Mobile Banking In Asia Pacific

There are a lot of obstacles to overcome but the benefits for those that can act quickly and open-mindedly will be massive, and that’s exactly why Artificial Intelligence/Machine learning blockchain technology, biometrics and other trends mentioned above will play a crucial role in the future.

Definition / Scope
Market Overview
Market Risks
Top Market Opportunities
Market Trends
Industry Challenges
Technology Trends
Pricing Trends
Regulatory Trends
Other Key Market Trends
Market Size and Forecast
Market Outlook
Technology Roadmap
Distribution Chain Analysis
Competitive Landscape
Competitive Factors
Key Market Players
Strategic Conclusion
References
Appendix

Definition / Scope

Mobile banking refers to the use of a smartphone or other cellular device to perform online/offline banking tasks, such as monitoring account balances, transferring funds between accounts, bill payment and locating an ATM.

Mobile banking was nothing but a SMS banking service. Until 1999, banks offered mobile banking through SMS. Recent advent of smartphones has changed the whole scenario and now mobile banking is a web-based service provided through mobile web. Mobile banking must not be confused with other features such as mobile wallet that allow transactions through mobiles at the point of sale.

Unlike the related internet banking it uses software, usually called an app, provided by the financial institution for the purpose. Mobile banking is usually available on a 24-hour basis. Some financial institutions have restrictions on which accounts may be accessed through mobile banking, as well as a limit on the amount that can be transacted. Mobile banking is dependent on the availability of an internet or data connection to the mobile device.

Transactions through mobile banking depend on the features of the mobile banking app provided and typically includes obtaining account balances and lists of latest transactions, electronic bill payments, remote check deposits, P2P payments, and funds transfers between a customer’s or another’s accounts. Some apps also enable copies of statements to be downloaded and sometimes printed at the customer’s premises.

There are multiple channel through which we can perform a mobile banking.

Mobile Text (SMS)
Mobile Web
Mobile Application
QR Code

Some banks are taking the technology one step further with account rewards confirmation, person-to-person payments (P2P) and, more importantly, remote deposit capture (RDC) capability.

Simply put, RDC is a service allow users to scan checks and transmit the scanned images to a bank for posting and clearing. In the case of mobile banking, a customer takes pictures of both sides of a check and forwards the photos to the bank, which then deposits the funds in the same way as if the deposit was made through a teller. RDC capability means customers have faster access to their money, while automating yet another deposit feature.

Market Overview

Across the APAC region, digital banking has grown at different paces in different markets. In developed markets, digital banking is more widespread. Australia and South Korea lead the region in digital banking activities. Australian banks are early adopters of internet banking and mobile banking, and they have continuously developed user-friendly mobile banking applications to meet the increasingly demanding customers’ digital requirements.

The digital banking penetration in emerging markets such as India, Indonesia and the Philippines is relatively lower. However, these markets have seen stronger increase in digital banking over the past few years. The increasing need for digital banking in these markets is mainly driven by high mobile penetration, low access to banking services and a highly dispersed geography. The unbanked and under banked customers have begun to be served through their mobile devices.

Customers have been continuously migrating routine transactions from traditional bank channels to digital channels. Therefore, many banks are paring down branches and reducing headcount in response to the increase in the digital banking transactions.

Figure below shows the mobile banking activity usage and intention by region. Asia Pacific (APAC) has in the use of mobile devices to check bank balance (52%), pay bills online (53%), and transfer money between bank accounts (45%). depositing a check using the smartphones (13%)

Market Risks

* Cyber crime According to a study conducted by PWC, 45% of Financial Services organizations have suffered economic crime, compared to only 34% across all other industries. Appknox’s study on these mobile apps only reinstated why banks are still a hot favourite for a hacker’s time worth spent. One of the recent cyberattacks that happened at one of Australia’s largest banks in 2016 was done by a malware attack using an Android mobile application.

The virus presented a fake version of the login screen and intercepted the username or account number and password. The sophistication of this malware enabled it to intercept the two-factor authentication code sent by banks.

* Security Appknox, a cloud-based security app solution located in Singapore, has released a report to understand the threats and vulnerability of 106 mobile banking applications in Asia. The report reveals that 85% of mobile banks were vulnerable to high, medium and low security loopholes and over 50% of apps were found to have at least four to six bugs in them.

Here are the key threats to the mobile banking applications that were studied:

13% of the mobile banking applications had broken trust for SSL
15% of the mobile banking applications had Remote Code Execution through the Java script interface
10% of the mobile banking applications had insufficient Transport Layer Protection
12% of the mobile banking applications had derived crypto keys
26% had other threats that could harm the security of their mobile banking applications

The tests were done on banking mobile applications based on the Android operating system and available for use in the APAC on the Google Play Store. The apps were analysed across 14 different threat scenarios that could cause security lapses.

* SMS Spoofing Attack The applications can perform actions that include checking credit or voice mail, calling emergency numbers or customer support, and even performing mobile banking, and typically appear on the phones as a menu or application bearing the operator’s name. Security researchers at Check Point discovered that Chinese hackers are using fake base transceiver stations (BTS towers) to distribute “Swearing Trojan,” an Android banking malware. Multiple incidents relating to SMS spoofing have been found across the APAC.

