Digital banking to be the norm by 2015

KUALA LUMPUR, 19 January 2012 – Digital banking is set to overtake branch networks as the main way customers interact with their bank by 2015. This is according to a new PwC report ‘The new digital tipping point’, which suggests that banks are missing a vital new source of revenue growth as they have been too slow to respond to the digital innovations that have radically changed business models and redefined customer experience.  This is despite strong demand for digital banking products from consumers and the fact they are willing to pay for these.

PwC conducted research with over 3,000 banking customers across nine developed and emerging markets. The report found that most consumers are willing to pay up to £10 (approx. RM48) a month for digital banking services if they believe these offer convenience and value. The research also reveals that there is customer demand for innovative digital offerings such as social media notifications, an electronic wallet for loyalty cards and financial tools provided by banks - all of which are the products consumers are willing to pay for.

Soo Hoo Khoon Yean, Partner, PwC Malaysia, said: “Banks have generally been slow to embrace the digital innovation customers now expect from other industries, such as retail or travel. This needs to improve if banks are to hold on to their existing customers and attract the next generation. The quality of a bank’s digital offering will become an increasingly important factor for consumers.”

“The new generation of customers – Generation Y1 - represent an important source of future value for banks. Banks need to take their digital products to the next level if they want to secure these customers who expect a rich digital experience. They want an experience that is both mobile and social, and integrates their banking needs with their digital lives.”

He continued, “The majority of banks still only provide basic mobile and internet banking services, so they should start investing in their digital offerings to offer more innovative features and services. By embracing the digital wave, banks can deepen their existing customer relationships as well as access new sources of revenue.”

Digital banking will evolve into a richer set of offerings, providing new value for banks and their customers through a new ‘digital feature set.’ This is based on innovations in: user experience, mobile devices and networks, social media and collaboration, customer analytics and channel integration.

According to Bank Negara Malaysia’s (BNM) Financial Sector Blueprint 2011-2020 which was released recently, e-payments usage per capita in Malaysia doubled from 22 in 2005 to 44 in 2010. At the same time, use of Internet banking and Interbank GIRO increased by 6.3 and 4.5 times respectively.

“This goes to show that consumers are increasingly adopting digital payment methods. Going digital not only provides users with greater convenience but also increases banks’ operational efficiencies. While it will improve our economy’s competitiveness, the channels provided must be secure, convenient and cost effective,” Soo Hoo concluded.

The new digital tipping point’ also revealed:

  • More and more consumers are using online and mobile channels to access financial products. 69% of those surveyed said they currently use the internet to purchase financial products.
  • While a lower number of respondents (33%) currently use mobile to purchase financial products, mobile banking is expected to follow a similar usage curve to internet banking, with China, India and the United Arab Emirates currently leading its adoption.
  • In terms of customer profile, it’s not surprising that Generation Y leads the way, with 67% of respondents saying they currently use or are considering using mobile channels for banking.
  • The majority of respondents (61%) still trust their banks over other providers to provide their current account. However, the report suggests that new entrants, such as mobile payment providers, will continue to act as a catalyst for change in the retail banking space.
  • Banks may also need to partner with technology, mobile and other non-traditional banking providers in order to deliver the digital experience customers now expect.

 

-Ends-

 

Notes to editor:

  1. Generation Y refers to people born in the 1980s and 1990s.
  2. 56% of respondents in India, 48% of respondents in China and 42% of respondents in the United Arab Emirates said they currently use mobiles to purchase financial products.
  3. PwC conducted research with over 3,000 banking customers across nine developed and emerging markets in May and June 2011. Participants were from Canada, China, France, Hong Kong, India, Mexico, Poland, the UAE and UK.
  4. The full report ‘The new digital tipping point’ can be downloaded here: http://www.pwc.com/gx/en/banking-capital-markets/publications/digital-banking-survey.jhtml

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