Digital Banking: The biggest challenge facing FIs in South Asia

Without doubt one of the biggest ongoing challenges for financial institutions (FIs) in South Asia is remaining relevant to customers in the digital banking evolution. 97% of Asia Pacific (APAC) consumers either consider digital channels the best way to interact with their bank, or use it as part of a multichannel offering from banks. This has been further supported by new 5G technology which has been rolled out across various countries in the region such as India and Sri Lanka, encouraging more banks to launch digital banking services and local governments within the region are starting to implement digital initiatives, like the ones seen in Pakistan in 2019. These new technologies and initiatives ensure that customers no longer have to visit a branch to gain access to the essential banking services they need, setting the minimum requirements FIs should offer their customers via their internet and mobile banking channels.

Keeping pace

While the market is undergoing an exciting period of change brought on, in part, by these new technologies and initiatives, many FIs in the region are being weighed down by a lack of connected digital infrastructure and, as such, are struggling to keep pace with market demands. Rather than retain and grow their market share, if they continue on the same trajectory they’re currently on, these FIs are at risk of losing customers to new nimble digital-native, inclusive and customer-centric competitors.

To address this, many South Asian banks are putting greater emphasis on technological advancements that will not only improve their customers’ experience but help to streamline their internal operations. However, the only way to do this effectively is to take a step back and carry out an in-depth evaluation of their underlying payments tech. Once this is done, FIs will clearly be able to identify the software and processes within their business that are holding them back and start to move to a future-proof digital banking service model that enables them to thrive.

Embracing a digital future

The aging, siloed banking systems built decades ago, that many traditional South Asian banks run on, were never intended to support the cutting-edge digital products, services and channels of today. While many FIs are trying to stretch these outdated platforms to comply with new digital regulatory requirements by bolting-on mobile apps or tricking the system to behave like a digital-first platform, this approach is incredibly short-sighted. In doing so FIs are only opening themselves up to increasing maintenance costs, more complexities when running the system and a rising number of points of failure.

Only by investing in an advanced, modern underlying issuing and acquiring payments platform that will actually drive their digital transformation strategy forwards will an FI truly be able to future-proof their business. FIs that choose to take advantage of modern platforms are able to build a coherent vision for their future, move away from offering separated products and services, and focus on providing a better customer experience by delivering an integrated, end-to-end omni-channel digital journey. Migrating to a modern platform will allow FIs to remain competitive and relevant - digital banking is currently experiencing rapid growth in the region, and the share of consumers in Asia actively using digital banking jumping by 88% in 2021 according to McKinsey.

Modern platforms enable FIs to re-engineer their internal processes and procedures, thus increasing operational efficiency, provide a single view of their operations, give them the agility to react to changing market conditions and consumer behaviours, and offer digital-first banking products and services to all. FIs will be able to develop and deploy unique, market-relevant products and services quickly and cost-effectively, as well as adapt, customise and scale to meet new or unanticipated needs. In short, modernising will enable FIs to become nimble – just like the new digital banks with which they are seeking to compete with.

Modernising is key to survival

While most Asian countries currently remain primarily cash-based societies, the tides are changing and it is impossible for FIs in South Asia to overestimate the need for digitalisation in their banking and payments systems with top performing banks in the region doubling their rates of cross-selling via mobile apps and online banking between 2015 and 2019 to 4.2 times that of slow adopters. However, digital transformation goes beyond simply offering customers a mobile app, it’s about end-to-end digitisation, and with digital banks seeking to take market share, it has never been more imperative that FIs modernise their systems before it’s too late. It can no longer be a case of whether to modernise, but when – after all, in today’s landscape, digitalisation is synonymous with survival.

If your business is looking to modernise its payments platform and embrace digitisation, our white paper ‘TranzAxis and the payments industry’ delves into the history and evolution of the payments industry as whole and explores why TranzAxis was built, where it fits into the modern-day payments landscape, and how the financial institutions that utilise the platform are ready to tackle whatever the future brings.