* Virus /Malware attack Mobile banking Trojans are designed to steal money directly from mobile users’ bank accounts. This type of attack is attractive to cyber criminals looking for an easy profit. Millions of customers of Australia’s big four banks and other banks and financial institutions globally were recently the target of a mobile malware attack (20 banking apps in total).

Top Market Opportunities

* Growing smartphone user In 2017, GSMA reported that more than five billion people were connected to mobile services, over half (2.7 billion) of which are based in Asia Pacific. The downloading of finance applications worldwide has risen by 100% in the past two years, and nowhere more so than in the Asia-Pacific region, where this category has risen steeply above all other app download categories, aside from games.

* Strengthening the multi-channel experience While the digital versions of European banks are still concentrating on the evaluation of products, digital Asian banks are setting up a real multi-channel client experience by bringing together online and mobile device channels on a single platform. This reinforcement is also made via the integration of social networks, largely overlooked by banks, with the objective of co-creation.

* Growth of banking industry Asia’s banking industry enjoyed extraordinary growth over the past decade. Total assets at the region’s banks soared by a heady 70% since the global financial crisis unfolded in 2008. The Asian banking system now houses 40% of total global banking assets, up from 27% in 2009.

* Bank and Fintech Collaboration From Southeast Asia to China to India, fintech is transforming Asian banking by creating new ways for businesses to increase money, modernize cumbersome service channels and bring in once-excluded customers. It is much easier for challenger banks to reach a wider customer base without having to expand their physical footprint. The disruption of traditional banking by fintech presents a brand new opportunity for the unbanked.

In fact, only 27 percent of people in Southeast Asia have a bank account. Countries like Indonesia, Philippines and Myanmar—unconstrained by legacy infrastructure—are moving at breakneck speed and scale to leapfrog the world in digital payments. In the process, these innovators bring more unbanked citizens into conventional banking.

* Innovation Technical and Process innovation are adopted by major banks in APAC. Notably, Citi has recently built an Innovation Lab comprising of a Client Experience Center and a Client Collaboration Center. In the facility, innovative solutions are demonstrated and clients can test them with on-site product experts. Accenture has also opened an Innovation Center for Financial Services in Beijing to showcase their own innovations.

* Good investment in infrastructure by Banks Banks are strongly focused on converting legacy infrastructure to modern systems and architecture for better efficiency and agility. Over 40% of the surveyed banks have invested in enterprise technologies including back-end infrastructure. Banks are also looking for enhanced storage capacity aside from better servers, networks, and legacy platforms

* Government support Strong government support for digital banking in APAC leads a good environment for banks and financial institutions. China is not the only fast-moving adopter of mobile technology. Singapore has the ambition and strategy to become a ‘Smart Nation’, not just financially but in all aspects of society. The evolution driving old-style banking towards digital banking falls within a long term vision. For several years now, Asian banks have been putting digitalization as one of the priorities for top management

Asia-Pacific region are following similar strategies. India, for example, is investing USD31 billion in its Smart City Mission – likely to benefit 100 million Indian citizens. Other countries embracing smart city initiatives include China, South Korea and Indonesia – according to the United Nations Economic and Social Commission for Asia and the Pacific.

Market Trends

* Favorable demographics Demography plays an important part in defining Asia-Pacific’s status as the world’s most innovative financial territory. With a few exceptions, the populations of Asian countries are young and comfortable using mobile and financial technology. This naturally drives innovation.

* Broader access to digital devices The Pacific islands registered strong growth in mobile connectivity. Number of mobile user are increasing rapidly in Asia pacific region.

* Improving network connectivity Digital technologies also have spread rapidly among businesses and governments, with nearly 60% of businesses in East Asia and Pacific having an internet connection, compared with 50% in the rest of the world.

* Cross border payment Cross border payment options boosting the mobile banking in Asia pacific. Country like china and India are excelling them for cross border payment using mobile. One of the first to take part in SWIFT’s Global Payments Innovation (GPI) was the Industrial and Commercial Bank of China (ICBC).

* Cloud Services Innovations in cloud computing technology are driving banks and other financial organizations to focus on more efficient ways to offer trusted, secure, and convenient services to their customers. The cloud is proving to be a superior option to boost capacity to handle data, and is now providing an unrivaled level of agility, security and scalability to banks.

For use cases such as data analytics, batch processing and data storage, banks can access the cloud as and when required, which means they can utilize such resources more flexibly and efficiently.

Cloud computing is also enabling financial institutions to achieve considerable gains in efficiency and reductions in costs, as the technology requires banks to pay for only the services they use. Ultimately, this means that for testing new applications, it is much more cost-effective to do so on the cloud than on existing IT infrastructure

* Cashless trend Market demand and regulatory push may result in the emergence of “Cashless Societies” 2022 onward; mobile payment capabilities are enabling monetization of mobile Internet use

* Remain as traditional banks Especially in developing countries like Nepal, Bangladesh, Cambodia etc., banks are still operating in traditional way because of Lack of clear vision, infrastructure and regulations

* Unbanked customer More than 1 billion people within the APAC still have no access to formal financial services as of 2018— meaning, no official employment, no bank account, no meaningful ability to engage in commerce online or offline. By some estimates, only 27% percent of adults have a bank account, and only 33% of firms have a loan or line of credit. As was highlighted by the speakers at the recent Mastercard-SMU Forum in Singapore, greater financial inclusion must become an essential component of Asia’s economic development.

