More Asian consumers going online for banking transactions

Posted on March 06, 2015

DIGITAL BANKING is gaining traction across Asia, a multinational consultancy firm said in a study, with more developed economies in the region leading the shift as emerging markets, the Philippines included, follow suit.

McKinsey & Co., in a report titled: “Digital Banking in Asia: What do consumers really want?”, said there are at least 700 million clients using online banking regularly in the 13 Asian countries included in its 2014 survey on banking habits, with the Philippines lagging behind its peers in terms of digital banking penetration following Thailand and India, and with South Korea, Australia, Singapore, Hong Kong and Taiwan on top of the list.

The 2014 survey was conducted from July-Sept last year and involved about 16,000 financial consumers across 13 markets in Asia -- 750 respondents each in Hong Kong, Japan, Singapore,South Korea, and Thailand; 700 respondents each for Australia, Malaysia, Philippines, and Vietnam; 800 in Taiwan; 3,500 in China; 4,000 in India; and 1,100 in Indonesia.

The survey was conducted via online and in-person interviews in a continuing effort to track personal finance trends in Asia.

“In our last survey in 2011, digital banking was more prevalent among consumers in developed Asia. Our latest findings in 2014 show that in both developed and emerging Asia, digital banking through desktops, smartphones, and tablets has become much more common,” the report said.

“The most recent research shows drastic shifts in behavior... In developed Asian markets, Internet banking is now near universal and smartphone banking has grown more than threefold since 2011.”

In developed Asia -- namely Australia, Hong Kong, Japan, Singapore, South Korea and Taiwan -- McKinsey said that in 2014, 92% of the respondents said they had used digital banking, compared with 58% in 2011. Some 61% of these consumers accessed banking services using smartphones -- up from 19% in 2011 -- while Internet banking had a 92% penetration rate in 2014, from 58%.

Meanwhile, in emerging Asia -- China, India, Indonesia, Malaysia, Philippines, Thailand, and Vietnam -- 33% of respondents said they had used digital banking in 2014, up from just 10% in 2011.

“Behaviors in emerging markets showed a faster shift, although from a much lower base. Internet-banking penetration in these markets rose from 10% in 2011 to 28% in 2014 and smartphone access from 5% in 2011 to 26% in 2014,” the report said.

“Stakes are particularly high” for banks to consider a digital banking strategy, the report noted, as more consumers are using digital banking more frequently.

McKinsey noted that customers in developed Asia connect with their banks over the internet or via smartphone more often than over traditional channels. Meanwhile, in emerging Asia, although traditional channels especially automated teller machines (ATMs) still dominate, customers are using the internet and smartphone banking almost five times more often than in 2011.

Across Asia, consumers also made fewer branch visits and calls in 2014 than they did in 2011.

“Many types of accounts are in play, with respondents saying generally that they could shift 35-45% of saving account deposits, 40-50% of credit-card balances, and 40-45% of investment balances such as those held in mutual funds,” the report further said.

The research also showed that “more than 80% of bank customers in developed Asian markets are willing to shift some of their holdings to a bank that offers a compelling digital proposition,” McKinsey said, adding that in emerging Asia, “more than 50% of consumers also indicated such willingness.”

McKinsey added that the survey results suggest that banks should use online platforms not just to present selected products and services “but also to create improved customer experience across the full product portfolio by taking advantage of online technology.”

The rise of digital banking, McKinsey said, has been anticipated for many years, but a much stronger ecosystem to enable digital banking -- the increase in internet and smartphone adoption, growth in e-commerce included -- has pushed the accelerating demand for internet banking.

“The trend toward digital banking is unlikely to stop... In one indication, across Asia, more than 80% of the survey respondents have purchased goods or services online. In addition, a large portion of the Asian consumers surveyed said they were open to using an online bank with no physical branch system, at least for some of their businesses,” it said.

The study further showed that in developed Asia, 72% said they would consider using a pure online bank, while only 44% of respondents in emerging Asia said the same, McKinsey added.

However, despite the “rapid shift” toward digital banking, physical banks -- branches and ATMs -- “will retain an important role in banking across Asia for a foreseeable future,” McKinsey said.

It noted that consumers “are using multiple channels, rather than turning solely to online or branch services” including sealing the deal, regulatory necessity, and sense of security.

“Incumbents and entrants alike will have to balance needs of consumers and regulators for a physical presence against the cost and reach advantaged of digital services.” -- Imee Charlee C. Delavin