Since my last article, developments in the COVID-19 pandemic have proven that the new normal of social distancing and going digital is not just a phase, but it is a trend that’s here to stay.
I’ve selected 7 top stories about the industry from the past 2 months, each talking about how countries in Asia Pacific are moving full steam ahead with digital transformation and banking.
Digital banking has been the trend in the Asia Pacific as more customers turn to mobile apps and solutions for their financial needs. However, the COVID-19 pandemic has become a catalyst for a fierce and accelerated adoption of digital banking services. As people are encouraged to stay online for social and commercial activities, the growth in demand for high quality digital financial service and solutions will also rise.
This is in line with Backbase and IDC’s Fintech and Digital Banking 2025 report, which highlighted that digital banking is set to be widely adopted with over three in 5 customers willing to make the switch to neobanks and challenger banks in the next five years.
In my interview with CIO Tech Asia, I shared that to keep up with neobanks, incumbent banks will have to dig deep into their operational culture and develop a courage to exchange the legacy goal of value chain ownership for being hubs at the centre of a renewed banking ecosystem. Customers, now spoilt for choice, will look out for innovative offerings and personalised customer experience — features that will require incumbent banks to dismantle internal silos and to enable synergistic journeys.
In my opinion article published on The Jakarta Post, I shared that in Indonesia, going digital is no longer just a medium-term goal, but is fast becoming an urgent need against the country’s fast-evolving financial landscape. The COVID-19 pandemic has spurred digital banking registration in the largely unbanked population, all while online lending sees increased popularity as Indonesians look for financial support following furloughs and layoffs.
While incumbent banks and big tech account for more than half of all digital payments in the country, the real challenge moving forward will be for banks to adopt a “start small and think big” mentality. With growing appetite and quickly evolving needs, the key to serving Indonesians lies in rapid innovation and adaptation through minimum-value-proposition products. The shift away from a legacy model to support agility will be challenging — but modular setups provided by services like Backbase will accelerate the process in banks and ensure a smooth, painless transition.
Despite all the news and developments around digitalisation, it is important to remember that the transformation is not happening equally across all of Southeast Asia. There remains a large portion of people who are not only unbanked, but are also without smartphones to connect them to digital services and solutions offered by banks.
In particular, it is estimated that half of Indonesia’s population is without a bank account. To change this, Bank Mandiri has partnered up with Bukalapak to rollout a non-digital way of bringing key banking services to the unbanked. Through this initiative, grocery sellers and street vendors (or warungs) will double up as branchless banking agents, allowing this new group of customers to make deposits, withdrawals, transfers, and payments without ever walking into an actual bank.
The Philippines, considered a laggard in the region for digital payments, is now seeing a boom in digital transactions as Filipinos turn digital to avoid physical contact amidst the COVID-19 pandemic. As such, GCash, the largest provider of mobile money services, saw a 150% growth in registered users between March and April. The amount of payments made on the platform in May also ballooned eightfold compared to 2019, signifying strong adoption of digital payment.
As Filipinos become more accustomed to going digital, more solutions have been rolled out, including the deployment of Quick Response (QR) codes. Partnerships have since allowed customers to pay for taxi rides and enabled patients to pay for teleconsultation services by simply scanning a QR code. When the government makes the National QR Code Standard available for commercial use by the end of 2020, it can be expected that the use of digital payments will climb accordingly.
On an industry level, BDO Unibank, the largest lender in the Philippines, said that the new normal created by the COVID-19 pandemic has shifted the way the financial sector operates. BSP, the central bank, said that there has been an uptick in onboarding for digital-only account. It also noticed greater use of electronic fund transfer facilities such as InstaPay.
With the adoption of online banking services expected to last beyond the current pandemic, banks must embark on digitalisation to allow the development of better mobile banking apps and new online product and services. These, on top of a well-built cybersecurity infrastructure, will help them stay relevant and operationally resilient.
In Thailand, Krungthai Bank (KTB) has adapted its operations as the country moves to embrace digital banking. Its mobile banking app has seen usage grow between 70% and 80% during the COVID-19 pandemic, with KTB aiming to bring the total number of users on the app from 10 million to 12 million by the end of 2020, and eventually to 20 million.
Doubling-down on efforts in releasing new features and services for its mobile app, KTB recognises that the digital platform has evolved to become its new source of income. In order to succeed in digitalisation, the bank has committed itself to streamlining its physical footprint through relocation, consolidation, and closure. With that, it looks to reskill workers so that they are better equipped to serve customers’ needs in the digital future.
In Vietnam, Deputy Prime Minister Vu Duc Dam said that digitalisation will be instrumental, and that without it, the country will lose in international competition. To highlight its importance, Vietnam has moved to approve the National Digital Transformation Programme, an effort to build a digital Government, digital economy, and digital society for the country.
To help business keep up with the pace of change, the country will focus on creating a fertile environment for digitalisation. One solution that has been implemented is the introduction of new digital conversion platforms launched each week to help different businesses keep up with the pace of going digital.
About the Author
Riddhi Dutta is the Regional Head for ASEAN & India at Backbase.
Riddhi oversees Backbase’s sales and go-to-market success for his territory in Asia Pacific. He helps financial institutions turn their digital ambitions into reality, helping them with designing digital transformation initiatives which are feasible, tailored, and creative with instant business value.
Riddhi has an excellent track record of championing legacy modernisation initiatives in several banks across the region, where he consulted and helped banks move to open banking platforms, including modern core banking and treasury solutions. Prior to joining Backbase, Riddhi held several senior roles at Infosys Finacle, Fintellix Solutions and ITC Infotech.
Riddhi earned a Masters of Business Administration in Marketing and Systems from the University of Delhi.