Digital banking services are increasingly being adopted in the Asia Pacific (APAC) region. The use of all-digital banks and platforms is expected to increase further in the coming years. This, as 63% of consumers responding to a recent survey said they’d be willing to switch to neobanks between now and 2025.
The survey and joint report published by Backbase and IDC on May 18, 2020 claims that the APAC region will experience a dramatic increase in new financial services and platforms. According to the report, many new banking licenses should be issued in the next few years, and markets will also become more liberalized.
The report’s authors performed a review of 55 traditional banks, 20 banking challengers, and 40 Fintech firms based in the APAC region.
The rise of digital banking platforms may be attributed (to some extent) to the conservative view of the value chain maintained by most incumbents, the report argued. It added that traditional financial institutions might not be able to benefit from innovative technologies because of their unwillingness to embrace change and work cooperatively with Fintechs.
About 80% of the 250 largest banks in the APAC area still want to own the complete value chain of banking. Third parties accounted for only 2% of the banking value chain.
Over 35 neobanks across APAC are now offering services via platforms developed using the latest technologies, and have adopted lean and agile best practices, which has given them a decisive edge over incumbents, the report revealed.
Per the study, around 38% of traditional banks’ revenues in the APAC region might be at risk in the coming years.
About 70% of APAC banking customers have complained about traditional or current banking processes being too tedious.
In Australia, however, it is expected that the nation’s ‘Big Four’ banks (ANZ, Westpac, Commonwealth Bank, and NAB) will still retain the majority of the banking market share in the country (at least through 2025). Meanwhile, small and mid-sized banks will be competing with all-digital challengers, the report claims.
Malcolm Macnaughtan, regional director for Backbase in Australia and New Zealand, stated:
“From a digital banking perspective, the rapidly unfolding pandemic will have a profound and enduring effect in Australia. Transforming to a digital-first business will be key to survive the persistent challenging conditions.
“Increased customer adoption of digital together with the launch of open banking present significant opportunities for banks with the capabilities to adapt. Incumbent banks and new challengers in Australia must innovate at a rapid pace to emerge on top in the race to be digital-first.”
Approximately half (48%) of APAC region banks will be using AI or machine learning for making more informed, data-driven decisions.
Banking revenue is projected to grow by 15% because of AI integrations, the report estimates.