They have partnered with FinTechs to harness the capabilities of new technologies and deliver more customised solutions. For example, UOB has partnered with Personetics to use artificial intelligence to identify individual transaction demands and enable UOB to provide customers with real-time and personalised guidance on their financial decisions. Second, they have built digital banks in overseas markets, leveraging a lower-cost operating model to quickly acquire new customers. For example, DBS launched digibank in India and managed to acquire over 2.5 million customers in its initial two years of operations. The bank has also recently replicated its digibank strategy in Indonesia. DBS was ranked by Euromoney as the world’s best digital bank last year. Third, they have adopted more customer-centric approaches, integrating solutions for their financial and non-financial needs. For example, OCBC has built a niche marketplace to provide curated products and services for mothers and their babies. The bank also launched the OCBC Silver Years programme to provide seniors a one-stop solution for financial advice, insurance products and lifestyle options. 28. Digital challengers with innovative business models can add diversity and choice to banking systems. They can often serve the needs of traditionally underserved segments, such as the credit gap faced by young and micro-enterprises. They could also bring with them deep digital know-how and insights from operating non-bank businesses. In China, for example, MYBank, has broadened financial inclusion, with 80% of its clients being first time borrowers like mom-and-pop shops. 99% of its customers repay on time.
Frankly, it’s too early to tell: we know the final rate of inflation, 2%; but we don’t know yet the « terminal interest rate », or the policy rates that will ensure a timely return of inflation to our target, while seeing no reasons for increased expectations on these. Let me rather give some light on the first part of the journey, the normalisation till neutral rate; for sure it’s unobservable, but this one can be estimated, in the euro area at below or close to 2% according to me. I sometimes use a simple metaphor: as long as it is about lifting off the accelerator, we have to act for sure, in a determined but orderly way, and we should be there by the end of the year. Afterwards, the question could come of pressing the brake, and tightening if needed: but this part of the journey remains today an open question, and will deserve further assessment and reflection, in due time. Let me only stress one last and obvious point of yesterday’s decision: it marks the return of interest rates in positive territory. This historical step brings with it multiple dimensions that need to be revisited: on our operational framework, on our TLTRO operations, on our remuneration mechanisms of bank’s reserves. This is a matter that, as Christine Lagarde said yesterday, we will take up without delay. May I add that with a long view, monetary policy cannot be the only game in town?