Technology in Asia focuses on the main street bank

HONG KONG (Reuters) – Asian Internet companies are challenging local traditional banks for their mainstream finances, exploiting their mbadive user networks for their business and following a trail drawn in China by tech giants Alibaba and Tencent.

Companies better known for their messaging applications, their pretty emoticons and their online holiday bookings are getting into the bank as Asian regulators open their banking sector to a new generation of digital players.

The change is in its infancy but contrasts sharply with the banking markets of Europe and North America, where the change is slower and where these startups tend to be backed by venture capital funds and operators in the financial sector, not by technology companies.

Technology companies in Asia see the advantage of being able to seamlessly integrate banking with their users' traditional online business and the efficiency of their technology.

"If you want to open a bank account (in Hong Kong), you have to go to an agency, answer questions for an hour, and you will still not be able to open the account without a phone call," said Wayne Xu, chairman of ZhongAn International, a unit of the Chinese online insurer ZhongAn, is setting up a virtual bank.

"However, all the information needed at the counter can already be collected on a mobile phone."

Last month, the Hong Kong banking regulator granted one of the four virtual bank licenses to ZhongAn, which could be the biggest reshuffle in years in a city dominated by HSBC and Standard Chartered. Last week, the regulator said it was progressing in four other applications.

In South Korea, the authorities issued two online banking licenses, one of them to Kakao Bank in 2017, which is operated by the company behind the largest application online chat of the country.

"The average 45 million monthly users of our messaging application, Kakao Talk, represent a huge benefit to us when we advertise for our bank," said a spokesman for Kakao Bank. He added that the bank was using Kakao's artificial intelligence technology for its automated customer support systems. The bank had 8.9 million users in March.

Among the other Asian countries that will approve banks only online, we can mention Taiwan – where a group led by a unit of the Japanese operator of the Line Corp courier applications has applied for a license – and Malaysia , which provides guidelines by the end of the year. Bank of Thailand Governor Veerathai Santiprabhob said the central bank was exploring the issue.

"Large technology companies see it as an opportunity for land grabbing, allowing them to create new sets of financial services that can be sold to their existing users," said Jeff Galvin, McKinsey's Hong Kong partner.

DIGITAL ASIA

The change in Asia is based on the deep penetration of mobile technology in all aspects of consumer life.

These trends were forged by Alibaba and Tencent in China, where the two feared financial services revolutionized the cashless economy with their digital payment applications.

In contrast, US tech giants such as Amazon and Google from Alphabet Inc. have focused their efforts in the financial sector on providing technology services and consulting to incumbent operators.

Asian consumers are much more willing to do business with high tech companies than elsewhere in the world.

According to Bain Research, more than 90% of consumers under age 35 in China and India use the services of a technology company, compared to 75% in the United States and only 51% in France.

Online banks in Hong Kong plan to start by offering services such as savings accounts, credit cards, personal loans and travel insurance.

"What we see in Asia is technology companies that are turning aside to finance, inspired or even threatened by the examples of Alibaba and Tencent," said James Lloyd, partner and head of fintech APAC at EY.

In Asia, the emergence of technological gains in the banking sector comes at a difficult time for incumbents in the region, who have begun to re-evaluate the extensive branch networks that until recently were considered a competitive advantage.

According to the International Monetary Fund, the number of bank branches in Hong Kong, Japan, Malaysia, South Korea and Thailand has decreased in recent years, from 1% to 7% in 2017 compared to 2015. This is compared to growth of up to 8% ten years ago.

Of course Asian banks established in Asia are planning to remain relevant in this changing space, with some of them linking up with new rivals.

Among the new digital banking licensees in Hong Kong, there is a joint venture between StanChart, the Chinese holiday booking giant, Ctrip, and the local PCCW telecom.

"We believe that the ecosystem we can build together will be an excellent lifestyle integration into the bank," said Mary Huen, director of StanChart Hong Kong and president of the new virtual bank, during the conference. a press conference.