As they face serious growth challenges, Asian banks have to reinvent themselves to survive in the digital age. What is driving this transition is consumers’ tech-savviness, the rise of fintech, and advances in technology.
McKinsey outlined this in its paper, ‘Future of Asia Banking: How Asia is reinvesting banking for the digital age’, which explores the contemporary status of Asia’s banking industry while recommending how they can be party of the changing digital landscape.
It is now time for financial institutions to employ contemporary tools, capabilities and manpower in data analytics, robotics, artificial intelligence (AI) and machine learning (ML) to augment their revenue and customer satisfaction. These can be employed in four key business areas – wealth management, consumer and SME lending, and transaction banking – which are expected to generate incremental revenues the banks annually.
When it comes to into digital banking in Asia, the McKinsey report outlined that the region will see tremendous advancement in fintech and digital finance. In India, the government has been pushing for digitization of several public sector banks, which in turn work cohesively with fintechs to ramp up the process.
Some examples of this collaboration include State Bank of India’s YONO app, which functions as a standalone digital bank, as well as the National Payments Corporation of India’s United Payments Interface (UPI), which “allows non-bank service providers direct access to UPI.”
McKinsey expects that as regulators consider ways to promote lower costs and better products for consumers, as well as improved system efficiencies and controls, open banking will become the norm in most Asian markets.
“This will undoubtedly increase pressure on the margins and market share of incumbent banks as they go to battle with fintech attackers over payments, lending, and investments. Scale plays a bigger role in this challenging environment, with positive implications for margins, cost efficiency, and productivity, and open banking could prove a boon to forward-looking banks that can leverage their scale and core assets—customer relationships, data reserves, and proven expertise in risk management—to deliver better products, services, and pricing,” the report added.