast, the entrepreneurship cycle holds that disruptive innovation does not pose great challenges. The main issue addressed in this study was what and how innovation challenges were evaluated in order to achieve better banking performance. To answer these questions, secondary data, non-parametric statistics, and the Delphi method of deriving meaning from interviews were utilized. The largest listed banks were surveyed in five Association of Southeast Asian Nations countries, or the ASEAN-5, which includes Indonesia, Malaysia, Philippines, Singapore, and Thailand. The presence of ASEAN financial technology companies, lack of manpower, unbanked populations, and lack of self-efficacy in digital technology challenged development among ASEAN-5 innovative banking institutions. Other findings indicated an association between the ASEAN-5 largest listed banks’ financial performance indicators and cost-income ratio reduction, and revealed that Singapore and Indonesia were the leading regional banking innovators. Recommendations made were that ASEAN banks should continue to pursue the formulation and implementation of sustainable innovation practices to combat ongoing disruptive innovation posed by financial technology companies. They might also be actively engaged in the ASEAN Banking Integration Framework in order to optimize innovative banking.
Article Details
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
Copyright: Asia-Pacific International University reserve exclusive rights to publish, reproduce and distribute the manuscript and all contents therein.
References
Achimba, C., Ongonga, J. O., Nyarondia, S. M., Amos, A. L., & Okwara, M. (2014). Innovation in banking industry: Achieving customer satisfaction. Open Journal of Business Management, 2(4), 261–274. https://doi.org/10. 4236/ojbm.2014.24031
Alt, R., Beck, R., & Smits, M. (2018). Fintech and transformation of the financial industry. Electronic Markets, 28(4), 1–9. https://www.researchgate.net/publication/326991488_FinTech
Akhisar, I., Tunay, K. B., & Tunay, N. (2015). The effects of innovations on bank performance: The case of electronic banking services. Procedia – Social and Behavioral Sciences, 195,369–375. https://doi.org/10.1016/j.sbspro. 2015.06.336
Alm, R., & Cox, W. M. (1999). Creative destruction. The Library of Economics and Liberty. https://www.econlib.org/ library/Enc/CreativeDestruction.html.
Ameme, B., & Wireko, J. (2016). Impact of technological innovations on customers in the banking industry in developing countries. The Business and Management Review, 7(3), 388–397.
Arnaboldi, F., Rossignoli B. (2015) Financial innovation in banking. In E. Beccalli & F. Poli (Eds.), Bank risk, governance and regulation (pp. 127–162). Palgrave Macmillan. https://doi.org/10.1057/9781137530943_5
Arnold, M. (2018, November 12). Five ways banks are responding to FinTech threat. Financial Times. https://www.ft.com/content/d0ab6b84-c183-11e8-84cd-9e601db069b8
ASEAN FinTech Census. (2018). Building a better working world. Ernst & Young. https://www.ey.com/en_sg/ financial-services/asean-fintech-census-2018
Bankers Association of the Philippines. (2017, September 8). Banking industry spurs discussions on AFIN industry sandbox advocacy. https://bap.org.ph/advocacy/banking-industry-spurs-discussions-afin-industry-sandbox/
Beliunas, L. (2017, June 28). The GAFA approach to banking. Part III. International School Technology-LinkedIn. https://www.linkedin.com/pulse/gafa-approach-banking-part-iii-linas-beli%C5%ABnas
Cajayon, A. N. (2019, May 6). Banks and FinTech: The next step. Business World. https://www.bworldonline.com/ banks-and-fintech-the-next-step/
Cekindo. (2020). Important points that you need to know about FinTech in Indonesia. Cekindo’s open-source publication. https://www.cekindo.com/blog/fintech-indonesia
Choudhury, S. R. (2019, July 3). Virtual banks could be bad news for small lenders in Singapore, Moody’s says. CNBC Watchlist. https://www.cnbc.com/2019/07/03/virtual-banks-will-be-bad-news-for-small-lenders-in-singapore-moodys.html#:~:text=Banks-,Virtual%20banks%20could%20be%20bad%20news,lenders%20in%20Singapore% 2C%20Moody%27s%20says&text=Singapore%27s%20decision%20to%20issue%20new,in%20a%20note%20on%20Tuesday.
