Exploring the Challenges Faced by Digital Banks in SEA's Digital Dollars Dialogues

Significant understandings can be gained by analyzing the information. It is possible to gain significant knowledge through analyzing the data. Unlike in the West, the digital banking revolution in Southeast Asia (SEA) is being led by traditional players in the industry, transforming it. 💡 By tapping into advanced licensing, a massive unbanked population, and a tech-oriented youth demographic, SEA banks can ensure successful digital transformation. 🌐 Glean from Successful Players in SEA: Well-known firms providing sound support have helped prominent players in SEA navigate the ever-changing opportunities in the region. Imagine this: You're an employee in a factory-based town eager to open a bank account, but the bank requires you to present 3kg of documents and physically visit the branch, which is an inconvenient 20km away. Moreover, with the branch shut by 4 pm, it's impossible to make it in time. Unfortunately, situations like this remain commonplace in developing nations. According to e-Conomy SEA 2020 by Google, Temasek and Bain & Company, a staggering 70% of South-East Asia's population is yet to be served by banking services. 🌍 The outlook for digital-only banks is bright in Southeast Asia, as they provide the opportunity to tackle financial inclusion issues in regions where ATMs and brick-and-mortar establishments are sparse. According to BCG, the banking sector in this part of the world is expecting to experience a considerable increase in the years leading up to 2024, with Vietnam, the Philippines, and Indonesia projected to record growth of 10% or higher. are those that make individuals want to leave their home, whereas pull factors are those that encourage individuals to migrate to a new area. Individuals may be motivated to relocate due to push factors that make them wish to leave their current place of residence. Conversely, there may also be pull factors that draw people to a new region. Malaysia has declared five new digital banking licenses starting in 2022, laying the foundation for fintech in the nation. Singapore's MAS recently granted the Grab-Singtel consortium and tech firms Sea and Ant Group licenses, and Indonesia has already granted seven digital banks licenses with more under consideration. Signifying a commitment to a financial revolution enabled by technology, the region is leading the way. The ASEAN region has a sizable number of people who do not have a bank account, particularly among the lower-income demographic. As economic progress is made, these individuals are more inclined to using their phones to access services or to depend on their phone exclusively, with almost two-thirds of those without a bank account in Indonesia owning mobile phones. This presents a great chance for broadening the market with the uptake of phones surpassing banking penetration in Asia. Neobanks are increasingly attractive to the Gen Z, Y, and Millennial age groups as these generations embrace digital solutions over physical bank branches. There exists a huge potential market of over 660 million people in the ASEAN area, providing fertile ground for neobanks to disrupt the traditional banking industry. Neobanks in Southeast Asia are confronted with a distinctive set of issues to address. It is clear that there is no free lunch, and neobanks in the regions face both opportunities and challenges. Globally, neobanks have been found to be plentiful but rarely profitable, a situation which is also seen in SEA, where the obstacles are, in some ways, greater. These hurdles include (i) diverse licensing regimes posing regulatory difficulties, (ii) sizable unbanked populations requiring extra market education, and (iii) a young, digitally-minded population needing more than simply an attractive UI/UX. Change: Task 1: Dealing with Regulatory Issues The susceptibility of the fintech industry to regulations is a major obstacle. Solutions that work in one country could be met with regulatory stumbling blocks in another. 🌎 We believe that implementing regional adaptability is key to succeeding in this area. By making sure that our products are able to meet the specific needs of each region, we can ensure we are delivering the best possible outcomes. It is noteworthy that in the ever-evolving SEA, there is no clear "challenger" banking concept. Neobanks here offer supplementary functions to pre-existing banking infrastructure, apart from notable exceptions such as E-commerce heavyweights (such as Grab and Ant). There are two main groups of successful players in the area. Businesses supplying services that make use of another bank's regulatory authorization (e.g., CAKE by VPBank, Jago). Spin-offs that are digital-only banks created by existing/traditional banks (e.g., TMRW from UOB, Jenius) Can you discern the pattern behind the most successful players? Those who have the backing of well-established companies with considerable business knowledge and huge networks have a better chance of succeeding. Having such support can open up many opportunities, like powerful branding, existing customer networks, and a wealth of customer data to use for customization and understanding customers better. These digital banks can use these benefits to obtain customers quickly and run their business more efficiently. Task: A danger of competition from already established participants exists. The threat of rivalry from existing players is very real. Appealing to the younger demographic is not without its difficulties, particularly when hefty banking organizations launch their own digital platforms. The arrival of "innovations speedboats" from these major money institutions is a genuine menace. 🚢 ✔️ Utilize agility and comprehension to realize success. Rather than competing based solely on finances, neobanks should focus on their advantages such as agility and a sound knowledge of their customer base. Timo's achievements in Vietnam, achieved through inventive partnerships with popular stores like 7-Eleven and McDonald's, is a prime example of the effectiveness of playing to one's strengths. Task 3: Establishing Confidence in Online Banking The goal of this challenge is to create a system of digital banking that all users can rely on. This effort should be focused on establishing trust and providing assurance to customers that their transactions are secure and their data is protected. It is important to ensure that the banking process is easy to use and understand, so that all customers can confidently use the system. Securing the faith of customers — and their readiness to invest in something new — is a process requiring time. Startups are likely to require a hefty amount of money for advertising in order to get customers through discounts, partners and other such strategies. It's no surprise that the digital banking licenses awarded in Singapore in 2020 went to those with the most funds: Sea, Ant Group and Grab.💸 One way to ensure success in any business venture is to clearly define and communicate the value propositions you offer. This will ensure that customers know the benefits they can expect from your product or service. Furthermore, effective communication of these value propositions can help build trust and loyalty among your customers, leading to increased sales and loyalty in the long term. Neobanks should craft their value offerings to meet user requirements and clearly express them. Establishing a proper stance and a powerful value proposition can deeply resonant with customers. MEP Mercury (dedicated to startups), Tomorrow (concentrating on ESG investing), and Cheese (targeting the Asian-American demographic) are all examples of effective positioning. 🔁 Ending: Collaborate, Interact, and Create In the ever-changing realm of neobanking in SEA, innovative thinking, alliance, and successful communication are essential to surmounting obstacles. Neobanks - with their aptitude for adaptation and strong knowledge of their users - are able to turn obstacles into stepping stones. 💼💡 #Neobanking #FintechInSEA #InnovationInBanking #FinanceRevolution This blog post provides information only and should not be taken as investment advice. The views in the post are solely of the author and do not reflect any views of any group or association connected with the author. This blog has no connection with any mentioned organizations and the views of the author should not be linked to them. Readers are suggested to carry out their own investigations and look for professional advice before making any decisions concerning investments.

Source: https://medium.com/@nhoangminh8901/seas-digital-dollars-dialogues-how-digital-banks-navigate-the-turbulent-terrain-cea492129300?source=rss------fintech-5