By Conrad Tan

David Conner, OCBC's chief executive who retires tomorrow after 10 years at the group, has seen his share of turmoil in the banking industry, most recently the financial crisis of 2008-09.

But Mr Conner, who joined OCBC as CEO on April 15, 2002, remains resolutely upbeat about the long-term future of financial services - though he emphasises that "services" are what he has in mind.

"I'd say financial services is a very exciting career for any young person. Serving customers is something that banks should be better at and there are plenty of new product ideas, service innovations and ways to improve customer experience that have yet to be discovered.

"I think the financial services industry has a bright future. The fundamental needs of people who need to manage their wealth is clearly a significant problem in an ageing society.

"There are periods when things look bleak. When Drexel Burnham Lambert went down amid the junk-bond frenzy and Michael Milken went to jail, people said that junk bonds were awful, but junk bonds are everywhere today. High-yield debt is a sound and useful instrument; it didn't go away. "With periodic bumps and ups and downs, the industry will sort itself out and be fine."

For OCBC, his hopes are that the bank will be much more than just "fine" in the future.

"I think there's a massive prize for the bank that becomes the Singapore Airlines of the banking world, noted for its service and its customer focus, that no bank has been able to attain," he says.

"If you get that prize, then you have pricing power because people are willing to pay for that extra level of service. I'm not naive; I think that that's a distant prize."

But even in the short run, investing money to improve the experience of customers and in service innovations yields important benefits, he adds. "If your customers are happy, they don't leave, so your attrition costs go down and your customer acquisition costs go down as well because happy customers bring in more business and their friends and family."

"But the big prize is pricing power. How you differentiate a bank is the heart of the question. It's quite clear that products are important but not sufficient - we don't have patents, therefore products get copied very quickly by our competitors.

"It's interesting that they're very, very slow at copying service innovations, which is something that we think would give us a significant distancing from our competitors."

Developing a differentiated approach to banking is among the biggest challenges he sees for the Singapore banks, he says.

"Bankers tend to compete on price too much and if we continue down that path, we're going to make the industry less and less attractive.

When customers see it as a commodity, they don't buy because of any feature, they buy based on price. That's the US airline industry, which operates half the time in bankruptcy."

Another challenge the banks face is how to grow internationally, given that many countries have rules that restrict foreign banks' operations or their ownership of domestic banks.

"In many countries, you can't buy, by regulation, and in other countries where you can, it's very expensive. So it's challenging," he says.

One of the achievements he speaks fondly of is the rigorous credit process that he instituted after joining OCBC, which has helped it to build and maintain a solid credit portfolio that weathered the most recent financial crisis well.

"It's not just how you assess who comes into the bank. It's deciding which parts of the economy in which you're strong and want to pursue as a bank and which industries you want to support.

"And then within each industry that you want exposure to, you need to understand the risks that are unique to that industry and then rank the players and go after the ones you want to do business with.

There are weak players in any industry, and there are strong players even in weak industries. "So part and parcel of the credit process is driving the portfolio with a forward view.

We choose to take the portfolio where we want, where we feel we understand the risks and where we think the risks are manageable."

"That discipline is something that most banks don't follow and it's something that helps us tremendously.

"I'm sure a lot of banks talk about it, but in my experience, I'm not sure it's a discipline that's real in all banks. One of the symptoms of that is that the marketing guys will be fighting with the credit guys.

"It takes effort to stop and reflect on things, rather than just keep doing what's out there floating by.

Reflecting on things is exactly what he plans to do immediately after stepping down from his job, he says.

"So far the only specific plan I have is to stay in Singapore and stay on the board of OCBC as a non-executive director. Otherwise, I want to think things through to see what else I might look for in terms of new challenges.

Frankly, I've got to get out of the job and reflect on things for three, six months and then decide."

This article was first published in The Business Times.