Banking in ASEAN

ASEAN (Indonesia, Malaysia, Philippines, Singapore, Thailand, and Vietnam) ?is one of the fastest growing regions in the world, As per ADB – Asian Development bank, the economic growth in ASEAN has reached 5.5 percent in 2022 and is expected to grow substantially faster than the global average.

According to the World Bank, the total market for banks in ASEAN is worth over $1 trillion, with strong growth in countries such as Indonesia, Thailand, and Vietnam. The ASEAN banking sector has performed well in recent years, with strong profits and healthy balance sheets but there is 25% of population which is still unbanked in ASEAN. In case of Indonesia, adult population is at 183 million, with percentage of unbanked at 51% and the underbanked at 26%. High unbanked populations and low penetration of traditional financial products make it an ideal growth field for digital financial services including Digital lending, e-wallets, insurance technology and wealth management.

Geographical landscape is another big challenge, for example?Indonesia consists of 6,000 inhabited islands and it is very difficult for traditional banks to cover all of them.

Increasing competition from non-traditional players such as fintech firms and digital banks, is also disrupting the traditional business model of banks. Dynamic market conditions, stiff competition and innovations in Technology are rapidly transforming the financial services industry in ASEAN. Banks and FinTech companies are starting to adopt blockchain, cloud computing, AI and machine learning to make financial services and products accessible to customers 24x7.

SMEs(Small and Medium Enterprises) are increasing at a rapid pace but majority are experiencing problems in accessing financing. Hence, banks and fintechs have a high potential in the market to collaborate and further develop the financial sector.

The digital transactions and payments across ASEAN has being on the rise with unicorn like Tokopedia and Gojek leading the way. Digital financial services bring in some US$11 billion in revenue, and this is expected to grow over threefold to US$38 billion and account for 11% of total financial services revenue by 2025, according to BCG. ASEAN populations is on the cusp of a financial inclusion and revolution; and is fast emerging as the next mega market for digital consumer finance.

Banks and Financial markets have to migrate from legacy systems to new business architectures. They are still decades behind in investments and carrying disparate sources of data. In many cases, when they have grown through acquisitions, organizations have not successfully consolidated their application systems for operational resiliency.

So Enterprises must embrace digital journeys to grow by investing in advanced technologies such as mobile banking, AI, IoT, cloud computing, micro services and Intelligent workflows. Moreover the partnerships with eco system and fintechs will allow banking sector to grow beyond the traditional businesses.

IT can play a key role in enabling the growth of the ASEAN banking sector. Using digital technologies such as mobile banking, online banking, and blockchain can help banks improve their Customer Experience, Revenue, efficiency and reduce costs. By adopting these technologies, banks can provide better and more convenient services to their customers, which can help them attract and retain a larger customer base. The use of information technology (IT) has transformed the banking industry in recent years, and it continues to play a vital role in enabling the growth of the ASEAN banking sector. Some of the key ways in which IT is enabling growth in the ASEAN banking sector include:

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1. Improving Efficiency: By adopting digital technologies such as mobile banking, online banking, and blockchain, banks can streamline their operations and improve efficiency. This can help them reduce costs and offer their customers better and more convenient services.
2. Expanding Reach: IT can help banks expand their reach beyond their domestic borders and tap into new markets. For example, mobile and online banking allow banks to offer their services to customers in remote or underserved areas.
3. Enhancing Customer Experience: The use of IT can help banks to enhance the customer experience by providing a range of digital services that are convenient, secure, and easy to use. This can help banks to attract and retain a larger customer base.
4. Improving Security: IT can help banks to improve security by using technologies such as blockchain and biometric authentication. This can help to protect against cyber threats and ensure the safety and security of customer data.

?The use of IT is enabling the growth of the ASEAN banking sector by improving efficiency, expanding reach, enhancing the customer experience, and improving security. By adopting digital technologies, banks can remain competitive in a rapidly-changing market and continue to offer top-quality financial services to their customers.

?Exploring Alternative Delivery Channels

?In addition to digital technologies such as mobile banking, online banking, and blockchain, there are several other options that banks in the ASEAN region can use to enable their growth. Some of these options include:

?Partnering with Fintech Companies: As mentioned earlier, the fintech industry is growing rapidly in the ASEAN region. Banks can leverage partnerships with fintech companies to access new technologies and offer their customers innovative financial products and services.

?Offering Digital Services: In addition to traditional banking products and services, banks in the ASEAN region can also consider offering digital services such as e-commerce, online payments, and digital wallets to their customers.

?Expanding into New Markets: The ASEAN region is home to a large and growing middle class with increasing disposable income. This presents an opportunity for banks to expand into new markets and increase their customer base.

?Diversifying into Non-Traditional Areas: As mentioned earlier, there are also opportunities for banks in the ASEAN region to expand into non-traditional areas such as insurance and asset management.

?Improving Customer Experience: Banks in the ASEAN region can also consider investing in technologies and tools that help to improve the customer experience, such as artificial intelligence (AI), chatbots, and personalization tools.

?Promoting Financial Inclusion: Many people in the ASEAN region need access to formal financial services, which presents an opportunity for banks to promote financial inclusion. By offering products and services that are accessible and affordable, banks can help to bring more people into the formal financial system. By exploring these and other alternative delivery channels, banks in the ASEAN region can reach more customers and provide them with convenient and accessible financial services.

?Conclusion:

In conclusion, the ASEAN banking sector presents significant opportunities for growth, and there are several strategies that banks can use to take advantage of these opportunities. These strategies include leveraging digital technologies such as mobile banking, online banking, and blockchain, diversifying into non-traditional areas and exploring alternative delivery channels such as branchless banking and self-service kiosks. By adopting these strategies and others, banks in the ASEAN region can continue to thrive and play a vital role in the region's economic development.