APAC's New Digital Banks: What does the Future Hold

The digital banks in the APAC region are poised for growth and have the potential to transform the banking industry in the coming years.

FREMONT, CA: Since the Covid-19 pandemic has induced lockdowns, shutdowns and restarts, social distancing, remote working, travel cribs, and environmental factors have resulted in a wider acceptance of digital banking even among more traditional players in the Asian ecosystem.

FinTech has come a long way since its early beginnings in the 1860s with the Pantelegraph used for bank signature verification. It has evolved through various key developments such as the introduction of the Diners Card in 1950, the AMEX Card in 1958, the ATM by Barclays in 1967, and the NASDAQ setup in 1971. With the launch of PayPal just before the millennium, digital-only or neobanks were established in the US and Canada. After the millennium, FinTech and its branch, InsurTech, were utilised by banks, financial institutions, and insurance companies as a supplementary or alternative channel to traditional operating methods in response to Y2K issues.

The subprime crisis in 2008 caused a lack of confidence and stricter regulations for established banks. This created a prospect for small and medium-sized financial institutions to enter the market. Advances in technology, such as mobile devices and faster networks, along with the emergence of Bitcoin and peer-to-peer systems, fueled the growth of FinTech in the Western World. This allowed for cost control and increased mobility in financial services.

Starting in 2014, there was substantial growth in FinTech in India, Africa, and China, driven by the emergence of SaaS software, mobile devices, payments wallets and digital lending. In addition, traditional banks underwent a digital transformation, while pure digital banks and FinTech unicorns, startups, and technology infrastructure firms emerged. The adoption of cloud and cloud-native technology, big data and analytics, artificial intelligence and machine learning, AI-powered chatbots, and intelligent automation were also contributing factors that boosted digital banking, particularly in traditional banking institutions.

The significance of digital banking as it offers various advantages such as improved operational efficiencies, accuracy, and cost optimisation, expanded customer reach, customised services, increased customer satisfaction, agility, scalability, faster time-to-market, and enhanced revenue generation through upselling and cross-selling.

The emergence of digital banks in the Asia-Pacific region is a notable development that has the potential to disrupt the traditional banking sector. These digital banks are leveraging technologies to provide convenient, low-cost, and personalised financial services to customers and businesses.

Several digital banks have already established themselves in the APAC region. These banks have shown promising growth and customer adoption, indicating that there is significant demand for their services.

The prospects of digital banks in the APAC region are bright, as the market is large and growing, and consumers are increasingly embracing digital channels for their financial needs. However, there are challenges, including regulatory hurdles, competition from traditional banks, and the need to continuously innovate to stay ahead.