Digital banking in the Asia Pacific (APAC) is set to be widely adopted with over three in five customers (63%) willing to make the switch to “neobanks” and challenger banks in the next five years, according to the Fintech and Digital Banking 2025report by Backbase and IDC.
The report also found that the region is expected to see 100 new financial institutions by 2025, ushered in by liberalisation of several markets and issuance of new banking licenses.
Also, the coronavirus disease pandemic has brought into question the industry readiness towards digital banking as a significant majority (70%) of APAC banking customers continue to view banking processes as tedious. A result of incumbent banks’ extreme focus on legacy systems and disregarding digital-first integration, only 30% of the banking customer base in APAC are active on digital banking channels.
Today, incumbent banks across APAC are faced with the pressing need to up the ante on digital-first banking due to intensified customers’ need for availability, access, and control of digital channel interactions.
The report found that incumbent banks have not been able to take advantage of potential ecosystem partners as they still hold traditional views of the value chain. Four in every five of the top 250 banks in APAC still prefer to own the entire value chain of banking, with third party-contributed business at a mere 2%.
Meanwhile, the average age of legacy core banking systems in the top 100 banks in APAC remains at 17.5 years, far behind the rapidly developing digital economy of today.
On the other hand, more than 35 neobanks or new digital challengers across APAC are built on agile innovative best practices — way ahead of incumbents in terms of flexibility, self-service capabilities, customer needs, and personalisation.
Consequently, with the emergence of new players and further digital disruption in the industry, 38% of traditional banks’ revenues are at risk by 2025.
“The pandemic has triggered the accelerated digitisation of financial services across the region. Consumers and small business owners alike expect their banks to truly step up their digital game and provide 100% seamless digital capabilities, any time, any place,” said Jouk Pleiter, CEO and founder of Backbase.
“Looking beyond, banks and neobanks have to elevate their digital-first capabilities to effectively enable hyper-personalisation for customers,” said Pleiter.