McKin­sey: Thai­land lags peers in e-bank­ing

Bangkok Post - - BUSINESS -

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.”

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