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Emerging markets leap forward in digital banking innovation and adoption – McKinsey

2021 Asia–Pacific Personal Financial Services Survey

As consumer use of digital banking accelerates in Asia–Pacific, the region’s emerging markets have become the hub of banking innovation for digital business models.

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Consumer use of digital banking in Asia–Pacific has entered a stage of acceleration, fueled largely by innovations launched in emerging markets. Therefore, now is the time for the region’s banks and nonbank service providers to renew their value propositions and build the capabilities that will enable them to stay relevant and thrive.

According to McKinsey’s latest Personal Financial Services (PFS) Survey, adoption of digital banking in emerging markets has caught up with that in developed markets. Nearly nine in ten consumers across the emerging and developed markets of the Asia–Pacific region use digital banking actively, and most of these are open to purchasing more banking services through digital channels. In our view, the broader adoption of digital banking during the COVID-19 pandemic has brought the industry to a new level of maturity, opening new opportunities and challenges for banks and nonbanks alike.

The window for seizing opportunities for growth will narrow quickly, however, as consumers give serious consideration to innovative propositions from digital-only banks, which are emerging as regulators grant licenses to new entrants with the aim—among other objectives—of encouraging innovation and inclusion. Amid the fast evolution of Asia–Pacific banking markets, banks need to understand how their customers perceive them, decide how they will exceed customers’ expectations, and chart the best course to secure their position in the market.

To thrive in the era of digital banking, banks in Asia–Pacific must combine current resources with new skills and capabilities to meet challenges and capture growth opportunities. In Section 1, this report lays a foundation for such an effort by describing consumers’ shift to digital banking. Section 2 then outlines how banks can reinvent their business and delivery models to get ahead of consumers’ fast-changing expectations by focusing on three key areas: the value of branches, customer engagement, and the bank’s overall competitive position. For each area, we recommend ways to create value. Finally, Section 3 discusses the capabilities banks will need for success.

The insights in this report are based on McKinsey’s proprietary Personal Financial Services Survey (see the sidebar “About the Personal Financial Services Survey”). The 2021 survey covers approximately 20,000 urban banked respondents in 15 Asia– Pacific markets.

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