Regulations impacting the digital banking sector in the APAC region.

An overview of what the future holds for digital banking in the APAC as new regulatory frameworks are introduced over digital banking foundations.

FREMONT, CA:From Singapore to Mumbai, Asia's digital banking ecosystem is as technologically complex as it is culturally diverse. The region's increasingly recognized reputation as a pioneer in banking innovation is the one consistent factor. According to McKinsey's recent Personal Financial Services (PFS) Survey, emerging market usage of digital banking has caught up to that of developed countries. Furthermore, nearly nine out of ten consumers in the APAC region's emerging and developed markets use digital banking and the majority are receptive to acquiring more services through digital channels.

The Covid-19 pandemic has bolstered the strength of digital banking in the region and given the sector the fuel it needs to mature. A new wave of regulatory intervention in the field has aided this, generating trust and credibility that both consumers and financial technology providers are successfully using.

The banking business in Asia is in the midst of an evolutionary transition, according to Jayant Bhatia, chief product officer of Mox Bank. Demanding customers, as well as the requirement to give rapid access to daily banking, payments, lending, and investing, are major reasons in this evolution, added Bhatia. Furthermore, digital needs have escalated with how clients shop, work, and bank as a result of Covid-19. Personalization offered digitally and with simplified customer experience would be the major differentiator.

Although the region has developed a wide range of regulatory approaches to digital banking, the introduction of digital banking across Asia has been largely driven by market-led regimes seen in Indonesia and Malaysia and the regulation-led approach exemplified with great success in Singapore.

Many governments including Malaysia and Singapore have issued digital banking licenses, allowing non-bank challengers to enter the market and adding a new layer of competition for financial incumbents. While technical developments have allowed digital banks to expand at breakneck speed across Asia, concerns about their ability to manage risks while remaining profitable have been raised, and regulators appear unyielding in their demands that firms meet regulatory standards.