Opportunities and threats to banks in Asia
In the report ‘Digital Transaction Banking: Opportunities and Challenges’ Deloitte writes that digital adaptation started off “as an option and has evolved into a necessity in every bank’s agenda around the world”.
Among large financial institutions the transformation to become more digital savvy is slow hampered by regulations, legacy systems and people processes. These conditions have opened windows to smaller, more nimble banks, as well as non-traditional banks like Internet banks, to come in, set up shop and take away market share in what would traditionally be banking services and income.
For Mohit Mehrotra (photo right), an Executive Director at Deloitte Consulting, digital presents a multi-faceted opportunity for incumbents and new players to come in.
“It is a combination of a few areas: (a) it is the new segments that you can go after; (b) the kinds of products and services that you can launch to market; and (c) the way you serve clients and the kind of customer service experience you deliver. Banks and Financial Services can use the combination of these three leveraging digital going forward,” he explains.
Other industry sectors like utilities and telcos recognize the opportunities. In 2009 Uganda’s Mobile Telephone Networks (MTN) launched MTN Mobile Money, a mobile payment platform. By end of 2012, MTN claimed the number of users of mobile money transfer had grown to 8.9 million nearly twice the estimated 4.9 million bank accounts as of December 2012. In the Philippines mobile carriers like Smart Communications (Smart Money) and Globe (GCash) are vying for the 105 million mobile subscribers with value-added services like e-wallets.
Mehrotra points to a big gap between the number of mobile phone users versus bank account holders, and says the gap is growing especially in emerging economies. “So from a client access perspective, yes the telcos have the advantage. I think it’s about building end-to-end solutions to address the financial needs of clients. I think that is where a collaboration-led approach is more important than one battling against another,” he adds.
When asked if social media players are getting into the act, he sees these players as more interested in collaborating with financial institutions to see how they can deliver different kinds of products and services.