BUSINESS TECH | Asia Pacific banks revitalize innovation as the pandemic exposes digital gaps

Asia Pacific (APAC) banks are going back to the drawing board on their digital transformation programs.


The second edition of the IDC report, Fintech and Digital Banking 2025 (Asia Pacific), commissioned by Backbase, reveals that Asia Pacific (APAC) banks are going back to the drawing board on their digital transformation programs. Digital banking fitness has been the key factor, with digital banks enjoying three times the growth in customer bases compared to traditional banks.

In response, incumbent banks are reinvigorating digital transformation initiatives, having had to accommodate at least a 50% growth in the quantity of digital customer transactions and interactions. It is expected that organizations will undertake a comprehensive realignment of customer engagement projects, with the report having highlighted that digital capabilities are the key to resilience and winning the race to recover from pandemic-related setbacks.

The IDC report further shows that Philippine banks are embracing the digital revolution hastened by the pandemic, as follows:

• In 2020, the Philippines showed the biggest migration into digital banking in the ASEAN region. In the coming years, there will be a deepening digital relationships, as banks race for product share-of-wallet.
• Banks will partner with fintechs and telcos to improve distribution and availability of offerings, especially for payments and lending.
• 6 of the top 10 banks will launch their own digital banking brands in the Philippines
• 60% of bankable customers in the Philippines are willing to shift to more digital players.

The outlook for the Philippines in the coming years is positive.
• Two digital banks have seen massive growth in new customers and are expected to be on track to grow their customer base by at least 80% every year until 2025.
• Average number of products per customer in the Philippines will rise to 4, excluding products jointly offered by banks and their non-bank partners.
• Banks will deliver new lending and payment products (micro-loans, personal loans, buy-now-pay-later, microinsurance) to deepen the customer relationship.
• Banks will be able to integrate new and current data to improve product offerings and banking services within an ecosystem.
• Unbanked and underbanked segments in the Philippines are expected to cut by half to around 20% of the bankable population.

Other APAC region-wide initiatives that will impact the Philippine banking system include:
• 60% of banks in Asia Pacific will leverage artificial intelligence (AI) or machine learning (ML) technologies for data-driven decisions, for a more humanistic type of customer centricity as the integration of human agents into customer engagement strategies increase.
• Banks will concentrate on digitalizing their core business of lending with some focus, subsequently, on deposits.
• Fintech partners will be a source of new capabilities for banks whereby 50% of lending decisions in retail banking will be supported by fintech propositions.

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