Welcome back to another episode of Continuous Improvement, the podcast where we explore the ever-evolving landscape of the banking industry and discuss strategies for staying ahead in the digital age. I’m your host, Victor, and today we’re diving into the challenges faced by large banks in the Asia-Pacific region as they contend with the rise of digital banking.

The adoption of digital banking is on the rise globally, driven by changing customer expectations and increased digital penetration. The COVID-19 pandemic has further accelerated this trend, creating an urgent need for change. In this episode, we’ll take a closer look at how traditional banks in the Asia-Pacific region are responding to competition from emerging digital banks.

Let’s start with Hong Kong. Large banks like HSBC are feeling the pressure from virtual banks. Despite being a late entrant into the digital banking space with their PayMe mobile application, HSBC has managed to amass an impressive 68% market share and two million users. To compete with newcomers, many of Hong Kong’s traditional banks are intensifying their digital transformation efforts and even eliminating or reducing fees.

Moving on to Malaysia, concerns arise about the underinvestment in technology by traditional banks. With nearly 200 FinTech startups reported as of April 2019, the rapidly developing FinTech sector is changing the landscape. E-wallets and payment services are seeing significant growth. However, traditional banks must adapt to keep up with the incoming virtual banks.

Thailand is also well-positioned to become an ASEAN FinTech hub. Despite 22% of the Thai population being unbanked, digital payments and peer-to-peer lending platforms are targeting this segment. Mobile and internet banking transactions have grown rapidly, with mobile banking expanding at a remarkable 123% Compound Annual Growth Rate from 2014 to 2018.

It’s not just the Asia-Pacific region experiencing the shift towards virtual banks. Regulatory bodies elsewhere, like the Financial Supervisory Commission in Taiwan and the Monetary Authority of Singapore, have recently approved new virtual bank licenses. The Philippines, Vietnam, and Indonesia, with their large underbanked and unbanked populations, present compelling cases for the introduction of virtual banking.

Even in cities like London and New York, where tier 1 banks have dominated the market, change is on the horizon. JPMorgan Chase, for instance, is entering the UK market with a digital-only lender, marking a significant move for the bank. New York, albeit slowly, is witnessing digital banking trends similar to the Asia-Pacific region. The demand for new products and instant payments is growing, challenging traditional banks to adapt.

Meanwhile, in Tokyo, the Japanese FinTech market is booming, with revenues expected to reach HKD80 billion by 2022. Top-funded FinTech applications in Japan mainly focus on cryptocurrency, investment management, and trading. The declining and aging population has affected overall banking industry profits, prompting banks to explore new avenues for growth.

Digital banking is experiencing significant growth in large markets worldwide. However, traditional banks, initially slow to adapt, are now faced with the task of navigating a highly regulated and complex landscape. The scarcity of digital talent further heightens the need for established banks to adapt quickly to protect their market share against emerging challengers.

That’s it for today’s episode of Continuous Improvement. I hope you found our discussion on the challenges faced by large banks in the Asia-Pacific region enlightening. Stay tuned for future episodes where we’ll continue to explore the evolving world of banking and discuss strategies for staying competitive in an increasingly digital world.

Thank you for tuning in, and until next time, keep striving for continuous improvement.