* Unsecured banking application Mobile banking applications still facing security threat from various sources. Cents like cybercrime, sms spoofing and other digital banking frauds are still occurring cross the region.

* Lack of regional cooperation Regional cooperation is very important to implement the digital banking strategy, but, many countries in APAC is not able to support digital payment regulations and policies because of their unclear vision.For example,Countries from the Asia-Pacific region have been focused on improving their national cybersecurity regulation with more stringent regulatory requirements, but there is yet no clear pathway towards regional conformity.

* Lack of ICT infrastructure Developing countries are still lacking good infrastructure to connect with the bank. For example, 1 billion people in Asia-Pacific still lack internet connectivity or the e-literacy required to fully leverage on opportunities enabled by ICT in Asia pacific.

Industry Challenges

* Customer Experience Still Not Integrated & Centralized Banks are facing rising customer expectations and falling customer loyalty. It is easier than ever for customers to switch banks. User experience is vital in improving customer satisfaction and customer retention

According to Study by Dimension Data, Just 21% of Asia-Pacific businesses think their company has adopted a fully integrated and centralised model for customer experience, even though 91% feel customer experience is an important competitive differentiator.
Another 90% said customer experience is critical for driving loyalty, while 69% said likewise for revenue growth, and 52% said it was essential for reducing cost, found a study by Dimension Data. The survey polled 1,100 respondents from 59 countries.
In addition, 67% of Asia-Pacific respondents believe customer experience was not represented at the board level and, instead, often is the responsibility of lower-level management or multiple managers.

* Payment Apps According to the Economist Intelligence Unit Limited research, payment app tops the chart as biggest competitors for the banks by 2020.

New payments players are driving the shift to digital with emerging payments solutions, including mobile wallets and peer-to-peer (P2P) payments networks, slowly but steadily displacing legacy payment options and cementing themselves in the day-to-day lives of consumers. In China, for instance, Alipay and WeChat, already dominate smartphone payments.

In APAC, mobile payments usage climbed 30% in 2018 and the trend is only going to accelerate in the coming years.

* FinTech It’s no surprise that fintech upstarts in Asia push industry incumbents to change on several fronts, especially in the delivery of customer experiences. Digitally native companies with no legacy challenges rapidly innovate through a cloud-first approach in an app-based world. Asia leads in this regard. For example, Rakuten, an online retail marketplace, isn’t just a messaging app. It also issues credit cards and offers mortgage solutions to more than 95 million users.

Another great example is the world’s tenth largest financial services provider, Ant Financial, the finance arm of Alibaba—which is not even a bank. Originally created to give locals access to financial support through the internet, it morphed into the largest financial services platform in China and aims to reach two billion consumers by 2025.

* Inadequate Infrastructure In many Pacific island countries, difficult terrain and poor infrastructure mean that banks are physically inaccessible for much of the population. Furthermore, the quality and reliability of the ICT infrastructure and system affect the risks of disrupted Service and lost data, and risk of privacy or security breach especially in developing country. For example, poor access to electricity and internet penetration hinders connectivity in India, and may be a contributing factor to slow adoption of mobile banking

Technology Trends

* Artificial Intelligence (AI) and machine learning AI and machine learning is going to redefine all aspects of banking – from the way we interact with customers digitally, to the way we help them make faster and better financial decisions.

One of the largest banks in the Pacific has launched a chatbot app that helps customers with more than 200 banking tasks such as activating their card, checking the account balance, making payments, or getting cardless cash.

Another institution launched a digital virtual banker specifically for business customers, enabling them to receive instant answers and assistance with common banking questions and tasks. The banks’ virtual banker is in pilot mode and available 24/7, providing help with more than 200 common questions related to the servicing of business banking accounts.

* Data Science and Advanced Analytics Big data is now a top priority among senior business leaders in the region. According to an IDC study sponsored by Cloudera, 40% of respondents in APAC said they are deploying or planning to deploy Hadoop in the next 12 months.

Take Oversea-Chinese Banking Corporation (OCBC), an early adopter of big data, for example. With the help of its retail partners, OCBC has been analyzing customer and transaction data to not only better understand consumer spending behavior, but also develop products such as Frank, a suite of financial services targeted at young adults.

* Cloud Services Cloud adoption contributes to improved data analytics, as well as more robust KYC and AML regimes, with organizations better able to detect fraud and criminal activity. Bank are primarily using three types of clouds service:

Software as a Service (SaaS)
Infrastructure as a Service (IaaS)
Platform as a Service (PaaS)

* Open API Open banking, an emerging term in fintech, refers to the use of open APIs that enables third party developers to build applications and services around the financial institution. It implies greater financial transparency options for account holders ranging from open data to private data.

The use of open APIs provides the opportunity for combinations of products and services beyond traditional banking. It also enables incumbent banks to build and launch products more quickly, and probably more easily, than they historically could.

New fin-tech start-ups are coming up with innovative solutions in APAC such as simple APIs to improve customer journeys. With open API, banks can plug and play into the digital ecosystem, building a foundation for “banking as a service”.

* More bank/fin-tech collaborations Cyber security: Building cyber security in the digital and more so in the IOT environment will be challenging, which will demand multilayered security, enabled with analytics insights, bio-metrics and adaptive security measures. New authentication technology is expected to change the way customers transact with their banks. Banks are already exploring fingerprint, iris and palm vein recognition across digital services.

