7 Banking Trends in APAC

The economies in the Asia Pacific region are undergoing considerable transformation and so is the banking sector of the region.

Over the past decade, the banks based out in the Asia Pacific region have emerged as extremely competitive and have outperformed their global peers by a huge margin.

APAC-based banks are on the forefront when it comes to adopting new technologies, implementing robust policies, offering value-added products and services, and remaining abreast with the innovation in financial technology space.

Let’s take a look at the seven banking trends that are in store for the Asia Pacific region:

1. Digital leadership by 2020

A survey conducted by EY on banks and financial institutions across the world found that above 50 percent of the lenders in the Asia Pacific region envision to become digital leaders by 2020. As high as 22 percent of lenders in Singapore aspire to be digitally mature in the next year.

This is because the APAC region has a far greater penetration of mobile and digital technology and the people adopt the technologies in far greater number compared to the other regions in the world.

Lenders in the developed APAC regions such as Singapore, Hong Kong, and Australia state their foremost priorities for the year is to develop partnerships with financial technology companies and invest in technology to reach out to customers and enhance risk management.

Lenders in the emerging APAC regions such as Indonesia, India, Malaysia, and mainland China are looking to implement a digital transformation program, achieving efficiencies in leveraging technology, and increasing data and cybersecurity.

2. A considerable rise of Islamic finance in key Islamic countries

The APAC region accounts for nearly 25 percent of the international Islamic finance market. Islamic finance institutions in Malaysia represent almost one-quarter of the finance sector. Kuala Lumpur, the capital of Malaysia, leads in Sukuk issuance with 44 percent of the total Islamic bonds issued in 2016 all over the world and is the headquarters of the Islamic Financial Services Board. Other rising Shariah-compliant finance markets include Pakistan and Bangladesh that collectively account for over 15 percent of the overall banking assets.

Despite its huge Muslim population, Indonesia is lagging behind in the adoption of Islamic finance as in 2017, Islamic finance markets make up just 5.5 percent of overall banking assets. However, the potential of the Shariah-compliant finance is huge in the country and authorities are devising a plan to develop the sector with the aid of the Malaysian model.

3. Evolution in digital banking

The banks and financial institutions in the APAC region are projected to invest $19 million to build more than 40 light digital branches in high consumer traffic centers. Moreover, latest technology enables banks and financial institutions to enable customers to avail self-service facilities and enhance in-branch engagement. A majority of Fintech companies have the benefit of being extremely specialized, offering lucrative alternatives to banking products and services.

4. Boosting of the workforce in wealth management and investment banking domain

Many lenders in the APAC region, as well as global players, are eyeing to boost their wealth management and investment banking staff to serve its wealth management and investment banking customers better.

For instance, HSBC Holdings would be hiring wealth management staff, both external and internal, and include advisers, product specialists and relationship managers to its workforce.

5. Employing open innovation for survival

Lenders in the APAC are looking more employing open innovation so that they will not only survive but thrive in the uncertain times. All five major Chinese lenders have partnered with technology firms to spur innovation.

For instance, the Bank of China is working closely with Tencent on a cloud platform, developed by the latter, which will offer the facility of funding solutions and internet banking. China Construction Bank has introduced the country’s maiden unmanned bank that is equipped with a virtual reality room, facial-scanning software, hologram machine, chatbots for welcoming customers at the entrance and answering their queries by the use of voice recognition.

6. The rise of non-financial tech firms and popularity of cashless transactions

Even though banks and tech firms share a symbiotic relationship, the advent of cashless transactions and mobile payments system have made tech firms as the biggest competitor of banks in the APAC region. Also, tech firms are leveraging the big data to venture into most financial areas from wealth management to insurance and microlending.

Companies such as Alipay, Tencent, Paytm, among others have entered the mobile payment scene a long back and it has proved to be a game changer the way transactions have been done until that time and it also made the concept of carrying cash obsolete.

7. Possible use of blockchain in the banking sector

The blockchain is expected to make considerable progress in the banking sector and lenders in the APACregion are gearing up to leverage the blockchain technology the best possible way they can.

Last year, a consortium of lenders Japan-based Mitsubishi UFJ Financial Group (MUFG), Singapore-headquartered OCBC Bank, and UK-based HSBC Bank partnered with the Infocomm Media Development Authority (IMDA), one of Singapore Government’s agencies, to successfully rollout Southeast Asia’s first Know-Your-Customer (KYC) blockchain.