Banking in Asia is Ripe for Disruption, Now More Than Ever
by Fintech News Singapore November 25, 2019Banking in Asia is experiencing fundamental disruption driven by the growth of tech giants into the financial services industry, new open banking regulations, and the issuance of virtual banking licenses, according to a new report by PwC and Oracle.
In a paper titled Beyond Digital: Data-Driven Strategies to Grow, Scale and Profit, the two companies outline a brief history of digital banks, examine current examples of innovation witnessed across banking, and explore the digital banking consumer in Asia.
Why Banking is Ripe for Disruption
In Asia, customers are ready for a new way of banking. According to an Oracle survey, 69% of consumers want their entire financial lifecycle on digital channels, and 30% of consumers are open to trying a fintech or virtual bank option. These data suggest that consumers are demanding sophisticated, smarter, and more relevant digital experiences.
In this changing landscape, it is crucial for banks to be able to respond with speed to new market developments, incorporate new products and processes in a timely manner, and offer more choices to customers, the report says.
According to PwC’s research, bank customers in Asia have a strong appetite for non-financial services and expect the right services at their fingertips without fuss. This showcases that it is critical for banks today to tie options for e-commerce, transport and lifestyle into one seamless digital banking experience.
For that, new ecosystems leveraging technologies and practices such as open APIs and open banking, present a significant opportunity to retain customers by responding faster and more accurately to new demands, the report says.
In the UK, Weatherbys Private Bank leverages Oracle Banking APIs solution, which provides more than 1,500 functional APIs for payments, retail, and corporate banking. Using the solution, the bank was able to build faster, better products, and provide tailored services while managing customer consent, protecting identities, and future-proofing security.
Emergence of Virtual Banks and BigTechs in Financial Services
Changing customer expectations, the rise of mobile, and the entry of tech giants such as Alibaba, Tencent and Line into financial services have changed the banking landscape dramatically.
These companies have managed to develop extensive ecosystems that provide an array of services ranging from social networking, gaming, video and financial services, changing the way consumers interact with financial services providers and how these products and services are delivered.
In Asia, jurisdictions including Singapore, Hong Kong and Malaysia are leading the region in virtual banking regulations.
The Hong Kong Monetary Authority (HKMA) announced earlier this year the eight recipients of a virtual banking license, and the Monetary Authority of Singapore (MAS) is offering as many as five digital banking permits to non-banks.
In October, during the tabling of Malaysia 2020 Budget, finance minister Lim Guan Eng said that the much anticipated virtual banking framework will be ready for public consultation by end of this year and the final framework along with applications will be open by the first half of 2020.
Virtual banks are set to not only transform retail banking, but are also SME (small and medium-sized enterprise) banking.
In Hong Kong, it currently takes an average of 38 days to open a business account with a traditional bank, while “time to cash” can take between 25 and 55 days. These timeframes, as well as poor end-to-end customer experience, are pushing SMEs towards quicker offerings from big techs or fintechs.
These factors are putting intense pressures for banks to either evolve or be left behind, we are seeing evidence banks at least attempting to overhaul their digital strategies with varying degrees of success. The next couple of year is an important inflection of where the industry is headed, and who will ultimately emerge as the ultimate winners.
Featured image credit: Unsplash
