What approach were the traditional big financial services players leaning on, to battle the nimbler digital-only banks and fintech startups?

A hidden movement in the financial services sectors in the Asia Pacific region (APAC) has been discerned in an online study.

The movement involves using digital financial wellness and money management apps to become more ingrained in the financial decisions of their customers.

In the Feb–Mar 2021 online study of 900 retail-banking consumers and 450 senior APAC business decision-makers and influencers within financial services organizations responsible for digital banking and customer experience, respondents from retail banks were seeing the value that the aforementioned apps can bring to customer experience and revenue, as well as data and insight mining capabilities.  

Commonly used by smaller digital-only banks, financial wellness apps delivered through mobile networks have been seeing adoption by institutional giants in APAC. Spending in this niche set has been expected to increase by a regional average of 57%, according to the study commissioned by Backbase.

Other key highlights from the study include:

  • 89% of the retail banking business decision-makers interviewed indicated they were “planning to” or “actively expanding” their financial wellness initiatives, while 72% indicated such initiatives with “high” or “critical” priority.
  • 67% of respondents indicated that outdated or legacy technology was a key challenge that their bank faced in trying to implement or further develop digital money management or financial wellness tools. Some 55% pointed to internal “organizational silos”, and 65% indicated a lack of understanding of customer needs; and 53% of respondents cited competing priorities.
  • 64% of respondents indicated their institutions had plans to “prevent exploitation of vulnerable and older customers”; 57% indicated they had plans of “identifying risks of vulnerability and financial difficulty” in their users. Also, 69% were planning to encourage customers to “build better financial habits”, while 70% were going to offer further “financial literacy tools”.
  • 69% of APAC consumer respondents found it difficult to build savings; 60% found planning for retirement difficult, and 49% of the respondents in APAC had difficulties managing debt.
  • 64% of respondents indicated that their institutions had plans to “prevent exploitation of vulnerable and older customers”; 57% indicated they had plans for “identifying risks of vulnerability and financial difficulty’ in users; and 69% were planning to encourage customers to “build better financial habits”. Some 70% of respondent organizations were going to offer further “financial literacy tools”.

According to the firm’s Regional Vice President, Iman Ghodosi, financial wellness apps have moved past the realm of online-only ‘digital banks’. The data shows the retail finance sector surveyed was seeing the benefits of interacting with their customers in this way.

“Larger banks see the opportunity of competing in the space and capitalizing on the comparatively low trust APAC consumers have with digital-only banks at the moment. The study showed only 26% of (responding consumers) trusted digital-only banks, compared with 60% of traditional banks,” Ghodosi said.

Guardians of financial literacy?

The study noted that banks can now use AI and analytics to offer far more safeguarding, and care more for their customers than they previously had the capacity to offer.

“The (study) data points to financial wellness apps being a primary interface between banks and their customers as we move into the future,” Ghodosi commented, adding that it was not without challenges.

Unlike nimble and dynamic digital banks, legacy financial institutions struggle with many aspects of implementing mobile-first digital services.

“We can see that for traditional banks, the path to success might be bumpy, however the cost for not meeting consumer needs will be far higher, as digital and neobanks flourish. We see the next six months as an inflection point in the space with some financial institutions being left behind.”