[ET Net News Agency, 17 July 2019] Virtual banks are making inroads in Asia-Pacific.
Newly licensed indigenous digital banks, global digital-only banks, and digitized
traditional banks are all vying for their share across the region's lucrative markets,
according to "The Future Of Banking: Virtual Banks Chase The Dream In Asia-Pacific," a
report published today by S&P Global Ratings.
"To date, developments in virtual banking have not caused any noteworthy changes to our
outlooks for banking sector country risks across the region," said Gavin Gunning, a credit
analyst at S&P.
"Our current base case is that virtual banking may not lead to rating or outlook changes
for Asia-Pacific banks over the next two years. Over a longer time horizon, however, as
virtual banking strategies take hold and further disrupt the traditional bank sector, the
potential for ratings differentiation is greater," he added.
New indigenous entrants in many Asia-Pacific countries--including in China, Hong Kong,
Taiwan, Australia, Singapore, Japan, Korea, and India--have either already begun
operations or are expected to become functional in the next year or so.
As more bank regulators across the region develop the infrastructure to manage and
supervise virtual banks, S&P expects this trend will continue. In addition, ex-regional
players are expanding in Asia-Pacific, such as London-based Revolut Ltd., which is now
operating in the region. Further, and perhaps most profoundly, traditional banks are
accelerating electronic and digital banking strategies in the race for digital supremacy
and a competitive edge.
Two key factors are driving the growth of digital banking in Asia-Pacific:
* Serving the underbanked: Primarily a factor in emerging markets, virtual banking
facilitates the introduction of simple banking products through accessible means other
than branches.
* Serving the overbanked: Primarily a driver in developed markets, virtual banking
mainly seeks to provide customers with greater banking convenience at a lower cost. (KL)