While digital banking penetration has doubled in emerging Asia, there is still an untapped opportunity, according to a McKinsey report.
McKinsey’s latest Asia Personal Financial Services survey, covered around 17,000 respondents from 15 Asian markets.
The report found that digital banking penetration doubled in the region, growing 1.5 to 3 times since the last survey in 2014.
Nearly half of emerging Asian respondents, however are not using digital banking but are likely to do so in the future, meaning digital banking penetration in the region is expected to accelerate significantly.
The penetration of digital banking in emerging Asia is 52 per cent, with higher rates for younger and affluent/ mass-affluent segments.
Those not currently using digital banking are likely to use digital banking over the next six months, the report found.
Digitally active consumers also purchase more products. The research found that this segment bought 1.6 times products compared to non-digital consumers in the past 12 months and own 1.1 times products indicating a strong correlation between digital engagement and value generation.
This result is consistent with RFI Group research which found that the average number of banking products held by digitally engaged customers is 3.8 compared with 3.3 for less digitally engaged consumers.
“There is a big opportunity to tap into this segment, especially for those customers who have a smartphone and are already using social media and e-commerce,” McKinsey partner Sonia Barquin said.
Rethinking the models
In fact, the survey, found that Smartphone banking is outpacing all other types of digital growth, jumping two-to-four-fold in many emerging Asian countries.
According to the global consultant, this trend and the continued shift to digital banking highlights the challenges for traditional banks in the region and the opportunities for their online-only counterparts.
Barquin said that the larger banks in Asia are using one or both of the following strategies.
Firstly they are digitising their existing operations and customer servicing and secondly, launching new digital-only businesses.
“In order to compete on specific segments or to expand to new markets, banks are looking at digital-only propositions,” she said.
“What’s clear is that they cannot rely on their existing business models and need to consciously invest to change their businesses in line with consumer sentiment and behaviour.”
Those who lead in the region include digital-only players who have achieved significant scale such as Alibaba, WeBank, Paytm and more recently, KakaoBank.
“Successful digital-only players include an integrated proposition leveraging beyond-banking ecosystems, including a strong digital credit proposition, convenience and attractive pricing.”
For the full report, read the May edition of AB+F