Some 60% of banks in Asia-Pacific do not have full digital account-opening services for new customers, despite recent reports that nine in 10 financial institutions in the region say they are ready to embark on a "digital transformation", according to a survey by the credit score agency FICO.
Banks indicated that the region's changing regulations (28%) and the need to create digital know-your-customer and anti-money-laundering solutions (21%) were key challenges to offering full account openings online.
"In Asia, the identification processes used for services such as e-government, banking or telecommunications evolved independently of each other, leading to a fragmented approach with inconsistent levels of security," said Dan McConaghy, president of FICO in Asia-Pacific.
"Open banking and regulations like Europe's revised payment service directive are bringing regulatory rigour to bear on the issue and forcing banks to comply with certain standards and embrace technologies that will better enable digital onboarding," he said.
FICO's survey said 79% of banks have launched or are considering a separate digital banking offering to leapfrog challenges in acquiring and retaining new customers.
"Fintech firms and challenger banks have disrupted the status quo in the financial services universe," Mr McConaghy said. "By developing compelling new products, services and experiences, these companies have set a new standard and raised customer expectations. Traditional banks find themselves needing to rethink and redesign their services, to transform themselves digitally and meet the market."
According to FICO's survey, 40% of respondents said digital-only banks and fintech firms are the greatest competition to their business, with regional internet players (20%) and telecoms diversifying into lending (20%).
Conversely, the greatest opportunities for digital banking, according to respondents, are digital payments (32%) and personal loans (24%).
Regional banks said they are planning to focus on investing in data science (19%) and improving their customer segmentation for products and services (19%) as top priorities for their transformation.
When asked to predict the size of their bank in the year 2030, 28% of the survey respondents predicted that their organisations would need fewer employees (5-50% decrease). A further 28% said they think banks will need significantly less staff (a 50% or more decrease) by 2030.
"There is some recognition in the market that the right size for many banks in the near future will be smaller," Mr McConaghy said. "New technologies, increasing competition and different business models will change the way financial services looks in 10 years' time."
FICO surveyed 20 chief risk officers from across Asia-Pacific in April at its CRO Forum 2019 event in Bangkok.
