Asia Pacific is expected to see 100 new financial institutions by 2025,
ushered by the liberalization of several markets and issuance of new banking licenses.
In fact, 3 in 5 customers will be using digital offerings by neobanks and challenger banks by 2025.
Without question digital banking in Asia Pacific is set to be widely adopted.
But is the financial services industry ready?
Learn more in the latest infobrief by Backbase and IDC.
Five years ago, IDC Financial Insights predicted that 100% of the top 250 banks across Asia Pacific would be executing a digital strategy. The reality? We are far from that number. Digital-first banking is even more important now as the COVID-19 situation has intensified customers’ need for availability, access, and control of digital channel interactions.
70% of Asia Pacific banking customers view banking processes as tedious.
Only 22% of the banking customer base has used these new channels in 2019.
80% of the top 250 banks still prefer to own the entire value chain of banking, with third party-contributed business at a mere 2%.
Only 20% of banks in Asia Pacific believe they truly understand their customers.
38% of revenues of traditional banks are at risk by 2025 because of emerging new players and further digital disruption in the industry.
Average age of core banking systems in the top 100 banks in Asia Pacific remains at 17.5 years — hardly responsive and up-to-date with the demands of the digital era.
2020 to 2025 will be all about achieving the twin aims of ensuring high personalization and the ability to bring this to scale.
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Digital-first is key to cope with the challenging conditions; high customer adoption of digital together with regulated open banking present significant opportunities for banks with the capabilities to adapt, offering holistic solutions and personalizing at scale.
By 2025, Australia will reach 90% of retail transactions through mobile.
80% of banking assets in Australia will still be dominated by the Big 4.
Banks could potentially achieve under-40 cost-to-income ratios and agility with an open API-based platform that allows for any third-party fintech capability to easily integrate and leverage into seamless digital customer journeys across all channels.
By becoming better aggregators of customer data, banks can go beyond static analysis of historical behavior to actively predicting it with AI/ML tools, which brings banks into the realm of smart and intelligent banking.
Vietnam banks build scale on top of highest-ever growth in digital investments, but the smaller banks look to succeed first.
Mobile transactions in Vietnam are expected to increase by 400%.
50% growth in new accounts by the top 8 banks is expected, using intelligent automation in account origination.
25% of banks in Vietnam will “actively pursue modern digital core platforms”.
Banks must ensure they secure ownership of the customer experience. This is essential, otherwise they run the risk of opening up APIs, giving away data to the competition, and failing to add any value to strengthen their own position.
Joint stock banks in particular are poised to win a larger market share thanks to enhanced features in their mobile offerings. This includes gamification, improved data security, and customer journey designs for integrated omni-channel customer experiences to crack the psyche of customers. Each touchpoint, be it digital or human, should connect all other components seamlessly and eliminate friction.
Fintech partnerships, both locally and regionally, can add a competitive edge. Banks can leverage cloud marketplaces to enable plug-and-play access to fintech solutions, such as superior onboarding and origination solutions to drive lending.
In a digital world, the bank is no longer the sole creator of value for its clients. Today, competitive strength comes from having good connections with other players and from adding or sharing value. Banks must use open APIs to connect, both internally and to third parties, to ensure they can keep their customer base interested.
Expect the Philippines to have the largest market share migration in the Asia Pacific region, as customers move toward digital-first banks.
80% of customers will open new bank accounts with other banks, diluting “primary bank” relationships.
75% of bill payments will be done through mobile channels, up from 18% in 2019.
Unbanked and underbanked segments in the Philippines are expected to cut by half to around 20% of the bankable population.
70% of customers who are active on digital apps believe they do not have options for “value add” banking products. New capabilities from fintechs, especially payments and lending, will fill the gap in financial inclusion. Banks to co-create features with fintechs, improve distribution of digital banking services, and integrate mobile payments more deeply in the day-to-day lives of new customer segments.
60% of bankable customers are willing to shift to other players that are more digital. Banks should deliver unique products ideated through customer data analytics. Fintechs and distribution partners will accelerate customer adoption with personalization content and frictionless experiences within digital channels.
Indonesian bank customers will maintain multiple digital loyalties, including those with non-bank digital platforms. Traditional banks can retain loyalty through the use of data to show that “my bank understands me”.
BY 2023, 40% of Indonesian bankable customers will go through direct onboarding, electronic KYC, or third-party onboarding.
25% growth of investments into real-time capabilities (marketing, fraud management, and payments) is expected.
Tier 1 and Tier 2 Indonesian banks will operate within at least 5 lifestyle ecosystems.
A modular architecture paves the way for faster, more agile ways of working. This can be through cloud
platforms to improve uptime, reliability, and stringent standards of 24/7 banking services. Supported by this LEGO-style building block architecture, it is possible to create and alter processes, products, or channels as needed. Changes are easily made, by small business teams, with minimal impact on the business.
For example, business owners can be increasingly creative in sales and service design, while engineering can
quickly develop and launch new value propositions. Modular banking is the key to fine-tuned processes, and will drive any efforts to create a future-proof digital banking platform.
Banks should escalate investments to compete on “real-time” ― focusing first on payments, then digital marketing, fraud management, and product offers. This can be achieved more quickly through fintech or third-party collaborations to process services more quickly, deliver superior user experiences, and gain scale.
Banks become more prominent not by sheer asset size alone, but through the size and extent of ecosystems they build with third parties.
More than half of new digital workloads in Thai banks will be on public cloud.
50% growth of investments into the management of the wealth business among the top 8 banks in Thailand is expected.
7% of retail business of Tier 1 banks in Thailand will be partner-generated, up from under 2%.
A modular set-up paves the way for faster, more agile ways of working. Supported by this LEGO-style building block architecture, it is possible to create and alter processes, products, or channels as needed. Changes are easily made, by small business teams, with minimal impact on the business. By swapping around different modules as needed, it is possible to customize offerings or add new features, without large deployment efforts. Modules are created once, reused, and infinitely combined, creating a fluid structure that can be used to respond to the latest customer demands.
Government and regulators have brought forth the most pro-innovation regime in the world, but banks struggle as their digital-first priorities compete for resources.
75% improvement to turnaround time of high-impact business processes for banks in India is expected.
70% of Tier 1 and Tier 2 banks will regularly access third-party data and insights as they intensify efforts to personalize customer strategies ― focusing not only on the “bright” side of banking (marketing, cross-sell, and upsell), but also the “dark side” (risk and fraud management).
60% of banks in India admit to the struggle in offering intuitive, relevant, and personalized content through newly-launched digital channels. Banks should achieve agility to evolving digital propositions, with the ability to integrate with third-party functionalities, and add more features to offerings without spending more on core system transformation.
50% of retail transactions in India are done through mobile and dominated by digital-first banking players. Banks should aim for hyper-personalization at scale through mobile experiences as the fight to be a super app intensifies. New key performance indicators (KPIs) around the mobile app experience is crucial. Digital KPIs to be set for specific productions and points of the customer life cycle.
Test your knowledge of the Fintech & Digital Banking 2025 report with our mini True or False game. 🚀
38% of revenues of banks are at risk by 2025 because of new digital players.
By 2025, Australia will reach 90% of retail transactions through mobile.
Mobile transactions in Vietnam are expected to increase by 400%.
5% of customers in the Philippines are willing to shift to digital players.
Indonesian banks are not likely to use big data and AI/ML to improve customer experiences.
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By 2025, 44% of the top 250 banks across Asia Pacific will work on modern digital platforms with API-enablement. So who will win the race in 2020 to 2025?
All the information you need about digital banking in Asia Pacific 2025.
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