Financial Times research highlights the need for banks to digitalise

There has been a huge increase in the use of e-wallets and payments via smartphones and QR codes

The "Evolve or be extinct" report was conducted by FT Focus and surveyed over 500 senior banking executives globally to gain insights into their perception of the banking industry, now and in the future.

The results illustrate the urgent need for banks to modernise their offerings, with 58 per cent of global respondents predicting they will completely cease to exist in the next five to ten years unless they change their business models.

Looking more closely at the Asia-Pacific, the FT Focus report indicates that the region is lagging behind other regions on transformation, however, Asia-Pacific banks are taking steps to "catch up" to the rest of the world, with plans to increase investment in big data, machine learning, and blockchain at significantly higher rates than other regions.

According to Myles Bertrand, Mambu’s managing director in the Asia-Pacific, the research illustrates how the banking industry is diverging on its approach to digital transformation.

“While less than one-third of Asia-Pacific banks describe their digital transformation strategy as mature or advanced, there’s an emerging cohort of digital ‘evolvers’ that is bucking this trend and really leading the way,” said Bertrand. “These forward-thinking players are setting a blueprint for the rest of the industry to follow while demonstrating the business case for a customer-centric approach. Banks in the region also need to change the way they approach innovation, and start proactively embracing new partnerships and collaborations.”

Pham Quang Minh, general manager Vietnam at Mambu, added: “What we are seeing in Vietnam in particular is that it’s increasing demand for online and mobile banking services from consumers that is driving the digital transformation of banks. Online transactions in Vietnam for the first four months of this year jumped 66 per cent compared to the same period last year, which has been accelerated enormously by the pandemic.”

In Minh’s words, there has also been a huge increase in the use of e-wallets, payments via smartphones and QR codes, and high demand for "instant credit" solutions such as Buy-Now-Pay-Later, particularly amongst those segments of the population that remain unbanked or underbanked.

“Vietnam’s consumers are demanding digital financial solutions and our industry is rising to the challenge, with banks like Timo, TNEX, and Cake at the cutting-edge of digital banking gaining attention around the world. This is an exciting time for Vietnam, but as this research report shows, those banks that are reluctant to take a digital leap risk becoming extinct,” he said.

Globally, two-fifths (40 per cent) of respondents said they intend to modernise to a platform-based offering post-pandemic, working with third party providers to develop plug-and-play banking services run on flexible, independent systems.

Modernising to a platform-based structure and investing in data capabilities are key factors that separate digitally-advanced companies from the rest of the banks.

The report also highlights the slow progress and challenges banks are facing as they move away from traditional and legacy banking services towards digital.

With nearly a quarter of banking leaders describing their digital strategy as either "nascent" or "exploratory", the findings reflect the need for greater collaboration within the banking community, as well as the opportunities for forward-thinking players that embrace innovation through fintech ecosystems.