* The rise of Reg-tech Reg-tech, which focuses on helping financial institutions manage their regulatory obligations more efficiently and cost-effectively, has gained attention, particularly in jurisdictions with more mature fin-tech ecosystems, such as Singapore, Australia and Hong Kong.

* Bio-metric security Banks and customers have started to embrace bio-metric authentication technology, as it combines security and convenience. In addition, bio-metric security also helps to minimize the risk of forgetting login details. Going forward, more banks will adopt bio-metrics to validate customers, especially fingerprint-based bio-metrics.

Pricing Trends

Collaboration with FinTech Many disruptors function more in collaboration than in direct rivalry with FIs, helping them innovate quicker and cheaper, explore new distribution channels, or address customers’ needs more holistically.
United Overseas Bank: Singapore United Overseas Bank (UOB) tied up with Chinese FinTech PINTEC to launch Avatec, providing quick and efficient digital credit assessment solution to FIs and other sectors such as e-commerce, telecommunications and retail that offers products such as point-of-sale financing and personal loans to potential customers. These tools harness the power of artificial intelligence, machine learning and anti-fraud algorithms to determine applicants’ credit quality within seconds, targeting the financially excluded in Indonesia and other Southeast Asian markets.
KEB Hana Bank: South Korea Hana Bank partnered with Samsung Electronics to deliver joint FS in mobile certification, payment and settlement; enter foreign markets; and introduce an affiliated reward point systems for customers of both organizations. The collaboration also allows for the bank’s accounts to be supported by the country’s top mobile payment system Samsung Pay.
Macquarie Group: Australia The first Australian-based bank to make its API available to third-party developers, Macquarie strengthened its Open Banking platform via partnership with cloud-based FinTech personal wealth platform, my prosperity in May 2018. This provides my prosperity’s customers access Macquarie’s investment and cash management accounts, and connects their portfolios through automated data feeds to gain real-time, consolidated view of their financial positions.
Credit Saison: Japan Consumer financing company Credit Saison collaborated with ride-hailing company Grab’s FinTech platform, Grab Financial, to offer small-ticket financing to consumers across Southeast Asia. This partnership uses Grab’s information pools to provide alternative data points for assessing credit worthiness, using behavior from the app such as transport movements, geo-location and GrabPay transaction data.
Other Pricing strategies In order to hold their customers and to capture this switching population, mobile banks are developing advanced and aggressive pricing strategies based on a free day-to-day banking, sometimes with least revenue or cash-flow situations, associated to a transparent pricing through unbundled “pay per use” services. This is a win-win situation. On the one hand clients gain transparency and can choose the services they need with personalization, on the other hand banks can charge some services on their real value and thereby generate revenues.

An alternative to attract new customers is cash incentives and partnerships. Many banks offering cash incentives to attract new clients. Big banks are also partnering with the other company. For instance, DBS Bank (Development Bank of Singapore) that proposes an enriched shopping experience with its Indian mobile-only bank Digibank. By pairing up with a VISA virtual debit card, it will give customers access to over 100,000 merchants, relying on a network of partnerships with supermarkets, movie theatres, food brands, high-tech brands, etc.

Also,e-wallets offers discounts, coupons and cash backs that are in adequacy with its customers’ spending patterns

Regulatory Trends

In New Zealand, on behalf of the government, Payments NZ is coordinating an industry pilot of Open Banking with participation from the five major banks (ANZ, ASB, BNZ, Kiwibank and Westpac) as well as Datacom, Paymark, Trade Me and Mirco.

The Monetary Authority of Singapore (MAS) is not compelling banks to share banking data. However, it sees the benefits to Open Banking and is supporting an organic approach to its adoption. In November 2016, MAS and the Association of Banks in Singapore (ABS) published a Financial Industry API Playbook to guide banks and fintechs in developing Open API-based services. Since then, several banks (e.g., DBS, OCBC) have made their APIs available through external developer portals.

In May 2018 following a public consultation on the development of virtual banks in Hong Kong, the Hong Kong Monetary Authority (HKMA) released its Revised Guideline on Authorization of Virtual Bank . Objective of the Revised Virtual Banks Guideline is to build a framework to further develop Hong Kong’s financial industry.

Australia will be implementing a phased rollout of the open banking regime beginning July 1, 2019. Australia’s four major banks (with nonmajor banks to follow) must give consumers access to, and control over, their banking data. This includes data related to mortgages, credit and debit cards, deposits, personal loans and more.

The Monetary Authority of Singapore (MAS) has directed all financial institutions to tighten their customer verification processes. Effective immediately, additional information beyond name, NRIC number, address, gender, race and date of birth must be used for customer verification before undertaking transactions with the customer. This extra information could include a one-time password, PIN, biometrics, last transaction date and other authentication information.

As part of an anti-money laundering and counter-terrorist financing initiative, reporting institutions are now required to perform ongoing due diligence on their business relationships with their customers.

Newly presented Bank of Thailand regulation facilitating e-KYC, or know-your-customer through electronic means. Thailand’s central bank has set up a “sandbox” which encourages banks to experiment in emerging technologies, including FR technology.

