The combination of late technology adoption, a leapfrogging effect in digital access and a huge population is driving surging growth in Asia’s online banking market, unlocking opportunities for FinTech products. Aside from local players and international banking majors, the region is an attractive market for specialist innovators, coming out of emerging UK hubs supported by Cambridge and Bristol corporate finance.
The Asia Pacific region has been especially well placed to drive digital banking due to the presence of major regional financial and technology hubs, such as Singapore, Tokyo, Taiwan and Shanghai. Local players have thus moved confidently in testing out user-friendly platforms and launching new FinTech products, especially mobile apps and smartphone-tailored payment services.
The smartphone is set to be especially key in driving digital banking in emerging economies, where both rural and recently urbanised consumers are leapfrogging from having no web-enabled tech (in particular PC) to purchasing their first wireless device. According to McKinsey’s Financial Services Survey, the penetration of smartphone banking stood at 26% of respondents in emerging Asia in 2014.
In developed Asian economies, digital banking is already used more frequently than traditional mediums, while in emerging countries the ATM remains the dominant channel. Despite the surge of online services, bank branches retain an important role in Asia, providing personal financial advice and a form of security for local consumers.
As Asia’s Internet population continues to grow, having a valuable digital proposition will be key to attracting new banking customers. The region is set to become a hugely competitive marketplace, with banks keen to attract IT specialists and marketers that can polish their product. Enhancing the presence of banking brands on online mediums such as social media is becoming necessary, driving online adspend by the industry.
However, the surging demand for digital banking is also creating opportunities for fraud and security breaches, with some platforms too vulnerable or irresponsible in protecting their clients. In 2014, the Asian Development Bank banned 30 individuals and 31 companies from its projects following the institution’s annual check for fraud and corruption.
With over 700 million digital banking users in 2014 (by McKinsey estimates), Asia is the biggest market in this segment globally. With the region set to add another billion Internet users over the next 15 years, online banking will continue to expand rapidly, driven by urbanisation, rising telecom penetration and IT literacy rates.
In order to succeed in the competitive online space, Asian banks must essentially adopt the practices of native digital firms. This means opening up application programming interfaces, enhancing innovation and policy agility, as well as launching hackathons to expand digital collaboration. Many banks are already actively acquiring FinTech specialists to ensure they stay in tune with digital consumption trends.
Asia’s digital banking surge is also fostering innovation by non-traditional financial players, which could lead to an expansion of serviced beyond the region if cyber-security concern are overcome. China’s e-commerce giant Alibaba has already attracted some $100 billion of assets since the launch of its wealth management platform, while domestic rival Tencent is also developing a financial eco-system around its online offerings.
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