McKinsey: Thailand lags peers in e-banking
Digital banking penetration in Thailand rose 200% in the last two years but still lags behind Asian peers, according to an April survey by management consultancy McKinsey & Co.
Digital banking use in Thailand stands at 36%, more than two times that of 2014. But the median is around 97% for developed Asia and 52% for emerging Asia, according to the survey of 17,000 respondents from 15 Asian markets.
Close to 60% of Thais not using digital banking today are likely to adopt digital options soon, McKinsey predicts.
In other emerging Asian countries, nearly half of respondents not using digital banking today are likely to do so in the future, according to the company.
About half of customers in Thailand would consider opening an account with a branchless digital-only bank, and those willing to bank digitally would be willing to shift more than a third of their total wallet to the digital account.
This is good news for e-commerce and associated industries.
The percentage of digitally active customers (those who use digital banking on a fortnightly basis and have made e-commerce purchases in the last six months) has grown 2.6 times (to about 16% in 2017) since 2014.
The percentage of digitally active has doubled in emerging Asia and increased 1.2 times in developed Asia.
Furthermore, digitally active consumers bought 1.3 times more products than their non-digital counterparts in the past 12 months and own 1.5 times more products, which may indicate a link between digital engagement and value generation, McKinsey said.
Digital banking penetration has grown 1.5-3 times in emerging Asia since 2014.
Smartphone banking penetration has grown even faster, logging a 2- to 4-fold increase in many emerging Asian markets.
For banks, these changes represent both a challenge and an opportunity, according to McKinsey partners Vinayak HV and Sonia Barquin.
“What’s clear is that they cannot rely on their existing business models and need to consciously invest to change their businesses in line with consumer sentiment and behaviour,” Ms Barquin said.
“Many are already doing this or looking to partner with fintech businesses at the risk of being left behind.”
For many fintech businesses, the challenge remains one of education and delivery of their products, Mr HV said.
There is a clear shift in Asia towards digital channels for daily transactions.
Bank branches now account for only 12-21% of monthly transactions, and customers prefer digital platforms for simple, routine transactions such as checking their balance, peer-to-peer transfers and bill payments, according to Ms Barquin.
A majority of Asian customers, however, still use the physical branch for transactions they consider complex.
“For Asia’s banks, this means that as they evaluate their branch networks they need to think about more than simply footprint,” Mr HV said.
“They also need to shift branches from purely transactional points to interaction hubs that meet customer needs for financial advice and sales of more complex products like investments.”