Digital transformation and beyond in Asia-Pac banks
The second edition of ‘Fintech & Digital Banking 2025 Asia-Pacific’ by IDC and Backbase says banking of future will be more customer-driven and platform-oriented:
In the wake of the pandemic and with the momentum for digital transformation accelerating once again, there is a hyperfocus on customer engagement beyond physical branches and customer call centers, says the second edition of ‘Fintech & Digital Banking 2025 Asia-Pacific’ by IDC and Backbase.
The study covers 6 countries in the region, including India, and concludes that it is all about being even more customer-driven and platform-oriented. “More importantly, it is about overcoming legacy technology, embracing new ways of working to be digitally fit and resilient amid the uncertainties ahead, strengthening innovation ‘muscles’, protecting margins and growing revenues,” it says.
5 CHALLENGES
The study lists 5 challenges that force a restart among banks. These are:
Digital Transformation, Again, as banks go back to the drawing board on their digital transformation programs. Each transformation road map has always been unique, but in the post-pandemic world, this is more differentiated, based on the context of the bank and the opportunities it sees in the recovery cycle.
Challengers Challenged with 63% of banking customers in Asia Pacific willing to switch to neo banks or new digital challengers in 2020. As the economic impact of covid deepened, customers stuck it out with traditional incumbents. New challengers will emerge and by 2025, there will be 100 new challengers across the region, with at least 2 digital banks in every Asia/Pacific market that will present a serious challenge to incumbents.
Quality over Quantity as covid has forced a rapid shift of customer transactions and interactions to digital. Asia Pacific banks rushed to meet an average of at least 50% growth of digital transactions. Ensuring the quality of these interactions has remained a challenge.
Temporary slowdown in innovation with banks having to focus on risk as they had to respond to the crisis.
Hunt for Customer Insights as banks were not able to come up with a view of the true state of the customer in 2020.
PRO-INNOVATION INDIA
In the India-specific study, the report says India continues to be one of the most proinnovation banking markets, but banks still struggle to meet the higher standards of availability, reliability, and quality that being digital-first entails.
The highlights of the findings are:
75% improvement to turnaround time of high-impact business processes for banks Seven out of 10 tier 1 and tier 2 banks are aiming for frictionless and contactless banking experience for customers at the time of onboarding, with focus on developing virtual capabilities in customer verification and authentication. 70% year-on-year growth in mobile transactions.
30% increase in spending on analytics and AI/ML technologies as banks build recommendations, facilitation and advice as their business.
OPPORTUNITIES FOR INDIA
India, according to the study has several opportunities:
Modern and Modular Architecture:
60% of banks in India admit to the struggle in offering intuitive, relevant and personalized content through newly-launched digital channels. Banks should achieve agility to evolving digital propositions, with the ability to integrate with third-party functionalities, and add more features to offerings without spending more on core system transformation.
The Super Banking App: As digital transactions grow at an exponential rate, banking-tech partnerships will build emphasis on mobile-platforms to design innovative and personalized customer journeys.
Digital to the Front-end: Banks still see as much as 3% of transactions not going through - presenting a huge gap in service reliability. While banks need to continue investments into the stability of core engines and automation of back-office operations, focus on designing customer-facing digital services takes much higher priority.
The study says the next 5 years is about reaccelerating digital-first. “This will be about success in 2 directions: relentless focus on ‘right-fit’ technology investments and orchestrating hyper-personalization. The banks that will succeed in digital on the road to 2025 will be able to use the right tools, technology, platforms and frameworks that are good for their own unique brand of digital. They will also have to orchestrate hyper-personalization so that personalization happens every single time,” it says.