Digital is the key to success in ASEAN banking

A discussion over the global economic outlook usually revolves around the likes of the US, Europe, Japan, China and India. But another economic powerhouse has emerged.

Fueled by wealth creation and consumption, and an extremely digitally-savvy and sizable young population, ASEAN is an economic and digital force to be reckoned with.

As a regional bloc, it is already the fifth largest economy in the world. Its Gross Domestic Product (GDP) is in excess of US$3 trillion, and six of its member countries make up the top 50 list of world economies by GDP. ASEAN-based companies now feature across the Forbes 2000 list.

Citi Research forecasts that the region will grow by close to 5 per cent this year and next. Underpinning this growth is the rapid expansion of its internet economy, forecasted by Google and Temasek Holdings to reach over US$240 billion, higher than initial estimates of US$200 billion, by 2025.

In an economy dominated by digital ecosystems and platforms, banks have had to change their business models to serve the ASEAN consumer.

For incumbents like Citi, this has meant a move from analogue to digital, an agile and open approach to banking and partnerships, and a better understanding of the forces driving consumption behaviors in ASEAN.

To bank ASEAN today and for the future, it is clear that digital is key to relevancy and success.

ASEAN's Thriving Digital Economy

The region's new kids on the block are dapper disruptors.

ASEAN is the birthplace to some of the world's most recognized unicorns - Grab, GO-JEK, Tokopedia, Lazada, Sea - and these expanding digital ecosystems and e-commerce businesses are heavily influencing consumption behaviour.

Funding for the region's internet companies is healthy, propelling further potential for growth. According to Cento Ventures' SEA Tech Investment Report 2018, Southeast Asia internet technology related investment reached a record US$11 billion in 2018.

The adoption of these digital ecosystems is being driven by the majority of the region's about 650 million population who own smartphones with internet connectivity. Around half of the population is also under the age of 30.

Google and Temasek Holdings' e-Conomy SEA Report 2018 estimates that there are 350 million mobile-first internet users in the region. Southeast Asians were also found to be the most engaged mobile users globally with 90 per cent of internet users accessing the web via mobile.

In a region where mobile internet penetration outweighs credit card penetration and access to the formal banking system, it is no surprise that the growth of the internet economy has and will continue to be explosive.

Fintechs and emerging technologies are also enabling accessibility to financial services, including payments. Payment intermediaries and digital wallet providers, QR code technology, and the development of national real-time payment schemes and instant payment networks across multiple markets are empowering more people to spend and consume.

This also gives ASEAN the potential to be a leader in promoting financial inclusion.

Banking the ASEAN Consumer

Demand for financial services in ASEAN will continue to increase. Wealth creation will drive demand for wealth management services, including investments, protection and savings.

According to a report from The Boston Consulting Group published in November 2018, the region's mass affluent population is growing at a quicker pace than the middle class and is set to be the "next megamarket" in ASEAN.

The population of the mass affluent in the region is expected to reach 137 million by 2030, from 57 million in 2017. In the same period, this segment will grow to make up 20 per cent of the region's population from 9 per cent, and account for 30 to 65 per cent of household wealth, up from 20 to 40 per cent in 2017.

The digitization of economies across ASEAN will also continue to improve accessibility to financial services.

Significant opportunities clearly exist but the extent to which they can be optimally captured will depend on how digitally relevant banks are.

In Asia Pacific, including ASEAN, Citi is on a transformation journey, digitizing what we offer and how we offer our products and services to align with changing customer behaviors and preferences.

We have digitized processes for efficiencies, unlocked the value of data for personalized offers and experiences, developed digital solutions and tools, and distributed our products and services through digital channels and ecosystems.

Integral to this has been getting the mobile experience right. To that end, Citi introduced a next-gen mobile app for the Asia Pacific region, enabling access to a comprehensive suite of banking capabilities on-the-go, anytime and anywhere.

Correspondingly, what we have seen is extremely positive traction in ASEAN. Between March 2018 and March 2019, our mobile user base in Malaysia and Philippines grew by over 50 per cent. In Singapore and Thailand, adoption was higher, at around 66 per cent and 72 per cent respectively. In Indonesia, the region's largest internet economy, we doubled the number of active mobile banking users.

While this is clearly a step in the right direction, what our experience in ASEAN has taught us is offering a superior digital banking experience through our own touchpoints is crucial but not enough.

Digital Partnerships

Equally important is being able to bring this banking experience to external touchpoints that customers value and frequent in their day-to-day lives. To do so, digital partnerships are key.

Today, banks' services are no longer compared to those of other banks; they are compared to the type of services and experiences that leading digital players offer consumers.

Establishing a presence in these digital ecosystems and platforms that potential and existing customers prefer is essential. Digital and data-enabled partnerships enable businesses to plug into these ecosystems for greater scale, wider networks and relevancy in the digital economy.

Recognizing this, Citi has progressively rolled out partnerships for customers in Asia Pacific and ASEAN. To date, we have regional digital partnerships with global and ASEAN-specific names. These are supplemented by a number of local digital partnerships in each of our region's markets.

We are also connected to the most popular social networks and platforms in the region. In Thailand, for example, we have launched Citi LINE Connect; integrating our banking tools into LINE, the country's largest social platform. The social network boasts a user base of over 44 million users.

These partnerships have enabled us to increase our customer base in ASEAN while deepening our relationship with existing clients by being attuned to how and where they want to interact with their bank of choice.

Digital banking, including partnerships, and the growth of fintech will continue to shape the future of the financial services industry in ASEAN. This will demand more agility and the use of newer and emerging technologies as they become more feasible.

One thing though remains constant - consumers will continue to lead the way.

The writer is head of Consumer Banking, Asia Pacific and EMEA, Citi.