To offer even more options, digital players are also quick to embrace open-banking standards and so-called faster payment applications to complement card payments with a broader range of services. Indeed, any digitally-delivered payment service that can seamlessly and intuitively meet a specific customer need with greater convenience and value is going to be appealing.
Digital banks like Monzo, N26 and Revolut all started using prepaid propositions but are now actively marketing debit cards linked to checking accounts, because payment functionality is absolutely central to any banking relationship. Bigger players have also moved into credit cards, such as Lazada in Thailand, and Amazon and Rakuten in Japan. After the success of Apple Card in the United States and Nubank's purple credit card in Latin America, more of these propositions are sure to come to Asia-Pacific.
The new digital players do not have a monopoly on innovation. In response to the newer fintechs and neobanks, incumbent players such as DBS, Shinhan and Westpac have repurposed their infrastructure to stay nimble and competitive, dramatically raising the quality of the customer experience and boosting their engagement in the process.
Business-to-business payments are also going digital with virtual cards. Leading with digital-first payment solutions has proven very successful for the likes of WEX and eNett in the B2B space, but also for Citibank, JP Morgan and other sophisticated corporate banks. As shown by the seamless approach to marketing the Apple Card in the United States, we expect that new entrants in Asia will also be eager to develop digital-first virtual card propositions for retail consumers and small businesses.
COMPETITION AND DIFFERENTIATION
In Singapore, the issuing of new digital banking licences is an important evolutionary step in the country's financial sector that will bring a fresh set of reputable competitors into the market looking to offer a range of differentiated products and services.
The Monetary Authority of Singapore has been very careful to set guidelines to ensure the new entrants will be suitably capitalised and that there is a level playing field for all parties. While many of the existing players already offer highly sophisticated digital banking services, the increased competition will create pressure for further innovation that should lead to better services and solutions for all.
For any player in this new digital ecosystem, focus is paramount. Delivering a simple intuitive solution that directly helps target customers solve a specific pain point or helps make their financial lives easier in a safe, secure and convenient way is not as easy as it sounds.
People do not go to Starbucks or Marks & Spencer wanting to make the payment. But they use the mobile payment apps offered by these brands because they cultivate loyalty, cater to their preferences and offer them special benefits. People do not necessarily expect life-changing experiences from these brands, but they do want value that goes beyond the transaction. Digital payment applications offer the ability to do that.
'FINTEGRATION' AND THE FUTURE
Partnerships are key. In this hyper-connected world, no one player can really do everything alone anymore, so having successful partnerships is an increasingly important aspect of doing business today.
Fintechs and traditional banks often make excellent partners as they have complementary capabilities. Banks provide fintechs with access to their distribution network, balance-sheet strength and trusted reputation with clients. Fintechs provide banks with more nimble technical infrastructure, helping them to deliver and continuously upgrade more compelling and innovative client experiences.
These partnerships can range from a simple application programming interface (API) integration that delivers artificial-intelligence-powered chat experiences or personal finance recommendations like those offered by firms such as Kasisto and Moneythor, to a much more complex ecosystem model like that developed by Ping An in China and now being pursued by Commonwealth Bank in Australia together with Microsoft and KPMG.
And there is significant room for further growth in electronic payments. While most retail payments in dollar volume terms are electronic, by transaction count they are not, so there is a huge opportunity for more innovation in many markets where many consumer segments remain underserved. For the most part, the opportunity is even bigger in the small business and commercial space.
No matter where we look in the Asia-Pacific region, open banking is emerging as an accelerator for developing the digital financial economy. As demonstrated in Singapore and other progressive markets, creating the right kind of environment that encourages competition, fosters innovation and features thoughtful regulation is key.
These pillars - plus the protection of consumer data in the right way - will lead the entire financial sector to embrace this era of open banking and, in the process, find new and better ways to serve the needs of consumers, small-business owners and companies alike.
