Asia-Pacific digital banking accelerating, led by emerging markets. Emerging markets in Asia-Pacific have become a hub of banking innovation for digital business models, given the accelerated adoption of digital banking due to the Covid-19 pandemic. Banks can reinvent their businesses to capture growth opportunities by focusing on three key areas — the value of branches, customer engagement and a bank’s overall competitive position. In 2021, 90% of consumers use digital banking at least once per month, and 62% are using fintech/e-wallet services. Most consumers are digitally capable, with 31% being “digital first” and 66% “multichannel”. Consumers are evolving to become “digital + multichannel” and relying less on branches. Overall, digital behavior from “digital first” to “multichannel” is relatively higher for the younger age group at 35% vs 31% overall. More than 60% of consumers are open to migrating to a direct bank.
Digital banking in APAC is taking off, and the battle for digital consumers is joined. Of some 250 digital banks worldwide, 20% are in APAC. They operate across the region, and many are growing fast. They have wealthy parents, too: corporate backers and joint venture partners include incumbent local banks, global banks, technology and telecommunications companies, and e-commerce ventures, among others. They seek to serve customers with diversified and personalized offerings, and they share key features such as electronic client servicing, a comprehensive digital infrastructure underpinning their operations, and 100% digital delivery to customers. As the digital insurgency gathers force, incumbent banks face pressure to upgrade their own digital capabilities to cater to evolving customer expectations. Some have taken conservative approaches, typically seeking to improve existing digital operations. Others have moved more aggressively, launching standalone digital businesses that target new or existing customer segments with independent operations. Competition for market leadership remains wide open in most countries, although national requirements governing which ones can play vary. In all markets, though, a strong corporate ecosystem (including a customer base) and good branding are important assets for new banks to have at their disposal.