FT Focus report shows APAC banks lag in digital transformation, two in three expect to lose market share

• Banks must reposition themselves, embrace tech to avoid extinction
• 3 in 5 believe they will cease to exist unless they change business models

Two in three (67%) banks believe they will lose market share within two years if they fail to digitally transform, according to a new report from cloud banking platform Mambu and The Financial Times Focus (FT Focus).

The ‘Evolve or be extinct’ report was conducted by FT Focus and surveyed over 500 senior banking executives globally to gain insights into their perception of the banking industry, now and in the future.

The results illustrate the urgent need for banks to modernise their offerings, with 58% of global respondents predicting they will completely cease to exist in the next five to ten years unless they change their business models.

Looking more closely at Asia Pacific (APAC), the FT Focus report indicates that the region is lagging behind other regions on transformation. However, APAC banks are taking steps to ‘catch up’ to the rest of the world, with plans to increase investment in big data, machine learning and blockchain at significantly higher rates than other regions.

Myles Bertrand, Mambu’s Managing Director APAC, said: “The research illustrates how the banking industry is diverging on its approach to digital transformation. While less than one third of APAC banks describe their digital transformation strategy as mature or advanced, there’s an emerging cohort of digital ‘evolvers’ that is bucking this trend and really leading the way. These forward-thinking players are setting a blueprint for the rest of the industry to follow while demonstrating the business case for a customer-centric approach.”

Myles notes that the ‘ecosystem’ approach has been successful in other regions, and with half of APAC banks concerned that they lack key workforce skills necessary to transform, an ecosystem approach will prove very effective here too.

Kevin Pu (pic), General Manager Malaysia at Mambu, added: “Malaysia’s digital banking scene is incredibly dynamic, and with Bank Negara Malaysia (BNM) now assessing applications for the five digital banking licences on offer, 2022 looks set to be a transformative year for the industry. But while we have many brave and digitally-focused banks, financial institutions and fintechs operating in the country, there are also many traditional banks lagging behind on their digital transformation strategies, and, as this research report shows, it is those banks that are slow or reluctant to take a digital leap that risk being left behind.”

Globally, two fifths (40%) of respondents said they intend to modernise to a platform-based offering post pandemic, working with third party providers to develop plug-and-play banking services run on flexible, independent systems. Modernising to a platform-based structure and investing in data capabilities are key factors that separate digitally-advanced companies from the rest of the banks.

The report also highlights the slow progress and challenges banks are facing as they move away from traditional and legacy banking services towards digital.

With nearly a quarter of banking leaders describing their digital strategy as either ‘nascent’ or ‘exploratory’, the findings reflect the need for greater collaboration within the banking community, as well as the opportunities for forward-thinking players that embrace innovation through fintech ecosystems.  

Download the global Evolve or be Extinct report.