While digital transformation is underway among financial institutions in Asia, they face several roadblocks, with changing regulations, digital KYC/AML and legacy infrastructure among major barriers to successful implementation.

Three out of five banks in Asia-Pacific still do not have full digital account opening for new customers, according to a survey of surveyed 20 chief risk officers from across Asia Pacific in April 2019 conducted by U.S.-based credit scoring company FICO.

Respondents cited the region's changing regulations (28 percent) and the need to create digital KYC/AML solutions (21 percent) as the biggest challenges they had in terms of acquiring customers online, FICO said. 

Fragmented Approach

«In Asia, the identification processes used for services such as e-government, banking or telecommunications evolved independently of each other, leading to a fragmented approach with inconsistent levels of security,» Dan McConaghy, president of FICO in Asia Pacific, said

«Open banking and regulations like Europe’s PSD2 are now bringing regulatory rigor to bear on the issue and forcing banks to comply to certain standards and embrace technologies that will better enable digital onboarding,» he added.

Short Cut

According to FICO, established banks are taking a short-cut to overcoming their existing challenges by launching a separate digital banking offering, which is allowing them to take on fintechs and challenger banks.

Seventy-nine percent of banks said they banks have launched or are currently considering a separate digital banking offering to leapfrog challenges in acquiring new customers, while 40 percent of banks said digital-only banks and fintechs were the greatest competition to their business, followed by APAC internet players (20 percent) and telcos diversifying into lending (20 percent).

More Opportunities

The banks said they saw digital payments (32 percent) and personal loans (24 percent) as the greatest opportunities in digital banking and were planning on investing in data science (19 percent) and improving their customer segmentation for products and services (19 percent).