With the great successes of challenger banks such as Revolut, Starling Bank, Monzo, N26, NuBank, Chime, and many more in Europe and America, APAC is fast following suit as the uprising digital bank hotspot.
Key business advantage is a digital bank’s acquisition rate. With the ability to onboard new customers more efficiently than incumbent banks, digital banks can grow their customer base at a much faster rate than conventional banks. Challenger banks typically offer a digital-first banking experience over a single mobile app to enable transactions and provide support to their customers. Most do not operate physical branches.
In ASIA, first movers of digital banking tech giants Ant Financial and Tencent in China have both launched MYbank and WeBank respectively, making waves in headlines back in 2015. MYbank grew to over 5 million customers whereas WeBank acquired 15 million customers in 2017.
In ASEAN countries, jurisdiction has either drafted, or are in the midst setting up digital banking frameworks to govern the transformation of the entire financial services industry while ensuring relevance and fit to the country.
Hong Kong and Taiwan issued eight and three digital bank licenses respectively in 2019. Meanwhile, Singapore and Malaysia are both preparing issue 5 new licenses each in the last quarter of 2020 and the first quarter of 2021 respectively. Singapore in particular will be issuing two Digital Full Bank (DFB) licenses and 3 Digital Wholesales Bank (DWB) licenses whereas Malaysia is still open for applications for both conventional and Islamic banking.
In Hong Kong, ZA Bank – backed by Zhong An Insurance – went live in March 2020 with an unmatched 6.8% high-interest deposit during the pilot, which started a strong proposition in the market. Ping An OneConnect Bank (PAOB) has recently piloted both retail and SME banking in June 2020. PAOB offers a unique customer journey where no documents required for SME loan approval. Other licensed digital banks such as WebLab, MOX(renamed from SC Digital solutions) and Airstar (renamed from Insight Fintech HK) are also in the pilot trial run. Overall, we see a trend of offering high-interest savings products with lesser or no hidden fee charges. Of course, customer onboarding and easy loan application processing are the 2 mainstream drivers among new digital banks.
Although the minimum paid-up capital required by Hong Kong Monetary Authority (HKMA) is HKD 300 million, Livi, MOX, and ZA Bank started with heavy capital at HKD 2.5 billion, HKD 1.6 billion and HKD 1.5 billion respectively.
In Taiwan, the digital bank licenses are awarded to LINE Financial Taiwan, Next Commercial Bank, and Rakuten International Commercial Bank.
In Singapore, MAS received a total of 21 applications for both the Digital Full Bank and Digital Wholesale Bank license. Among these applicants, strong interest can be seen from China-based companies, with their partnership in consortiums or even single applicants in Singapore. Several of these companies, which include Ant Financial, Xiaomi, and AMTD, are also seen to be applying for digital banking licenses in other countries. Similarly, regional fintech leaders such as Grab and Razer are also showing up as strong contenders in the digital banking landscape.
In Malaysia, BNM is still in the drafting stage, and applications are expected to be opened in late 2020. Both Axiata and BigPay have expressed strong interest while Touch N Go Digital, Grab, and Razer Fintech are seen to be probable applicants. Interestingly, two state governments of Malaysia, Johor and Sarawak, also expressed interest in applying. This adds to a brewing expectation of hot competition for the limited licenses.
Incumbent led digital banks are also gaining traction in ASIA.
DBS – named as one of the best digital banks – launched Digibank in India and followed by Indonesia. Compared to other startup challenger banks, Digibank leverages on DBS’ strong backing, allowing it to offer more comprehensive banking services covering savings, loans, investment, and forex.
Meanwhile, CIMB launched its digital bank, OCTO, in the Philippines. CIMB partnered with GCash, a wallet owned by Globe, the largest telco in the country to aggregate its savings product onto the GCash app. This helped CIMB acquire an astounding 500,000 customers within 6 months.
On the other hand, UOB also launched TMRW in Thailand and Indonesia. TMRW introduced gamification to create a unique mobile-only banking experience where customers level up their virtual city as they advance in their savings progress.
Digital acceleration post Covid-19
The onset of the Covid-19 has drastically shifted consumer behavior from in-person to cashless transactions. Digital transactions via e-wallet, online transfers, and bank transfers have recorded exponential growth whilst countries were in full or semi lockdown.
As the market stabilizes and normalcy gradually makes a return, financial institutions are quick to embrace a new digital normal – expediting their digital transformation to meet the new consumer demands.
Together with the new digital bank entrants, the financial industry in ASIA is bound to witness a new digital revolution like never before.