In the next three years, Asia will see more than fifty new digital banks that will completely change the financial services landscape. That’s just the beginning, GFT’s Christopher Ortiz says. The region will also see broader adoption of blockchain technology with new private exchanges, multi-currency e-wallets and digital assets.
Some of the incumbent banks understand that a technological revolution is inevitable and are working on a digital reshaping of their offering, with broader cloud adoption, end-to-end digitalization of processes and a revamped user experience. What’s interesting is the focus remains predominantly on the retail offering, while the institutional and wealth businesses are trailing behind, weighed by the concept of personalized relationships.
While this remains true for the current core client base of the top wealth managers, some wealth players are underestimating the impact of the transfer of wealth to the next generation, who despite not being digital natives have already adopted a complete digital lifestyle.
Some of the most prestigious Swiss private banks understand the impending evolution and have already started a deep transformation of their offering and services with a digital mindset, to smoothly transition to a real personal digital experience. Asian wealth institutions are poised to start this process and revisit the impact of these new services on their current revenue streams.
This is no longer about providing digital channels; that was the goal of the past ten years. The challenge is to reshape business models and create revenue-generating digital processes and services. It is estimated that cloud migration can help financial institutions reduce 80 percent of their mainframe costs, but this is not a short migration process it could take several years. As such, our recommendation to CIOs is to start embracing the cloud and initiate the migration as soon as possible.
By 2025, most banking services will be completely digitalized. Multi-currency e-wallets with multiple central bank digital currencies and stable coins will replace physical currency, and the broad tokenization of investment assets and real state will be a reality, while most cross-border transactions will be booked on DLT technology. Financial intermediaries will also have reinvented themselves.
Banks, as we know them today, are undergoing a fundamental change to become IT platforms with a banking license. However, the overall readiness of current financial services incumbents is under par. With some exceptions, the risk-aversion mindset is likely to prevail, and the lack of a transformational change mindset will stretch the profitability and long-term survival of key incumbents.
The median age in Asia is around 30 years old, and about 70 percent of the region’s population is underbanked. The scale and challenges are unprecedented.
In addition, If we look at the amount of unserved retail wealth in Asia, the opportunities are limitless. Yes, Asia will witness a revolution. Now it’s up to the incumbents to jump on the wagon and help drive it.