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How Asia is reinventing private banking

Asia reinventing private banking
ATMs of different Thai banks, Bangkok, Thailand (Source:

Foreign leaders, as well as top Asian institutions from the private banking industry, are looking to spread coverage in Asia. Emerging markets of Asia have become a major engine of growth in the private banking industry. 

The post-pandemic period not only encountered normalized economic conditions but also saw an immense growth of financial services in Asia. Recent shifts in consumer behavior, especially due to the pandemic-induced lockdowns have led the way for the transformation in Asia’s private banks. Moreover, the virus crisis not only accelerated the need for international cooperation but also shifted supply chains, as many companies may seek to bring their businesses closer to home. This led to high retained earnings levels and mature digital transformation in the private banking industry.

On the other hand, key drivers such as changing lifestyles and rising demand for convenient services have led the banking industry growth in Asia. This has resulted in financial inclusion becoming a top priority for bankers. 

Deloitte’s report on emerging markets in the Asia-Pacific region (China, India, Indonesia, Malaysia, Thailand, and Vietnam) suggests that these markets are expected to grow faster than mature economies. Adding that this will offer considerable opportunities for banks, insurance companies, and fund managers to increase global market share.

The majority of the Asian markets are emerging economies having large populations with low financial literacy, Choice Capital Advisors said in a note. It added that governments all across the South East Asian region have been making efforts to capitalize on their large population by increasing financial literacy. Hence, consumer finance and all its allied sectors are a huge honeypot for global investors. 

Journey to financial inclusion in Asia

The expansion of the private banks in Asia, specifically in China, has benefited from favorable market conditions. Private Banks improved value creation for their businesses by widening their target customer groups and increasing focus on developing efficient digital capabilities to cater to mass markets.

China’s banking industry alone is now larger than that of Europe’s, according to analysis from Deloitte. China also boasts four of the world’s 10 largest banks. China’s new ownership rules allow global investors to set up wholly-owned onshore arms to provide banking services and distribute funds. Earlier, even billion-dollar banks and asset managers faced major hurdles in trying to gain access into Chinese grounds.

India, for instance, has allowed non-bank service providers direct access to the Unified Payments Interface, a system that allows multiple bank accounts to be connected with a single mobile application. Meanwhile, Hong Kong and Singapore have recently introduced new procedures for licensing digital-only banks. Among others, Australia and Singapore⁠ adopted open banking rules. This allows qualified third-party service providers to access account information and initiate transactions on behalf of customers.

Banking for the unbanked

Traditional banks are rebalancing strategies that are likely to give poorer people access to financial services. Forward-thinking private banks combined with potential new entrants in Asia’s financial market have played a significant role in defining industry standards. 

Private banks have been experiencing a period of growth this year. Amid large swaths of underbanked people and businesses, Asia, more specifically China, has led the ‘Banking for the unbanked’ revolution. Pandemic-led financial inclusion of the unbanked is changing the way of many governments and businesses work. Lack of electronic funds access and quick access to cash via debit card became major concerns. Especially, when it came to accessing the unbanked populations for providing funds and stimulus.

A recent McKinsey report suggests that over 40 banks among the top 100 largest banks by asset size in the world are from Asia, that account for approximately half of the market capitalization globally. The region has been the largest regional banking market for more than a decade. This is driven by the growing wealth in the region as well as the increasing HNWI population and its need for financial advice.

Virtually most unbanked adults live in developing economies. China and India, claim large shares of the global unbanked population because of their sheer size. As per 2017 Global Findex data by World Bank, China has the world’s largest unbanked population with 225 million adults without an account, followed by India (190 million). As of 2014, the World Bank estimated that there were still two billion adults.

With emerging opportunities to engage the unbanked population, tech-savviness by consumers has helped banks to deliver new innovations. 

Digitizing banking in Asia

Technology, data, and digital access have helped the unbanked move into a banked position. Leaders of the private banks in Asia have significantly worked on digitalizing their banking processes. This was through reshaping customer experiences, leveraging efficient, reliable, and cost-effective data infrastructure. 

Some client segments for private banking are particularly keen on the use of digital media, said KMPG in a recent note. It added that millennials for example and Asia Pacific clients, both display a strong preference for online interactions.

Big tech firms have also been muscling their way into financial services in recent years. Firms such as Alibaba, Amazon, Facebook, Google, and Tencent have lent $572 billion globally in 2019. This is double the amount of credit extended by fintech firms, at about $223 billion in 2019, according to the Bank for International Settlements. BIS data suggested financial services as core businesses represented about 11% of revenues for Big techs. It added that big techs’ move into financial services has been most extensive in China. They have also been expanding rapidly in other emerging market economies, like Southeast Asia, East Africa and Latin America. 

Private banking in 2021?

As emerging markets in the Asia Pacific region continue their extraordinary growth trajectory, the future of banking increasingly relies on the central role of diverse Asian economies. 

The sector in Asian economies will be expecting continued volatility due to ever-changing dynamics. Private banks in Asia will need to constantly redefine for promising better transaction opportunities and for serving the niche needs. 

Banking politics and regulation will also be playing a bigger role in the post-pandemic economic recovery in Asia. Secular trends change in conduct, political instability and litigation risks could also dent the sector’s attractiveness in these regions. Modification of infrastructure, cybersecurity standards, and regulations are essential banking policies that will help to prepare for the long haul.

Going forward, the situation could worsen in the case of fresh new lockdowns. This can further lead to uncertainty in future earnings and credit costs for banks. Heavy investment, redundant branches, and inflation rate by central banks are also among the major factors that can structural changes. Lending income will also continue to take a beating if interest rates decline.