Across APAC consumers increasingly prefer digital channels for financial services. The trend, combined with regulatory changes that lower barriers to entry, is helping digital-only banks overcome incumbents’ traditional trust and scale advantages, according to new research from Forrester.

But in Australia, the research shows the pace of switching to digital-only banks is considerably slower, despite a similar preference for digital channels and a growing cohort of digital only banks marketing themselves on digital experience. Forrester analysts argue, however, open banking should bring Australia closer to the regional rate.

Source: Forrester, The Pulse Of Financial Services Customers In Asia Pacific.

According to Forrester, currently just 14 per cent of Australian consumers will consider switching to a digital-only bank in the next two years, less than half the APAC average. The figure is up to 59 per cent in metro India and 48 per cent in Indonesia.

More than half of Australian consumers ruled out a switch to digital-only banking entirely in the next two years. And while Australians have a strong preference for digital channels like their regional neighbours, one in 10 still favour the branch – among the regional high in that measure.

The data comes from Forrester’s report The Pulse Of Financial Services Customers In Asia Pacific, which included a poll of polled nearly 15,000 adults across APAC. 

Open Banking Catalyst

Author of the report, Forrester senior analyst Zhi-Ying Barry, says open banking, an upcoming data portability scheme in Australia, will help to accelerate bank switching, benefiting newer digital banks.

“Despite recent delays, Forrester expects open banking to have a significant impact on the Australian financial services sector—as the ease of sharing data encourages more customers to consider switching to another financial services firm that provides them with better products, services and experiences,” Barry told Which-50.

She says while Australian consumers generally prefer digital channels, the importance of retail branches and human interactions can’t be discounted.

“Australian consumers still cherish being able to interact with a human being who can provide guidance and reassurance should there be an issue. A major challenge for digital startups will be to provide that human guidance and reassurance in the absence of branches.”

APAC’s shift to digital

Across the region, “the writing is on the wall,” the Forrester report says, “digital-only banks will gain ground on traditional banks in Asia Pacific in the next few years”.

“The adoption of digital banking is about to accelerate and reach new levels of scale in Asia Pacific … the regional retail banking environment is on the cusp of major new digital banking breakthroughs.”

The analysts argue newly empowered consumers, particularly in fast developing and mobile first economies like China and India, regulatory changes, and a growing trust in non-financial organisations, including global tech giants, is powering the change.

Across APAC, 77 per cent of consumers now prefer digital channels, with mobile banking being the favourite, and 73 per cent of consumers believe they should be able to accomplish any financial task on a mobile device.

The risk for incumbents, Forrester says, is smaller players being better able to respond to the changing demands. The report warns traditional financial institutions are running out of time to respond.

The report concludes,“Glitzy labs and heavily publicised transformation initiatives have reached the end of the line. Breaking through the land of diminishing returns requires more pragmatic, surgical strategies that move the needle more quickly.”

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