Survey Reveals Rising Shift Towards Digital Banking, Increasing Competition for Traditional Institutions
A recent survey has revealed that over 70% of consumers in Singapore are open to switching to digital-first banks, signalling heightened competition for traditional banking institutions. While established banks have been enhancing their digital offerings, many have yet to convert increased customer interest in digital products into actual sales, according to a McKinsey report released on Friday.
In the Asia-Pacific region, despite a clear willingness to use digital platforms, only 20-30% of respondents have actually purchased banking products, such as savings accounts, loans, or credit cards, through mobile apps or online channels. This discrepancy between interest and action is largely due to banks offering limited digital solutions and failing to engage effectively with digital customers, McKinsey suggests.
This gap creates an opportunity for new digital-only players to capture market share. Many of these virtual banks are backed by consortia with diverse expertise across banking, fintech innovation, media, and analytics. For example, Mox Bank in Hong Kong, a joint venture between Standard Chartered, PCCW, HKT, and Ctrip Finance, leverages capabilities in banking, telecom, and entertainment to provide a wide array of financial services.
In Singapore, tech giants like Grab and Singtel, along with Sea Group, have been awarded full digital bank licenses. These banks are expected to begin operations early next year. The growing momentum for virtual banking is evident, with over 500,000 customers joining Hong Kong’s virtual banks by mid-2021.
To remain competitive, traditional banks must offer a comprehensive range of services through digital channels. According to McKinsey, these services should provide intelligent customer experiences that anticipate needs, offer personalised solutions based on customer behaviour, and ensure a seamless omni-channel experience across digital and partner ecosystems.
While some banks in Asia have struggled with the disruptive impact of digital banking, others have successfully adapted. For example, DBS Bank has strengthened its market position through extensive digitalisation, and its digital segment has achieved significantly lower costs compared to its traditional business. Similarly, the State Bank of India (SBI) launched its digital platform, Yono, in 2017, which has rapidly grown to 24 million accounts by mid-2020.
In Thailand and Indonesia, Singapore’s UOB has also launched its digital bank, TMRW, targeting the digital-savvy generation. As digital banking continues to gain traction, incumbent banks will need to manage the costs associated with legacy systems while investing in new technologies and acquiring digital skills to stay relevant.
