Asia’s internet firms are challenging the region’s traditional banks for consumer finances, tapping their massive user networks for business and following a trail blazed in China by tech giants Alibaba and Tencent.
The push into banking by companies better known for their messaging apps, cute emojis and online holiday bookings comes as regulators across Asia open up their banking sectors to a new breed of digital players.
The shift is in its infancy but contrasts sharply with the banking markets of Europe and North America, where change is slower and such startups tend to be backed by venture capital funds and financial sector incumbents, not tech firms.
Asia’s tech entrants see their advantage in the way they can seamlessly integrate banking services with their users’ regular online activities and the efficiency that comes from their technology.
“If you want to open a bank account (in Hong Kong) you need to go to a branch, answer questions for an hour, and you still won’t get the account opened without follow up calls,” said Wayne Xu, president of ZhongAn International, a unit of Chinese online insurer ZhongAn, setting up a virtual bank.
“However, all the information needed at the counter can already be collected on a mobile phone.”
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Hong Kong’s banking regulator last month issued one of four so-called virtual banking licenses to ZhongAn in what could be the biggest shake-up in years in a city dominated by HSBC and Standard Chartered. Last week, the regulator said it was making progress on four additional applications.
In South Korea, authorities have issued two online only bank licences, one of them to Kakao Bank in 2017, which is operated by the company behind the country’s largest chat app. “The 45 million monthly average users of our messaging app Kakao Talk is a huge plus for us when advertising our bank,” a spokesman for Kakao Bank said. He added the bank uses Kakao’s artificial intelligence technology for its automated customer support systems. The bank had 8.9 million users as of March.
Other Asian countries set to approve online-only banks include Taiwan – where a group led by a unit of Japanese messaging app operator Line Corp has applied for a license — and Malaysia, which plans guidelines by the end of the year. Bank of Thailand governor Veerathai Santiprabhob said the central bank was exploring the issue.
Large technology companies are seeing this as a landgrab opportunity where they can build out new sets of financial services that can be cross-sold to their existing users,” said Jeff Galvin, a Hong Kong-based partner at McKinsey. Driving the shift in Asia is mobile technology’s deep penetration across all aspects of consumer life.
Such trends were forged by Alibaba and Tencent in China where the two upended financial services and drove a revolution in the cashless economy with their digital payment applications. In contrast, US tech giants such as Amazon and Alphabet Inc’s Google have focused their financial industry efforts on providing tech and consulting services to incumbents. Asian consumers are far more willing to bank with tech firms than elsewhere in the world.
“What we are seeing in Asia is technology companies moving sideways into finance, inspired by or even threatened by the examples of Alibaba and Tencent,” said James Lloyd, partner and APAC fintech leader at consultancy EY.