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Banks need to strike the right balance for digital transformation

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Banks need to strike the right balance for digital transformation


Every financial institution is looking to digital transformation to meet rising customer expectations for speed and convenience, lower its operating cost, and fend off competition, including from tech companies moving into financial services. Some are spending over 10% of yearly revenue on technology investments, according to Bloomberg. “This is a huge investment and most financial institutions cannot support this for the long term,” says Michael Fei, SME banking CEO at OneConnect Financial Technology, an associate of Ping An Insurance.

The covid-19 pandemic has revealed how even financial institutions that considered themselves digitally advanced are, in reality, still wedded to analog processes along the chain of processing.

“For many financial institutions, this has been a wake-up call,” says Fei. “In the past, many had thought that if they have an online portal and a mobile application then that’s enough. But now they’ve realized it’s not. Some banks have online portals and mobile apps where you can apply for loans, but they still need to send items to the customer and carry out on-site inspection before they can process the loans, which hasn’t been possible during covid. Banks have had to reshape and redesign the whole process of their lending products.”

Banks have also realized their lack of truly deep customer knowledge, which is crucial to inform responsible and flexible decisions during an economic downturn as customer needs rapidly change.  

“Now that everything is digital, financial institutions are realizing how little they knew their customers,” says Tan Bin Ru, chief executive officer for Southeast Asia at OneConnect Financial Technology. “Customer hyper-personalization tools, to understand what products to offer, have been acknowledged conceptually for a long time but not implemented—now banks are moving towards it and really getting tools to do it.” Traditional banks that were not previously utilizing alternative datasets now want to integrate them more into secure lending, Tan says.

The power of partnerships

Banks have increasingly understood they need outside help to execute their digital transformation agenda. “Banks usually have very rigid systems and procedures,” says Fei. “For instance, if you want to launch a new product you have to follow the process, and it takes at least six months. In the age of digitalization, this doesn’t work, as customers want things immediately. This has put huge pressure on these financial institutions to build agile operations and systems to be able to respond to the needs of their customers.”

But the number of tech companies pushing into financial services can be overwhelming and not all of them have domain expertise, which can lead to misguided attempts to apply new technologies everywhere. Without experience of financial services, tech companies may also underestimate the trade-offs involved in deploying certain digital tools. 

OneConnect combines expertise in digital technology with deep knowledge of banking. Fei, who has past experience working at HSBC China and Bank of Langfang, a Chinese commercial bank, describes one partnership with a Chinese national bank to reimagine its customer service center as an illustration of why banking experience matters in digital reform. The lender was looking to transform a 6,000-person call center toward a more intelligent, AI-enabled approach with greater use of automation. But automating customer services must be done carefully; customers will not appreciate being handed off to a robot for certain sensitive or urgent inquiries where a human counterpart is desired.  

OneConnect built a knowledge map with the bank, to understand and anticipate what problem a customer is trying to solve with a given query, and then understanding when and where to apply automation versus human support. “This required extensive understanding of the business and the industry, which many technology companies do not have,” he says. “You need that, to know when to intervene, what should be done by robotics and what should be a human being. Many tech companies cannot offer this.”

Rather than advocating digital transformation across the board, OneConnect works to get the right balance between customization and integration, and to appreciate that banks are looking for a blend, or omnichannel approach. “Our banking customers, and their customers, want to be offline for certain things, and online for others; they want that flexibility,” says Tan.

A second partnership problem banks face is the sheer number of technology vendors and startups, which can be overwhelming and complicate their digital transformation journey. It is unclear which fintechs will survive and which will not; startups might offer an appealing technology, but if their underlying business model proves unviable, or they cannot raise sufficient funding to support their expansion, or they pivot to a new direction, a bank is exposed.

In many cases, banks take on many different fintechs because no single startup can manage the breadth of their needs, or because the bank wants to diversify its risk. “Since the digital journey is such a long process, a lot of banks feel they need to look at 15 to 20 fintechs to piece together their journey, but the more players they have, the more risk there is,” says Tan.

OneConnect solves both problemsan overly complicated vendor network and the risk of working with fledgling tech companies—by offering a broad sweep of turnkey solutions, with the commercial scale and security that customers can rely on. Typically, a bank will chart its desired journey and up to 80% of those solutions can be provided by OneConnect, says Tan. The company, publicly traded on the New York Stock Exchange, also draws on over 30 years of experience in financial services of its parent company, Ping An, described by The Economist as a window into the future of finance. “No other traditional financial-services group in the world comes close to rivaling Ping An’s ability to develop technologies and deploy them at such a scale,” the magazine recently wrote.

OneConnect: The journey so far

OneConnect has built a broad business in China, serving all of its major banks, 99% of its city commercial banks, and 53% of insurance companies. But its footprint is increasingly global, with over 50 international customers in more than 15 markets, including Singapore, Indonesia, Malaysia, Philippines, and Abu Dhabi.

