By Erich Gerber, Senior Vice President EMEA & APJ, TIBCO Software Inc.,
The development and penetration of the financial sector in local Asian markets confirms that the future has arrived in the region. Taxis, groceries, and all types of other goods and services, can now be paid for from devices that fit into the palm of our hand without a physical exchange of cash. Soon, transactions will become even simpler as an open banking model takes hold and fosters more innovation through integrations with third parties.
The digital age is truly redefining how banking services are delivered, the types of businesses offering these services, and consumer expectations of the services they receive. In the Asia Pacific region, fintech startups, digital-only banks, and companies outside of the financial services sector have taken an early lead in offering services to attract the region’s rapidly-growing, savvy middle class. Legacy systems and obsolete regulations are making it difficult for traditional banks to compete in this environment. However, a key advantage that these banks have is their customer data, which is essential to survival in the digital economy.
Asia Pacific leading financial sector evolution
Asia’s emerging markets are quickly becoming major engines of growth and innovation in global banking. McKinsey estimates that as incomes rise and the share of middle class households expands to two-thirds, personal financial assets in the Asia Pacific region will total USD 69 trillion by 2025, three-quarters of the global total. Over 77 percent of these customers prefer digital banking over visiting physical branches for an increasing variety of services. This is especially true in mobile-first countries like China, India, Thailand, and Indonesia.
Established models in banking have also become obsolete, as innovators such as Alipay and WeChat Pay help to reorganize economic activity around new models to address the explosion of the e-commerce sector. For banks to match these nimble, non-banking competitors, they must rely on data and its internal management to support the introduction of new services. Cross-selling and referral opportunities become easier to identify when high-quality, secure data is available. Technology solutions to address data management not only optimize customer acquisition, but also simplify compliance.
This year’s pandemic and travel restrictions accelerated the development of these digital services among traditional banks to enable data-driven customer experiences that reflect a clear understanding of their purchase journey and preferences. In Thailand, KBTG bank resolved data issues that prevented them from offering the digital banking choices that would fit their customers’ lifestyles. Now, its 16 million retail banking customers can perform all activities on a mobile device and it handles up to 10 million digital transactions per day.
A modern approach to banking services
Open banking, which is enabled by a series of technology solutions, regulations and services, takes digital services a step further. It allows faster, more secure transactions to take place anywhere in the world through third parties. Consumers gain more choices, better service, and the opportunity for frictionless commerce. With a click or voice command, they can send money and gifts using social media or a payment platform. API-connected integrations effectively remove the extra steps of logging into the account on the bank’s website to enter payee details. However, concerns about data breaches have prompted the creation of regulatory frameworks to facilitate development with minimal risk. Singapore, Hong Kong, and Australia have taken an early lead in embracing open banking, and developing markets in the region are not far behind.
The banking industry, and the traditional model that it has relied on for decades, is transforming to address the modern, digital world. Leveraging data to improve customer experiences allows banks to build loyalty among mobile-first customers. Competition from non-traditional banking players and the emergence of open banking systems are industry forces that are too powerful to deny. Adopting new technology solutions with data as the backbone driving growth is critical if incumbent institutions want to stay around to witness the next 100 years of banking innovation.