Davis, F. D. (1989). Perceived usefulness, perceived ease of use, and user acceptance of information technology. MIS Quarterly, 13(3), 319–340. https://doi.org/10.2307/249008
De Jesus, F., & Torres, E. (2017). Analysis of the ASEAN Banking Integration Framework: The Philippines as a looking glass for consumer preference. Journal of Global Entrepreneurship Research, 7(24). https://doi.org/10.1186/ s40497-017-0082-2
Drucker, P. F. (1985). Innovation and entrepreneurship: Practice and principles. https://papers.ssrn.com/sol3/ papers.cfm?abstract_id=1496169
Elliott, J. E. (1980). Marx and schumpeter on capitalism’s creative destruction: A comparative restatement. The Quarterly Journal of Economics, 95(1), 45–68. https://doi.org/10.2307/1885348
Enders, A., König, A., Jelassi, T., & Hungenberg, H. (2006). The relativity of disruption: E-Banking as a sustaining innovation in the banking industry. Journal of Electronic Research. http://www.jecr.org/node/180
Festre, A., & Nasica, E. (2009). Schumpeter on money, banking and finance: An institutionalist perspective. European Journal of the History of Economic Thought, 16(2), 325–356. https://doi.org/10.1080/09672560902 891101
FinTech. (2017). Unleashing the potential of FinTech in banking. Ernst & Young. https://assets.ey.com/content/dam/ey-sites/ey-com/en_gl/topics/banking-and-capital-markets/ey-unleashing-the-potential-of-fin-tech-in-banking.pdf
Gada, D. (2018, March 5). Five ways FinTech is disrupting financial services industry. Finextra. https://www.finextra. com/blogposting/15105/five-ways-fintech-is-disrupting
Global Findex–World Bank. (2018). The unbanked. Open source publication. https://globalfindex.worldbank.org/ sites/globalfindex/files/chapters/2017%20Findex%20full%20report_chapter2.pdf
Hanusch, H., & Pyka, A. (2006). Manifesto for comprehensive Neo-Schumpeterian economics. Volkswirtschaftliche Diskussionsreihe, No. 289. University of Augsburg, Institute for Economics. https://www.econstor.eu/ bitstream/10419/22812/1/289.pdf
Khan, L. M. (2015). Schumpeter, entrepreneurship, and creative destruction. https://papers.ssrn.com/sol3/papers. cfm?abstract_id=2558433
Kjellman, A., Björkroth, T., Kangas, T., Tainio, R., & Westerholm, T. (2019). Disruptive innovations and challenges for banking. International Journal of Financial Innovation in Banking, 3(2), 232–249. https://doi:10.1504/ IJFIB.2019. 10023963
Koffi, H. W. S. (2016). The FinTech revolution: An opportunity for the West African financial sector. Open Journal of Applied Sciences, 6(11). https://doi.org/10.4236/ojapps.2016.611068
KPMG. (2018). Cross-bordered payment interoperability network. https://assets.kpmg/content/dam/kpmg/sg/ pdf/2018/11/xbpin-feasibility-study.pdf
Kurup, N. (2018, May 30). Digital disruption: How FinTech pushing banks to change. Finextra. https://www.finextra. com/blogposting/15407/digital-disruption-how-fintech
Landstrom, H. (2005). Pioneers in entrepreneurship and business research. Springer. https://www.springer.com/ gp/book/9780387236018
Laton, M. Z., Yunus, H., & Abdul, R. M. A. (2015). Innovation and organizational cost saving: A case from Malaysia innovation projects. Mediterranean Journal of Social Sciences, 6(5), 499. https://doi.org/10.5901/mjss.2015. v6n5s2p495
Laurenco, I., Branco, M. C., Curto, J. D., & Eugénio, T. (2012). How does the market value corporate sustainability performance? Journal of Business Ethics, 108(4), 417–428.
Marous, J. (2019, November). Gaining a competitive edge during digital disruption. Digital Banking Report, Special Edition. https://www.opentext.com/file_source/OpenText/en_US/PDF/opentext-digital-banking-report-jm.pdf
McCraw, T. K. (2007). Prophet of innovation. Harvard University Press. http://www.hup.harvard.edu/catalogphp? isbn=9780674034815
Mittal, V. (2019, January). ASEAN FinTech census 2018. Ernst & Young. https://doi: 10.13140/RG.2.2.27523.96804
Morgan, B. (2018, October 11). 10 examples of customer experience innovation in banking. Forbes. https://www.forbes.com/sites/blakemorgan/2018/10/11/10-examples-of-customer-experience-innovation-in-banking/?sh=61654639729d
Musara, M., & Fatoki, O. (2010). Has technological innovations resulted in increased efficiency and cost savings for banks’ customers? African Journal of Business Management, 4(9), 1813–1821. https://academicjournals.org/ journal/AJBM/article-full-text-pdf/C5541BC31993
Nguyen, T. L. (2018). Diversification and bank efficiency in six ASEAN countries. Global Finance Journal, 37, 57–78. https://doi.org/10.1016/j.gfj.2018.04.004
Oh, H. Y. (2016). Innovativeness or confidence? The effects of consumers’ innovativeness and self-efficacy on the acceptance and diffusion of innovative technologies. International Journal of Software Engineering and Its Application, 10(8), 117–126.
Schumpeter, J. A. (2003). Capitalism, socialism and democracy. Taylor & Francis e-Library.
Syahullah, M. (2018). ASEAN banking efficiency review facing financial services liberalization: Indonesian perspective. ADB Policy Review, Asian Economic and Social Society Journal, 6(2), 88–99.
Van de Werff, A. D., Hogarth, J. M., & Peach, N. D. (2013). A cross-country analysis of financial inclusion within the OECD. Consumer Interests Annual, 59(1), 1–12. https://digitalcommons.georgefox.edu/cgi/viewcontent.cgi? article=1003&context=gfsb
Weiers, R.M. (2014). Introduction to business statistics. Cengage Learning Asia.
Wilson, J. D. (2017, April). Is FinTech a threat or an opportunity? Mercer Capital’s Bank Watch. https://mercercapital.com/article/is-fintech-a-threat-or-an-opportunity/
Winarno, W., Mas’ud, I., & Palupi, T. (2021). Perceived enjoyment, application self-efficacy, and subjective norms as determinants of behavior intention in using OVO application. The Journal of Asian Finance, Economic and Business, 8 (2), 1189–1200. https://www.koreascience.or.kr/article/JAKO202104142283653.view?orgId=kodisa