Digital Banking

In APAC, Southeast Asia Consumers are Most Receptive to Challenger Banks

Two out of three banking customers in Asia Pacific (APAC) are either relatively open or inclined to consider fintechs and challenger banks which they perceive as being successful in addressing customer pain-points and facilitating customer journeys, a new survey found.

The study, conducted by The Asian Banker and commissioned by data analytics company FICO, polled 5,000 digital banking customers in ten key APAC markets to gain better insights on consumer preferences, interactions and engagements.

The research found that in APAC, Southeast Asian customers are the most receptive to fintechs, challenger banks and new entrants. Thailand scored the highest with 78% of respondents stating they were open to consider a fintech, followed by Vietnam with 77%, and Indonesia with 69%.

Customers in more developed economies like New Zealand and Australia, were found to be the lesser inclined to consider fintechs, with 61% and 51% of respondents, respectively, stating they were not willing to try a fintech or challenger bank.

Willingness to try a fintech/challenger bank, Source: Asia Pacific Digital Banking Consumer Study, Asian Banker Research, 2021

Digital onboarding and personalized products

APAC consumers’ openness to tech-enabled new entrants comes on the back of rapidly changing customer preferences and expectations. Today’s customers want a smooth, hassle-free and digital onboarding process, improved pricing on financial products, and personalized products.

A majority of APAC customers (62%) prefer to begin a new banking relationship digitally, though 40% said they were willing to visit a branch if required. Across the region, the appeal of in-person branch banking is fading fast. 65% of APAC customers now prefer to use digital channels to engage with their bank during financial hardship.

Preference on engaging with main bank during financial hardship, Source: Asia Pacific Digital Banking Consumer Study, Asian Banker Research, 2021

Competitive interest rates and/or lower fees were also found to be critical for APAC customers with respondents in most markets stating they were open to share additional financial information if that meant securing better prices.

Willingness to offer main bank more financial information in return for better interest rates or lower fees, Source: Asia Pacific Digital Banking Consumer Study, Asian Banker Research, 2021

When asked about the principal digital banking features that would make customers change providers, APAC respondents cited personalized and advanced settings (31%) as the top switching driver. The availability of personalized and advanced settings, such as reset password functions, view transaction history and updating personal details options, was most important for Southeast Asian customers, and in particular those in Malaysia, Indonesia and Thailand.

Key digital banking features – switching drivers, Source: Asia Pacific Digital Banking Consumer Study, Asian Banker Research, 2021

Ramping up fraud prevention and security

Security features are another top five switching driver cited by APAC customers. 20% of respondents view biometric security features, one-time password (OTP) and two-factor authentication (2FA) transaction confirmations, as extremely important features when deciding between banks. This is especially the case for customers in the Philippines, Taiwan and Hong Kong.

Likely to switch banks due to biometric security features, OTP and 2FA transaction confirmation, Source: Asia Pacific Digital Banking Consumer Study, Asian Banker Research, 2021

This trend comes at a time when fraud attacks are skyrocketing as COVID-19 accelerates digital adoption. Cloud-based risk management platform Feedzai saw a 650% increase in account take over scams from Q4 2020, as compared to Q1 2020. Attempted online banking and mobile banking fraud attacks increased 250% and 200%, respectively.

Fraud and compliance specialist GBG estimates financial institutions in APAC will spend US$83.3 million on average on new fraud prevention technology between 2020 and 2021, with Thai, Chinese and Indonesian financial institutions expected to spend the most.

Estimated new fraud technology investment budget in 2020-21, Source: Future-proofing Fraud Prevention in Digital Channels: APAC FI Study, GBG and the Asian Banker, Oct 2020

Findings from the FICO survey are similar with the results of a new Mastercard study, which found that customers in Asia’s developing markets were particularly trusting of fintechs and well-known IT companies. 95% of those in the Philippines and 93% in India said they would trust a digital wallet provider, and most respondents (89%) in India said they’d trust a payments technology company. 83% of respondents in Thailand said they’d trust another service provider as long as it was recommended by their bank.