Home Resources Library Digital banking The Rise of Digital Banking in Southeast Asia – BCG

The Rise of Digital Banking in Southeast Asia – BCG

Digital banking adoption is growing across Southeast Asia, driven by evolving customer expectations and enhanced digital penetration. The COVID-19 pandemic has accelerated this trend, as enforced digital transitions have embedded a more immediate impetus for change.

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These drivers will see Southeast Asia’s digital banking opportunity expanding significantly in coming years, reflecting a trend which has seen over 200 new digital banks established globally over the last decade. Since 2015, the number of digital banks has grown by 190%, supported by significant investment and positively evolving regulation.

Understanding Emerging Challengers

Institutional banks are now facing a new era of digital-first competition. Customers looking for more personalized and targeted offerings are turning away from incumbent operators towards a new breed of digital-first challengers, launched by financial technology (fintech) operators and non-financial institution (NFI) players. These operators are unified by a focus on superior customer experience, branchless design, and use of technology.

Emerging Digital Challenger Banks can be broadly slotted into two main categories — those with, and those without, a full banking license. Those institutions without full banking licenses are categorized as Neobanks. Those with a full banking license are identified as Challenger Banks. In this changing environment, traditional operators face a growing pressure to transform. These legacy incumbents must adapt if they are to defend, grow, and win in this evolving landscape.

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