The omnipresence of digital ecosystems run by tech giants threatens a wholesale takeover of future mindshare and market share from traditional banking clients but an opportunity arises from the pandemic.
While short-term risks from the ongoing pandemic are understandably at the forefront of banking leaders' priorities, they have done little to disrupt the long-term prospects. Shrinking fees, increasing regulation and, most notably, the potential for significant market share loss to fintech firms remain.
In fact, the pandemic has mandated hundred of millions to stay homebound which in turn has led to the accelerated adoption of financial technology. Research from financial advisor DeVere Group said European fintech app usage spiked 72 percent. Similar trends have been observed in Asia where one Filipino bank, Rizal Commercial Banking Corp, posted a 259 percent surge in signups for its online banking services within the three days of the country’s decision to enhance regional quarantine measures.
Although the trend of digital adoption and coronavirus conditions apply to all regions, the current timing is especially critical in Asia due to the concurrent issuance of virtual banking licenses in major markets like Hong Kong and Singapore. And the pandemic may create an opportunity for established lenders to slow or curb market share loss.
Bad Timing for Alluring Retail Rates
Firstly, enticing rates will likely be a weaker motivator to help newly licensed digital banks hit the ground running.
Whilst some fintech players have opted to use rates to lure new users – Hong Kong’s newly launched online-only lender ZA Bank was reportedly offering as high as 6 percent interest for three-month Hong Kong dollar deposits in January – the current timing is not favorable as liquidity needs are increasing especially in the retail segment with more job losses expected.
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