Wednesday, January 27, 2021

McKinsey — Joining the next generation of digital banks in Asia

Not every Asian digital bank is a success story, of course, but those that have developed a productive business model and scaled effectively have thrived. Once established, digital banks can generate higher revenues at a lower cost to serve than incumbents, putting them in a position to expand market share. In addition, their digital architecture enables them to access ecosystems of businesses and customers, bringing exponential benefits in terms of knowledge and data.

While digital banks in other geographies are often startups, Asian digital banking is being driven largely by established companies and consortia. Despite structural challenges with regard to governance, consortia bring significant advantages in terms of achieving scale. Just five years after launch, Tencent-backed WeBank serves some 200 million people, and Alibaba-supported MYbank has more than 20 million SME customers.
Over a short period, China’s digital banks now have a roughly 5 percent share of the country’s RMB 5 trillion (~$700 billion) unsecured consumer loan market and more than 7 percent of online SME loans. South Korea’s KakaoBank, launched in 2017, attracted more than 10 million customers in its first year and now has a roughly 5 percent share of the country’s unsecured consumer loan market....
Joining the next generation of digital banks in Asia
Raphael Bick, Denis Bugrov, Hernán Gerson, Alexander McFaull, and Alexander Pariyskiy


Ralph Musgrave said...

I do wish someone would explain what a "digital bank" is. That McKinsey article doesn't, far as I can see. Anyone can pay for stuff online with a normal bank account and check their account balance online or at an ATM. So what does a "digital bank" have to offer?

Tom Hickey said...

Basically, a digital bank is a bank that only operates online, e.g., through devices connecting with a digital platform. This eliminates offices, office workers, and other fixed costs not related to the platform.

There are various forms this can take.

The Types of Digital Banks and What They Mean For Business: Neo banks, beta banks, new banks and nonbanks are all types of digital banking

See also fintech.

This is the latest and greatest. China just stepped in and announced that they were going to regulate it at the time of the AntGroup proposed IPO. This is all new, so it is the "Wild West" as we say over here, as it "cowboy capitalism."

Peter Pan said...

No fee banking has been available in Canada for over a decade. They started off as virtual (online only) banks, but have now become divisions within the chartered banks. So 'no fee' customers have the best of both worlds.