The 42-storey Thai Farmers Bank headquarters lies on the “wrong” side of Bangkok’s Chao Phraya River, giving staff an unusual view of the city. This is not the bank’s only unique outlook: it’s considered to have one of the more visionary IT and overall re-engineering strategies in Thailand’s post-crisis environment.
Thai Farmers Bank (TFB), the country’s third largest, has been implementing a massive re-engineering process since its current president, Banthoon Lamsam, took the helm in 1992. Ongoing IT investment forms a substantial part of that process: this year’s IT budget alone is around Bt3 billion.
The bank’s latest project involves the installation of Citrix MetaFrame servers, which upon completion will provide employees across all 530 branches with access to applications such as LotusNotes and Microsoft Office. It’s a step the bank hopes will improve its stance even further in Thailand’s increasingly competitive banking environment.
“It will definitely add value in the longer term,” says JP Morgan and Chase banking analyst Pornchai Prasertsintanah. Although the bank’s operating profits are currently inferior to its larger rivals, Pornchai says TFB is implementing various important changes that should lay a solid foundation for future growth. “The next two to three years may be depressed in terms of their bottom line, but they’ll then be in a better position to compete with foreign banks.”
The project kicked off in 1996, when TFB moved to their current headquarters and prioritised linking employees to the central IT system, particularly so they could access Lotus Notes. Once that was done, the bank’s 47 zone offices were targetted. They were successfully integrated by 1998.
The following year, Citrix Systems was brought on board to help with the greater technical problems involved with deploying the system to all remaining branches. All Bangkok branches were connected by the end of August this year, while branches across the rest of the country are expected to be part of the system by year end.
For the bank, the rollout of what could be seen as a reasonably basic system translates into savings of time, money and productivity. Due to the project’s nature and integration with overall IT infrastructure, however, the bank says it cannot produce figures that measure this precisely.
“In terms of infrastructure, having Lotus Notes is like having a road connecting us to each province,” says first senior vice president systems group, Chartchai Sundharagiati. “We cannot tell what cost savings will be generated by having this infrastructure, but we have to build it if we are going to compete with other banks.”
Instead, they can provide simple examples of how things will improve under the system. For instance, memos from headquarters to branches will no longer need to be sent as hardcopy – they can be emailed instead. And in the future, online approval for loan applications will be possible. Currently, applications and supporting documentation need to be sent to headquarters as hardcopy, with a turnaround of up to two weeks. Under the new system, approval will take just a few days.
“If we can approve loans faster than a competitor, it means customers will come to us,” says assistant vice president of the research and process development department, Winij Panamaeta. “It will help make our products more competitive.”
It’s precisely these retail customers analysts say Thai banks must target if they are to stay afloat in a changing environment. Merrill Lynch banking analyst, Therapong Vachirapong, describes Thai banks as “sleeping giants”, with tonnes of customers they’re not making the most of. But with competition nipping at their heels, their market focus is gradually shifting away from corporations towards smaller retail markets.
The bank’s moves on information technology are likely to allow it to tap this market more efficiently.
“It’s a big step for TFB in terms of operational reforms – they’re basically changing the way they do business,” says Therapong. Banks used to lend money on a collateral-value basis, meaning risk evaluation was simple. Now, however, it’s preferable to assess clients on the basis of their cash flow. “But to do this, you need more analysis – and thus more information. This requires an upgrade of the IT system.”
TFB’s IT subcommittee, charged with formulating IT strategy, is comprised of a 50/50 split between IT staff and key users, and headed by the vice president of the IT department and top management. While president Banthoom Lamsam has not been directly involved, his influence has been felt via his encouragement to bring in various consultants – Accenture and McKinsey are just two of many – for advice along the way.
Chartchai says the current project’s biggest challenge has been dealing with the scale of its implementation. The lesson learned so far has been to plan well, and start out small by doing plenty of pilot tests. “If you don’t do a lot of testing, then you’re likely to get some surprises. You need to keep control of the system’s usage,” he says, before returning to his road analogy. “Too many cars -you’ll have a traffic jam.”
Despite upbeat assessments from analysts, Chartchai is circumspect in defining TFB’s IT position relative to other banks. “We’re an early adopter, we’re not a leader,” he says. “We might be leading in some ways, but our purpose is to utilise IT and apply it effectively.”
The bank can be sure that more eyes are focusing on the wrong side of the river than ever before to see how they’re managing their aims.