Banks and Third-Party Providers (TPP) have to comply with the Payment Services Directive 2 (PSD2) requirements on Strong Customer Authentication by September 14, 2019. Now that the final PSD2 Regulatory Technical Standards (RTS) has been published, financial institutions are actively preparing and implementing their PSD2 compliance strategy. In doing so, FIs should be aware of these PSD2 criteria:

Strong Customer Authentication: Authentication must be based on two or more factors, including passwords or PIN, tokens or mobile devices, or biometrics.
Transaction Risk Analysis: PSD2 mandates the use of transaction risk analysis to deter fraudulent payments.
Dynamic Linking: For payment transactions, the authentication code must be dynamically linked to both the amount and payee.
Mobile App Security: Payment service providers must adopt security measures to mitigate the risk resulting from compromised mobile devices. PSD2 also mandates the use of dedicated mobile app cloning counter-measures in applications, also known as replication protection.

Other Key Market Trends

* Improving customer experience A good example of how firms in the region are using advanced digital technology to serve customers is Siam Commercial Bank. Siam Commercial Bank partnered with Refinitiv to support the continued enhancement of its digital strategy, offering its customers comprehensive market data and information.

This combination of data and tools is helping Siam Commercial Bank, and other firms like it across the region, provide its customers with new experiences tailored to their specific requirements.

The rise of non-financial tech firms and popularity of cashless transactions

Even though banks and tech firms share a symbiotic relationship, the advent of cashless transactions and mobile payments system have made tech firms as the biggest competitor of banks in the APAC region. Also, tech firms are leveraging the big data to venture into most financial areas from wealth management to insurance and micro lending.

Companies such as Alipay, Tencent, Paytm, among others have entered the mobile payment scene a long back and it has proved to be a game changer the way transactions have been done until that time and it also made the concept of carrying cash obsolete.

* Possible use of blockchain in the banking sector The blockchain is expected to make considerable progress in the banking sector and lenders in the APAC region are gearing up to leverage the blockchain technology the best possible way they can.

Last year, a consortium of lenders Japan-based Mitsubishi UFJ Financial Group (MUFG), Singapore-headquartered OCBC Bank, and UK-based HSBC Bank partnered with the Infocomm Media Development Authority (IMDA), one of Singapore Government’s agencies, to successfully roll-out Southeast Asia’s first Know-Your-Customer (KYC) blockchain.

* Internet of Things and voice payments Today everything from cars to smart home devices have a large number of voice control commands and it is predicted to increase even more. Many multinational companies like Master card, Samsung, Amazon and LG, have jointly developed new additions to their smart fridges with the existing infrastructure. These new additions will enable users to order and pay for their groceries using only their voice.

Market Size and Forecast

* Australia The rapid increase in the use of mobile banking, with its higher satisfaction levels compared to branches, appears to have affected the number who use it compared to visiting a branch. Mobile banking usage is at 46.5% (up 3.1% points from 43.4%), beating visiting a branch at 45.1% (down 3.5% from 48.6%). Phone Banking also saw an increase on 2017, with 24.1% of Australians aged 14+ using Phone Banking (up 1.6% points from 22.5%).

* The Philippines The country has seen a substantial jump in the number of mobile banking users, with 1.2 million in 2013 to 20.9 million in 2016. Meanwhile, the volume of mobile banking transactions registered a CAGR of 117% during the past three years to reach 585 million at the end of 2016, which was 2.4 times the volume of internet banking transactions. Mobile banking transaction value surged by a massive 87% per year between 2013 and 2016, compared to 12% for internet banking.

The report also said that 80 percent of Filipinos said they would prefer using a mobile app for checking balances and paying bills over visiting a physical branch. Meanwhile, 85 percent use banking apps to verify account balances, 63 percent use them to pay bills, while 59 percent use them to transfer money, the study said.

While 65 percent of Filipinos have also used smartphones for purchases, only 41 percent make mobile payments at least once a week, citing convenience, smartphone ownership, and mobile payment security as the top reasons for doing so.

Practically the same reasons were cited by six out of ten Filipinos who have used on-demand services such as booking transportation and ordering beauty treatments using apps in the Philippines.

* Indonesia With only 50-60 million Indonesians, out of a total population of 250 million, estimated to have bank accounts and, by estimates, between 96 million and 114 million actual mobile subscribers

Research institute Microsave reported that only 0.73 percent of cellphone users in Indonesia have utilized online financial services.

* China There are approximately 900 million mobile banking subscribers in China, and it is expected that the number of mobile banking subscribers will exceed the number of internet banking subscribers in 2017. Industry and Commercial Bank of China (ICBC) has the largest mobile banking user base, followed by China Construction Bank (CCB) and Agricultural Bank of China (ABC).

Joint-stock commercial banks have seen faster growth in mobile banking users. The number of mobile banking subscribers in China Minsheng Bank Corporation (CMBC) and China Merchant Bank (CMB) surged by 65% and 39% annually between 2013 and 2016, respectively.

* Japan Much like China, the advancement of the tech industry in Japan has often been mirrored by its inhabitants. This is no different when it comes to the adoption of mobile wallets, with an estimated ⅕ of smartphone owners using digital wallets.

* South Korea Online banking transactions are rapidly shifting from internet banking to smartphone-based mobile banking in South Korea. The country has recorded a compound annual growth rate (CAGR) of 16.2% in the number of subscribers to mobile banking services between 2013 and 2016, compared to 8.7% for internet banking services.

