Kopi Time E150 - Piyush Gupta on the Present and Future of Banking
Mar 26, 2025
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Piyush Gupta, the outgoing CEO of DBS Bank Ltd., delves into the evolving landscape of banking. He discusses how banks have adapted since the 2008 crisis, emphasizing their digital transformation and challenges in risk management. The conversation highlights the competition between traditional and digital banks, and the complexities of digital assets like CBDCs. Gupta also addresses the crucial role of banks in the green transition and AI's potential, expressing optimism about humanity's ability to adapt through transformations.
The banking sector has evolved significantly since the 2008 crisis, with enhanced capital safety but slow technological integration hampering progress.
Regulatory relationships differ globally, with Asian regulators fostering constructive dialogue, unlike the more skeptical approach observed in the West.
The advent of AI and large language models promises to transform banking operations, necessitating a delicate balance between innovation and ethical considerations.
Deep dives
Evolution of Banking Since the Financial Crisis
The banking sector has transformed significantly since the 2008-09 financial crisis, with major global banks now being more capitalized and adopting digital technologies. However, despite these advancements, the integration of liquidity rules has been sluggish, leaving a sense of uncertainty in the system. While the increase in capital has enhanced safety measures, many banks are still grappling with the remnants of the crisis and inefficiencies that linger. Although digitalization has been embraced, many banks lag in fully upgrading their technological infrastructure, especially in areas like microservices and cloud-native technology.
The Banking Industry's Image Post-Crisis
The perception of banks as the villains during the 2008-09 financial crisis stemmed from self-inflicted damage through excessive compensation and a focus on self-serving practices rather than contributing positively to the economy. In contrast, banks in Asia maintained a more constructive role during financial challenges; this difference in image has influenced regulatory scrutiny and public sentiment. The aftermath revealed a need for banks to reconnect with their fundamental purpose: serving the real economy and individuals effectively. Although there have been improvements in bank performance over recent years, the historical narrative of distrust remains, impacting regulatory dialogues in different regions.
Technology and Banking the Unbanked
Despite improvements in data analytics and credit research, the banking sector has struggled to extend its services to unbanked populations, allowing non-bank finance companies to fill this gap. While many banks possess advanced systems for data utilization, they have not capitalized on these capabilities to expand their lending to underserved sectors effectively. Some regions, like India and Indonesia, showcase banks that have made significant strides in reaching the unbanked but overall progress has been inconsistent globally. The future of banking will hinge on how institutions leverage data and technology, regardless of whether they are traditional banks or fintech companies, to enhance credit access.
Regulatory Dynamics and Risk Management
The relationship between regulators and banks varies significantly across regions, with Asian regulators exhibiting a more constructive dialogue compared to their Western counterparts, which often harbor suspicion. Although the Basel framework has improved the safety and management of larger banks, smaller banks involved in the regional crises were not always subject to these regulations, highlighting potential vulnerabilities. Despite challenges in maintaining effective communication, the evolving landscape demands closer collaboration between regulators and the banking sector to innovate responsibly while ensuring consumer safety. Risk management remains a prominent concern as financial intermediation inherently carries risks that can manifest in various ways across the financial ecosystem.
Impact of Artificial Intelligence on Banking
The rise of artificial intelligence and large language models is set to revolutionize banking, automating tasks typically performed by white-collar workers and enhancing customer service through predictive analytics. These technologies enable applications that can anticipate customer needs, improve operational efficiency, and personalize user interactions significantly. However, as banks navigate these technological transformations, they confront ethical and risk considerations, including the implications of enhanced automation on employment dynamics. Ensuring the responsible use of AI while balancing innovation and customer trust will be crucial as the sector embraces these fundamental changes in the coming years.
Kopi Time hits 5 years and 150 episodes! We celebrate the milestone with Piyush Gupta, outgoing CEO of DBS Bank Ltd. Piyush brings his remarkable intellectual breadth in this conversation, in which we touch upon various aspects of the present and future of banking. We begin by discussing how banks in Asia and the West have evolved since the 2008/09 global financial crisis, and their track record in embracing digital banking, financial inclusion, risk management, and relationship with regulators. Piyush then weighs in on conventional banks versus pure-play digital banks. The conversation moves on to the digital asset ecosystem and what that means for both banks and central banks going forward. We also talk about cyber security and banks’ role in green transition. We conclude with Piyush’s take on the promise and challenge of AI, particularly LLMs. What makes him hopeful? It’s the capacity of humanity to absorb all sorts of transformations and cataclysms, and yet move forward. This is not goodbye; we will have Piyush back.