The company has built new technology solutions to enhance pricing accuracy, such as an alternative data, AI-based credit scoring model for a credit bureau in Indonesia, and supported Malaysian banks to develop user-friendly apps, digital portals, and onboarding. It is leveraging image recognition, a core enabler of “insur-tech” that allows insurers to quickly assess damage claims and pay out to eligible beneficiaries. OneConnect has partnered with Swiss Re, a European insurer, to develop a digital end-to-end solution for motor claims handling, based on AI-based image recognition and advanced data analytics. The tool can analyze photos of vehicle damage, identify repair needs and costs within minutes, offer cash payments, and even offer value-added services, like directing drivers to a repair garage.

OneConnect is also helping build the fintech ecosystem by working with governments, regulators, and stakeholders. It is working with Singapore’s blockchain association to build the skills, literacy, and talent pool needed to enable innovation and has partnered with Abu Dhabi Global Market, a financial center in the United Arab Emirates, to support the development of a “digital lab,” a sandbox for fintechs to collaborate and develop their innovations.   

Working closely with its partners at home and abroad, OneConnect is helping the finance industry move swiftly into the digital era by leveraging the right tools at the right time, benefiting customers and finance institutions alike by widening access to services and lowering costs.

This content was produced by Insights, the custom content arm of MIT Technology Review. It was not written by MIT Technology Review’s editorial staff.

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Reopening US schools is complicated.

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Reopening US schools is complicated.


Across the country, schools are wrestling with the difficult choice of whether to reopen, and how to do it with reduced risk. In Kalamazoo, Michigan—not far from one the main sites where Pfizer is frantically manufacturing vaccines—they plan to stay virtual through the end of the school year. In Iowa, a state without a mask mandate, kids can now go back to in-person learning full time. Meanwhile, in a school district in San Mateo County, California, that borders Silicon Valley, there’s no clear decision—and low-income and affluent parents are clashing over what to do

It’s been a difficult journey. Since March 2020, when most schools closed, districts have been asked to adjust over and over—to new science about how the virus behaves, new policy recommendations, and the different needs of families, kids, teachers, and staff. 

Now, as President Biden forges ahead with his promise to reopen most schools within his first 100 days, the debates sound as complicated as ever—and offer a glimpse into many of the difficulties of reopening society at large. 

The limits of “guidance”

Schools across the country have looked to the Centers for Disease Control and Prevention for guidance on how to operate in the pandemic. In its latest recommendations, the CDC says a lot of the things we’ve heard all year: that everyone in a school building should wear masks, stay at least six feet apart, and wash their hands frequently. But schools have found that even when guidelines seem relatively straightforward on paper, they are often much harder—or downright impossible—to put into practice. 

“There’s a difference between public health mitigation policies when we think them through and when we write them down, and then when we try to implement them,” says Theresa Chapple, an epidemiologist in Washington, DC. “We see that there are barriers at play.”

Chapple points to a recent study by the CDC that looked at elementary schools in Georgia. After just 24 days of in-person learning, the researchers found nine clusters of covid-19 cases that could be linked back to the school. In all, about 45 students and teachers tested positive. How did that happen? Classroom layouts and class sizes meant physical distancing wasn’t possible, so students were less than three feet apart, separated only by plastic dividers. And though students and teachers mostly wore masks, students had to eat lunch in their classrooms. 

Researchers also note that teachers and students may have infected each other “during small group instruction sessions in which educators worked in close proximity to students.”

Following the CDC’s best practices might be inherently difficult, but it’s also complicated by the fact that they are just guidelines: states and other jurisdictions make the rules, and those often conflict with what the CDC says to do. Since February 15, Iowa schools have been required to offer fully in-person learning options that some school officials say make distancing impossible. Because the state no longer has a mask mandate, students aren’t required to wear masks in school.

Jurisdictions following all these different policies have one thing in common: although case totals have dipped since their peak in January, the vast majority of the US still has substantial or high community spread. A big takeaway from the CDC’s latest guidance is that high community transmission is linked to increased risk in schools. 

“If we are opening schools,” Chapple says, “we are saying that there’s an acceptable amount of spread that we will take in order for children to be educated.”

Meeting different needs

Some schools are trying alternative tactics that they hope will reduce the risks associated with in-person learning. 

In Sharon, a Massachusetts town just south of Boston where about 60% of public school students are still learning remotely, pods of students and staff are called down to a central location in their school building twice a week for voluntary covid-19 testing. One by one, children as young as five turn up, sanitize their hands, lower their mask, swab their own nostrils, and place their swab in a single test tube designated for their whole cohort. To make room for everyone, sometimes even the principal’s office becomes a testing site: one person in, one person out. The tubes are then sent to a lab for something called “pooled testing.”

