By The Nation
That’s according to “The Future of Banking: Virtual Banks Chase The Dream In Asia-Pacific,” a report published on Wednesday by S&P Global Ratings.
“To date, developments in virtual banking have not caused any noteworthy changes to our outlooks for banking sector country risks across the region,” said Gavin Gunning, a credit analyst at S&P Global Ratings. “Our current base case is that virtual banking may not lead to rating or outlook changes for Asia-Pacific banks over the next two years. Over a longer time horizon, however, as virtual banking strategies take hold and further disrupt the traditional bank sector, the potential for ratings differentiation is greater.”
New indigenous entrants in many Asia-Pacific countries including in China, Hong Kong, Taiwan, Australia, Singapore, Japan, South Korea, and India have either already begun operations or are expected to become functional in the next year or so. And with more bank regulators across the region developing the infrastructure to manage and supervise virtual banks, it is expected this trend will continue. In addition, ex-regional players are expanding in Asia-Pacific, such as London-based Revolut Ltd., which is now operating in the region, and traditional banks too are accelerating electronic and digital banking strategies in the race for digital supremacy and a competitive edge.
Two key factors are driving the growth of digital banking in Asia-Pacific:
-Serving the underbanked: Primarily a factor in emerging markets, virtual banking facilitates the introduction of simple banking products through accessible means other than branches.
-Serving the overbanked: Primarily a driver in developed markets, virtual banking mainly seeks to provide customers with greater banking convenience at a lower cost.