Meanwhile, the number of subscribers to smartphone-based mobile banking grew at a faster 26.2% per year during the same period of time and accounted for 95% of total number of subscribers to mobile banking in 2016, up from 74% in 2013. Both value and volume of mobile banking transactions have risen faster than that of internet banking during the past few years.

* Singapore Singapore scored the top spot for usage of online banking websites at 82.5% and ranked fifth in mobile banking app usage globally. Use of mobile banking has overtaken physical branch interactions by 15% during the past 12 months, according to the J.D. Power 2018 Singapore Retail Banking Satisfaction Study.

SM It is clear that Singapore’s Smart Nation journey to digitally transform its banking sector is well on course; however, there are a number of roadblocks to overcome before Singapore can truly be considered a digital and cashless economy.

Nearly half of customers have used PayNow in the past 12 months. The study also finds that 64% of bank customers use at least one mobile wallet or payment app

Despite the mobile banking channels making significant progress, the user experience still has a way to go. Among mobile banking customers, 46% indicate having experienced a problem with their mobile banking app, such as long loading times and login problems, which is a higher percentage than the 43% in 2017. he most frequently used apps are DBSPayLah! (28%); ApplePay (13%); GrabPay (12%); and NetsPay (12%).

* Thailand Mobile banking payment volumes increased from 585 million in 2016 to 1.23 billion in 2017 with an astonishing growth rate of 110%. The transition to digital banking also provides Thailand banks an opportunity to expand their current products, increase interest income and improve their operational cost efficiencies.

*India According to the Reserve Bank of India’s (RBI) annual report for 2017-18, mobile banking services witnessed a growth of 92 per cent and 13 per cent in volume and value terms, respectively. The number of registered customers rose by 54 per cent to 251 million at end-March 2018 from 163 million at end-March 2017. The volume of mobile banking payment transactions almost doubled from 977 million in 2016 to 1.87 billion in 2017.

The increase is huge and showed that mobile banking payment is becoming more mainstream and there is lesser dependency on physical bank visits. Also, 2017-18 marked a historical moment that the volume of mobile banking payment transactions surpassed credit card usage for the first time.

Market Outlook

The Asia-Pacific region alone will account for two-thirds of e-wallet payments by 2022, predicted Worldpay.

In Hong Kong, e-wallets are catching up to credit cards, and are set to make up more than a quarter of the online payments market (28 per cent) by 2021.

In Singapore, while credit cards are overwhelmingly the payment method of choice in 2017 (66 per cent market share), by 2021 both bank transfers and e-wallets are set to nearly double in share; from 11 per cent to 21 per cent% and 13 per cent to 21 per cent, respectively.

China dominates mobile payments market. Mobile payment transactions in China added up to more than US$12.8 trillion 2017, making it the world’s largest mobile payments market.

In Australia, bank transfers are set to overtake credit cards by 2021, increasing 23.3 percentage points to become the most popular payment method, with a whopping 43 per cent of the market.

In India, e-wallets (26 per cent) and bank transfers (24 per cent) are already the most popular payment methods, and The country’s mobile wallet market is predicted to hit $4.4 billion by 2022, with a CAGR of about 148% during 2017-2022

Technology Roadmap

* Use of 5G Financial institutions are in the midst of becoming more mobile, with many of those legacy operations opting to work more closely with FinTech providers to upgrade services, retain customers and acquire new ones. The debut of 5G promises to add another tool that can aid such efforts. As that mobile technology gets closer to mainstream introduction, the potential 5G ecosystem for FinTech and mobile banking is gaining clarity.

* Plattform model A platform is a digital infrastructure that allows multiple stakeholders, including providers, third-party developers, distribution and services partners, and end-user consumers, to connect online, interact, create and exchange value with each other.

The platform model is a radical shift from the traditional model where banks operate within a specialized industry. Instead, it focuses on being part of a broader ecosystem and linking up to businesses and services from across multiple sectors. Operating in an ecosystem allows providers to switch focus from simply selling their own offerings to fulfilling customers’ desired outcomes.

A relevant example is the case of Ping An Insurance in China which offers services including finance, P2P lending, healthcare consultations, real estate and auto listings, and entertainment to over 430 million digital users via its One Account customer portal.

* AI/Machine learning and IoT Most of the Asia pacific countries have already made a clear vision regarding the use of AI/Machine learning for the digital payment. Most countries have been making clear regulation and policy to use AI/Machine learning for payments.

Following factors have been identified by the banks and will implement AI/Machine learning accordingly:

New User Experiences: Create simple, more human-like interactions

Augmented Workforce: Empower your operations to do more
Platform Economy: Tap into open, fluid solutions
DesignOps: Focus on the customer and value
Digital Ethics: Keep consumer trust front and centre

Recently, United Overseas Bank Limited (UOB), one of Asia’s leading financial groups, announced it is partnering with Personetics, the leading provider of Cognitive Banking applications, to bring AI-powered capabilities to the region’s rapidly-growing digital banking user population.

* Digital Presence Mobile banks are expanding digital presence and focusing on growth – Companies have already started developing their digital footprint on social media – Facebook, Google, Twitter, Snapchat and additional platforms – both organically as well as by using paid promotions. Aggressive and fast growth will be the focus in the future

Distribution Chain Analysis

There are multiple channel through which we can perform a mobile banking.