After just 24 days of in-person learning, the researchers found nine clusters of covid-19 cases that could be linked back to the school. 

Pooled testing allows a small group of samples to be tested for covid all at once. In Sharon, each tube holds anywhere from 5 to 25 samples. If the test for that small group comes back negative, the whole group is cleared. If it’s positive, each group member is tested until the positive individual is found. Meg Dussault, the district’s acting superintendent, says each pool test costs the school between $5 and $50, and over a third of Sharon Public Schools students and staff participate. 

“I’ve seen the benefits of this,” she says “And I believe it’s essential.”

Because schools are funded unequally and largely through taxes, access to resources is a common theme in discussions of school reopening. The state paid for Sharon’s pilot period, but not every district or school has the money or staffing to mount large-scale programs—and Dussault says the district will need to foot the bill for any testing once this program ends in April. It will also need to keep relying on the goodwill of the parent volunteers who wrangle students and swabs for testing each week. 

In the seven weeks since pooled testing began, Dussault says, only one batch has come back positive. It’s given her peace of mind.

And even with mitigation measures in place, there are stark demographic differences in opinion on reopening. A recent Pew study found that Black, Asian, and Hispanic adults are more likely to support holding off until teachers have access to vaccines. Those groups are also more likely than white adults to say that the risk of covid-19 transmission “should be given a lot of consideration” when weighing reopening.

Chapple worries that these parents’ concerns will be overlooked, or that funds for remote learning will dwindle because some districts decide to move to in-person learning.

She says: “School districts need to keep in mind that if they’re reopening but a small percentage of their minority students are coming back, what does that look like in terms of equity?” 

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SpaceX has successfully landed Starship after flight for the first time

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SpaceX has successfully landed Starship after flight for the first time


On March 3, SpaceX’s Starship pulled off a successful high-altitude flight—its third in a row. Unlike in the first two missions, the spacecraft stuck the landing. Then, as in the last two, the spacecraft blew up.

What happened: At around 5:14 p.m. US Central Time, the 10th Starship prototype (SN10) was launched from SpaceX’s test facility in Boca Chica, Texas, flying about 10 kilometers into the air before falling back down and descending safely to Earth. 

About 10 minutes later, the spacecraft blew up, from what appears to have been a methane leak. Still, the actual objectives of the mission were met.

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Rocket Lab could be SpaceX’s biggest rival

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Rocket Lab could be SpaceX’s biggest rival


In the private space industry, it can seem that there’s SpaceX and then there’s everyone else. Only Blue Origin, backed by its own billionaire founder in the person of Jeff Bezos, seems able to command the same degree of attention. And Blue Origin hasn’t even gone beyond suborbital space yet. 

Rocket Lab might soon have something to say about that duopoly. The company, founded in New Zealand and headquartered in Long Beach, California, is second only to SpaceX when it comes to launch frequency—the two are ostensibly the only American companies that regularly go to orbit. Its small flagship Electron rocket has flown 18 times in just under four years and delivered almost 100 satellites into space, with only two failed launches. 

On March 1, the company made its ambitions even clearer when it unveiled plans for a new rocket called Neutron. At 40 meters tall and able to carry 20 times the weight that Electron can, Neutron is being touted by Rocket Lab as its entry into markets for large satellite and mega-constellation launches, as well as future robotics missions to the moon and Mars. Even more tantalizing, Rocket Lab says Neutron will be designed for human spaceflight as well. The company calls it a “direct alternative” to the SpaceX Falcon 9 rocket

“Rocket Lab is one of the success stories among the small launch companies,” says Roger Handberg, a space policy expert at the University of Central Florida. “They are edging into the territory of the larger, more established launch companies now—especially SpaceX.”

That ambition was helped by another bit of news announced on March 1: Rocket Lab’s merger with Vector Acquisition Corporation. Joining forces with a special-purpose acquisition company, a type of company that ostensibly enables another business to go public without an IPO, will allow Rocket Lab to benefit from a massive influx of money that gives it a new valuation of $4.1 billion. Much of that money is going toward development and testing of Neutron, which the company wants to start flying in 2024.

It’s a bit of an about-face for Rocket Lab. CEO Peter Beck had previously been lukewarm about the idea of building a larger rocket that could launch bigger payloads and potentially offer launches for multiple customers at once. 

But the satellite market has embraced ride-share missions into orbit, especially given the rise of satellite mega-constellations, which will probably make up most satellites launched into orbit over the next decade. Neutron is capable of taking 8,000 kilograms to low Earth orbit, which means it could deliver potentially dozens of payloads to orbit at once. As a lighthearted mea culpa, the introductory video for Neutron showed Beck eating his own hat. 

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