Digital banking has become a universal and irreversible trend with consumers around the world now happy to access financial services online.
People are increasingly going online to check their bank balances and to make transfers and payments, not least in Asia where economic growth has fueled the rapid expansion of a middle class with more and more disposable income and where consumers have been quick to embrace new technology.
Asia is now home to around half of all internet, social media, and mobile users. Online shopping, remittance services, and mobile banking are flourishing across the region, especially among younger consumers.
That enthusiasm for new digital products and channels, which help make life easier for the average consumer, will have repercussions across all forms of money management in the coming years. The massive shift from in-store to online shopping is a clear example of the extent to which consumers are increasingly willing and comfortable with interacting and making transactions online.
According to data research company eMarketer, the Asia-Pacific region overtook the US in online spending in 2014. This year, Asia-Pacific business-to-consumer online sales are projected to reach US$681.2 billion compared with US$538.3 billion in the US.
Asia also accounts for more than 45% of all online shoppers worldwide – led by China, Korea, and India.
But people aren’t just going online to do their shopping. MasterCard’s latest Online Shopping Index, conducted across 14 Asia Pacific markets in the last quarter of 2014, also shows that approximately 60% of internet users in the region go online to check their bank balances. That is broadly in line with the US where 61% of internet users bank online, according to the Pew Research Centre.
However, there are significant differences between the various markets in the Asia-Pacific region.
While around 80% of adults in Australia and New Zealand go online to check their balances, only 41% in Japan do. And while the figures for the most developed markets have stayed steady in recent years, some developing markets have are showing marked increases.
For example, in India in 2012 50% of those surveyed by Mastercard went online to check their balances but now 65% do. Vietnam and the Philippines have seen comparable increases.
Similar trends were found when it came to transferring money, paying bills, and trading stocks and other financial investments. On average almost 50% of adults in the region go online to transfer money and pay bills, while a fifth trade stocks and other financial investments. Again, Japan lags significantly behind while Australia and New Zealand are out in front.
There is now a clear demand – and, crucially, the capacity – for digital banking across Asia. It is time for banks to re-think their strategy and to position themselves accordingly. The shift online will bring many benefits, presenting an opportunity for direct banks to offer specialist branch-light services for specific segments or for universal banks to fundamentally change the way they use their branches and offer streamlined, data-driven customer services augmented by customer-centric on-line capabilities.
A billion-plus opportunities
Today in Asia there are currently 670 million digital banking customers. McKinsey estimates that this will rise to 1.7 billion by 2020 – 900 million of which will be in China. The demand is there but in order to win these new customers banks will need to offer easy-to-use, comprehensive services and market them effectively.
According to MasterCard’s own research, security, value, and ease of use are the key drivers for online commerce. For online banking the same criteria apply but with the additional demand of seamless integration across digital, mobile, and in-branch interactions. The technology for banks to deliver that across multiple platforms (branch, web, tablet, mobile), and as a result improve customer engagement, is already available.
Established banks must take advantage of the data available and learn from best practice or risk losing the next generation of customers in emerging markets to new start-ups.
From contactless payments to mobile-banking, online shopping to remittances, Asia is embracing change. The digital revolution represents a significant opportunity for everyone in the financial services industry.
Asian banks in particular have the capability to lead in building world-class digital offrings as they often operate without the constraints of legacy systems.
First DiBS
The most prominent bank chief executive officer to have made commitments to integrate digital is Piyush Gupta from DBS who has very publicly discussed his digital ambition for the bank and making everyone at the bank “think like a tech company.” And change is happening at DBS. The bank, already a winner of numerous awards for technology ranging from mobile banking to cloud-based technology, has successfully simplified and re-launched its websites over 19 new apps such as P2P platform PayLah! and embarked on a proactive communications strategy on social media.
DBS is partnering with IBM and A*Star, Singapore’s technology research agency, and on top of a declared $200 million of incremental investment over three years launched a bank wide initiative to adopt human-centred design principles, encouraging staff to fully integrate digital tools into their workplace, and is fully committed to competing on an innovation-driven platform.
The digital revolution represents a significant opportunity for everyone in the financial services industry. Those who embrace change and lead with digital will have the competitive advantage to reap the rewards in Asia’s fast-growing emerging markets.
Such a commitment is not, however, a one-time investment. The leaders of the future must be committed to sustained innovation to remain on top. While it was technology legend Bill Gates who most recently observed that people don’t need banks, they need banking, it is leaders like Piyush Gupta who will ensure that it is Asian banks that will be leading into the digital future.