* Mobile Text (SMS) Mobile text and alert is the simplest, letting the user to transfer funds or access account information via text message. Texting terminology varies from bank to bank, but the overall function is generally the same. For example, texting “Bal” will obtain the account balance while “Tra” will allow inter-account transfers. Users need to first register and verify their phone numbers with their bank, but once that’s completed, they can also set up alerts to let them know about negative balances or deposit confirmations.

* Mobile Web Mobile web is the second mobile banking option. Similar to online account access from a home-based computer, this option allows for checking balances, bill payment and account transfers simply by logging into the user’s account via a mobile web browser.

* Mobile Application Mobile banking applications for Android, iPhone and Blackberry, connect the user directly to the bank server for complete banking functionality without having to navigate a mobile web browser. These applications can be downloaded either through the bank’s website or through the iTunes store.

* QR Code QR code payment is a contactless payment method where a payment is performed by scanning a QR code from a mobile app. This is an alternative to doing electronic funds transfer at point of sale using a payment terminal. This avoids a lot of the infrastructure traditionally associated with electronic payments such as payment cards, payment networks, payment terminal and merchant accounts.

Some banks are taking the technology one step further with account rewards confirmation, person-to-person payments (P2P) and, more importantly, remote deposit capture (RDC) capability.

Other nature of payment can be P2P, P2B, B2P, and B2B.

Competitive Landscape

Mobile banking trend in Asia pacific is increasing rapidly. Bank and financing environment become very competitive and fragmented. There are hundreds of domestic and international banks operating across the region who is providing digital banking to the customers.Furthermore increasing numbers of Fintech and payment apps giving intense competition to the traditional banks in APAC.

Threat of New Entrants Many international banks and payment solution providers are providing digital payment solutions in the market and many others are planning to enter in the APAC due to high favorable environment for the digital payment so threat of new entrants is very high. Global fintech investment recorded a massive surge in 2018, and most of the investments came from Asia Pacific (APAC) countries.

An Accenture report notes that the figures more than doubled to $55.3 billion. According to the report, APAC countries, including Australia, Japan and Singapore, contributed a larger share in the growth. While most of the investments in the APAC region were led by China.

Bargaining power of buyers Mobile banking is very competitive. Banks can provide the digital payment service to consumers in competitive price to compete with the other banks and payment solution providers. Increasing competitions from the fintech and payment apps resulted the price cut in the mobile banking subscription fee and transaction fee. Furthermore, switching bank is not an expensive process anymore therefore bargaining power of buyer is medium to low.
Bargaining power of supplier Many banks and payment solutions have been providing digital banking in the APAC. Consumers have many options to choose appropriate mobile banking as per their needs and requirements. This leads to a high consumer power in the mobile banking market in the APAC.
Intensity of rivalry among firms in an industry Rivalry among firms is very high in APAC due to following factors:
Large number of domestic and international banks operationg in the APAC
Fintech investment in APAC is very high, this only increase the competition
Some Fintech/Payment solutions are providing banking functions like loan, credit etc. For instance Alibaba and amazon.
Threat of Substitute Threat of substitute is very high in the digital banking market because of multiple options for consumers to pay the bills and credit. Consumers do not need mobile banking anymore to do a digital transactions, payment apps like Alipay. Tenpay. PayEase. AsiaPay, NTT Com Asia etc.
Market Differentiation Traditional banks offer mobile banking features that are mostly focused on basic services such as account checking, classic transfers, push notifications, ATM geolocation, and only few offer differentiating services. Despite different and styles, most banks’ relationships with their customers have become homogenized. This lack of differentiation underpins unexploited financial opportunities.

The financial services provided by banks are still Product-centric rather than customer-centric. Mobile capabilities, such as camera, geolocation, NFC, voice command or biometric authentication, open a wide range of possibilities to differentiate the customer experience and the services themselves.

Competitive Factors

* Customer experience In the modern digital age, customers have lots of options when it comes to choosing a company to invest their hard earned money. Not only that, customer demands have increased with the widespread adoption of technology. This is why banks should improve customer experience for their customers. Following points give the advantage on mobile banking

24/7 availability
Instant fulfilment of customer needs
Personalization
Full control over customer finances

* AI AI includes machine learning, machine analytics, natural language processing, algorithms, and more. AI technology can have a significant impact on the mobile banking industry.

Some 80 percent of business decision makers in Asia-Pacific recognise the importance of artificial intelligence (AI) in ensuring their company’s competitive advantage.

* Security Banks use security mechanism like gesture patterns and biometric data like fingerprint and retina scans in addition to traditional passwords and two-factor authentication. Almost all financial institutions use encryption to protect financial information and privacy, which guarantees worry-free mobile banking

* Personalized notifications and customer service With the help of mobile beacons and device sensors, banks can send personalized offers and notify customers about new services based on their location, context, preferences, and buying history.According to “Think with Google” report, Three-quarters of consumers are expecting personalization from products and brands. Over three-quarters of banking and insurance consumers say that these kinds of promotions encourage them to buy. About 71% of consumers prefer ads that are tailored to their needs and 90% of business leaders think that customization and personalization are the keys to having a competitive edge.

