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Banks feeling the pressure of the digital revolution

Banks in Asia-Pacific are looking to digitise banking to remain ahead of new competition and win customers, according to a new report by Temenos, the banking software company.

The Economist Intelligence Unit (EIU) report, conducted on behalf of Temenos, titled ‘A Whole New World: How technology is driving the evolution of intelligent banking in Asia-Pacific’, found that competition is increasing between established retail banks and the technology and ecommerce disruptors that are offering new payment solutions.

Tech companies such as Google, Facebook, Apple and payment tech companies such as WeChat Pay, Alipay and PayPal are viewed as the biggest threat to APAC bankers (60%), followed by neo-banks, like Volt Bank, Varo Money, Monzo (25%).

With these threats top of mind, 37% of Asia-Pacific bankers see mastering digital marketing and engagement as their top strategic priority by 2020. Migrating client usage to digital from physical channels is the top priority by 2025 (29%).

Temenos managing director APAC Martin Frick says, “Asia-Pacific bankers are acutely aware of the race they find themselves in against technology giants that have the capital and scale to take market share from established players.”

Frick says, “Neo-banks are not far behind and have the flexibility to outmaneuver major banks on the margins. To remain relevant, retain customers and appeal to the evolving demands of younger generations, banks must master digital engagement, and quickly.”

The report also found that as digital technology regulation in Asia-Pacific catches up to the rest of the world, 37% of bankers believe that this emerging regulation in areas such as data protection and digital taxation will have a significant impact on the banking sector.

Regulation across the region has developed at different speeds, the report states. In Australia, open banking is being driven by the government to increase competition within established regulations and frameworks.

In other parts of Asia-Pacific, including Singapore, open banking is primarily being driven by organisations as they look to remain competitive, and results in retrospective regulation.

The report also highlights China, where tighter licensing and data protection rules have been established to reduce Alipay and WeChat Pay’s dominance across the broader region.

The report states that new technologies such as AI, machine learning, and blockchain are viewed as the dominant trend that will have the biggest impact on retail banks by 2025. For 37% of respondents, emerging data regulation will have a major impact on the banking sector.

Furthermore, the main concerns about open banking are the ability to capture customer data (34%) followed closely by a third-party relationship vulnerability being exploited (31%) and an inability to protect against cyber-attacks (31%).

The Economist Intelligence Unit surveyed 400 global banking executives about the challenges retail banks expect to face between now and 2020/2025, and the strategies they are deploying in response. Just over half (51%) of respondents were at C-Suite level and 10% were board members.

The APAC report was based on roughly 100 respondents from the Asia Pacific region and was supplemented with in-depth interviews with senior executives from leading banks in the region.

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