Unlike the large incumbent banks, smaller players and financial institutions have traditionally served more targeted communities with bespoke preferences and requirements. These smaller players, such as thrift banks in the Philippines, play an important role in meeting the financial needs of communities that have fallen off the radar of bigger banks.

Priding themselves on their community-centric approach, many of these smaller institutions are now finding themselves competing with other neobanks and challenger banks as customers increase their expectations for seamless financial digital experiences. According to the Fintech and Digital Banking 2025 IDC report, it was found that 63% of banking customers in Asia Pacific were willing to switch neobanks or new digital challengers.

In this article, I’ll be tackling the third chapter of our Banking Transformation Case Studies eBook to identify some of the most actionable insights for these banking players who serve an extremely important role.

Within an increasingly competitive landscape, here’s how smaller industry players can keep up with the new challenges of a digital era.

Play to your strengths

As opposed to the larger counterparts, the size of small institutions provides an added advantage in accelerating their digital transformation process.

While they may not compete with their bigger counterparts in terms of capitalization, their digital transformation process can be accelerated due to the smaller number of transactions they handle.

SeAbank is a smaller joint-stock bank in Vietnam. CEO Mrs Le Thu Thuy shares how
addressing customers’ needs doubled digital transactions in 2020.
Watch the full interview here.

My colleague, Eric Nieuwenhujsen, Technical Director at Backbase, recently penned an article focusing on three challenges that credit unions face as they look to modernize – organizational siloes, compliance demands, skills gap – and the three steps to overcome them.

By implementing a strategic digital roadmap and leveraging partnerships with third-party fintechs on an as-a-service basis, small institutions can digitalize some of the smaller aspects of their processes to ensure optimal return on investment while innovating at speeds demanded by the market.

From silos to platforms

What makes technology companies such as Netflix, Grab, or banks like DBS successful?

The majority adopt an outside-in approach and a customer-oriented mindset towards their services and products. Furthermore, these companies invest in a unified horizontal platform to orchestrate the entire customer journey while providing a seamless and personalized experience.

Ujjivan Small Finance Bank MD and CEO Nitin Chugh shares how banks should prioritize
revenue, customer experience and partnership. Watch the full fireside chat here.

Unfortunately, I have seen many banks – from small to large – failing in these aspects. Banks still have a short-term myopic view, looking at different point solutions to solve the respective customers’ pain points. The danger and challenge lies when banks are looking to scale up. It will be difficult to consolidate the different point solutions, and leveraging on a platform to do so can bring about reusability, quick time to market and scalability.

I share about what banks with limited budgets should focus on.
Watch the full conversation with Bangko Sentral ng Pilipinas (BSP),
Bank of the Philippine Islands (BPI) and Unionbank of the Philippines here.

Selecting the right partners

Typically, we see small financial institutions prioritizing convenience and going with the cheapest player in the market for their technological needs due to their limited resources.

For small institutions to keep pace, tap on partners that are able to provide the right expertise and flexible solutions to meet your priorities in catering to customer’s needs.

Austrian-based BKS Bank selected Backbase to introduce omni-channel digital banking solutions to complement its legacy system. In addition, through Backbase Academy, BKS Bank was able to educate its internal digital team – consisting of product owners, forms developers and a UX-designer – to roll initiatives out quickly via Backbase’s modular system.

To go toe-to-toe against the giants and new digital challengers, small institutions have to avoid a ‘wait and see approach’ or clinging onto the status quo.

UNObank CEO and Co Founder Manish Bhai, a digital greenfield bank that was recently
awarded a digital banking license by BSP, shares his top tips for selecting
a trusted technology partner. Watch the full interview here.

By taking proactive steps towards their digital transformation journeys and leveraging trusted expertise, smaller players have plenty of opportunities to stay relevant with their communities and provide continuous value to their customers.

About The Author

Riddhi Dutta is the Regional Head for ASEAN & South Asia 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.