* Chatbots Using chatbots in banking saves money compared to human assistants, and chatbots are easy-to-use even for less technically savvy customers. People look for fast and personalized interactions with their financial institutions and don’t like emails or online forms. Many banks in APAC have implemented the Chatbot service to compete IN the market.

* Other factors Other key competitive factors for mobile banking are user friendly banking application, price of the service and customer support

Key Market Players

* China There are now more than 3,000 banks in China.China Construction Bank (26.1%) and Industrial and Commercial Bank of China (21%) combined account for close to half of China’s mobile banking market in Q2 2017.

* India In India, 430 banks were permitted to provide mobile banking services up to end-June 2018. According to data released by the Reserve Bank of India, the top five banks account for more than 92% of the entire value of mobile banking transactions in the country. State Bank of India leads the pack with 36% market share, followed by ICICI Bank (21.5%), HDFC Bank (17.8%), Axis Bank (12.8%) and Kotak Bank (4.7%).

* Philippines BDO Unibank Inc. : BDO included a peer-to-peer payment scheme in its mobile platform, which contributed 16% to all payments made through its mobile banking channel. The internet banking volume also grew 45%, while mobile banking transactions more than doubled during the first quarter of 2016. During the same period, the bank registered more than 500,000 active mobile banking users. As such, personal online banking revenue grew 23% as of December 2016

* Australia Commonwealth Bank is a multinational bank with presence across New Zealand, Fiji, Asia, the US, and the UK. Founded in 1911, the bank is headquartered in Sydney. The bank employs around 51,800 staff and operates more than 11,000 branches.

CommBank formerly known as CommBank Kaching is Commonwealth Bank’s banking app. It has been regarded as Australia’s number one online banking app with over 7 million installs and a rating of 4.1 on the app stores

* New Zealand Bank of New Zealand (BNZ) is one of New Zealand’s big four banks and has been operating in the country since the first office was opened in Auckland in October 1861 followed shortly after by the first branch in Dunedin in December 1861In 2016, 88 percent of the total BNZ customer transactions were being done through digital channels. In recent years mobile banking has grown 37 percent, year on year.

* Singapore Development Bank Singapore produced record earnings of $3.18 billion in 2017, with Singapore and Greater China (mainland China, Hong Kong, Macau, and Taiwan) the outperforming markets. In 2017, it also successfully completed the integration of ANZ’s former retail and wealth franchise across Singapore, Hong Kong, China, Indonesia, and Taiwan, adding more than 100,000 affluent customers. It also replicated the success of digibank by DBS, its online banking service, in India and Indonesia.

* Thailand Bangkok bank is the largest bank in terms of consumer banking and digital payment. And is also the country’s top bank in terms of the number of overseas branches, with 26 international offices in 13 countries. It operates through 1,238 branches. Bangkok Bank is also a publicly listed company and is one of the top five largest companies traded on the Stock Exchange of Thailand.

* Hong Kong The Hongkong and Shanghai Banking Corporation maintains a network of around 600 offices in 20 countries in Asia Pacific, as well as owning of a number of HSBC banks operating in various countries and holding the group’s stakes in further lenders, particularly in mainland China. It has lunched Hong Kong of PayMe, a new social payment application, and Easy Invest, a mobile stock trading application.

It has also introduced Voice ID for phone banking in Hong Kong.Another major digital bank is Citibank Hong Kong.It has a network of 48 branches spread over Hong Kong Island, Kowloon, New Territories and Macau. Citibank’s parent company, Citigroup, has three main divisions in Hong Kong: Citi Markets & Banking, Global Consumer Group and Global Wealth management.

Citi won more than 30 awards in Global Finance Magazine’s 2018 World’s Best Digital Bank Awards, reaffirming the bank’s commitment to innovation and excellence in digital banking across its Corporate/Institutional as well as Consumer Banking business. Citi was named Best Digital Bank in 16 markets—Australia, Bangladesh, China, Hong Kong, India, Indonesia, Japan, Malaysia, New Zealand, Pakistan, Philippines, South Korea, Sri Lanka, Taiwan, Thailand and Vietnam.

* South Korea Sinhan bank of South Korea is major player of digital and mobile payment player of Asia pacific. The launch of a new sub-brand, Sunny Bank, is Shinhan Bank’s transformation to lead the digital banking era. Sunny bank is an online banking platform that aims to expand the client base to younger generations. Automobile finance market is also one of the areas Shinhan has aimed to lead.

Innovative organisation and a pioneer in digital transformation.

* Japan Rakuten Bank: It’s the first Japanese internet-based bank in Japan to have more than six million accounts, and more than three million Japanese have downloaded the bank’s easy-to-navigate app. All this has helped Mikitani lift his reported wealth to beyond $7 billion. Besides rauten, Mitsubishi UFJ Morgan Stanley PB Securities is also a leading digital payment player in japan.

Strategic Conclusion

Mobile banking is the future of banking industry. The only thing not fixed yet is how it is going to evolve in the years to come, with so many ongoing developments in both technical requirements and customer solutions.

Traditional banks will have to adapt and introduce features like voice commands, biometrics, and customer-centric journeys, all while competing with the new coming challenger banks and Fintech

Appendix

APAC-Asia Pacific
SMS-Short Message Service
QR -Quick Response
P2P-person to person
P2B-person to business
B2P-business to person
B2B-business to business
MNO-Mobile network operator