Neobanks in APAC onboard more than 130 million new customers in 2021
The last year has seen an acceleration in the growth of neobanks (or digital banks), owing to a number of factors such as technological advancements. The expansion has continued into 2021, with Asia Pacific Countries (APAC) experiencing a surge in customer growth.
According to Finbold data, APAC region neobanks added 134.8 million customers in 2021 H1, bringing the cumulative total to 437.2 million, a 44.57% increase over the 302.4 million in 2020. Neobanks in the region served 239.3 million customers in 2019.
In terms of new customer acquisition, APAC neobanks increased their customer base by 113.62% between 2020 and 2021, from 63.1 million to 134.8 million. Between 2018 and 2019, a staggering 233 million new customers were added.
Elsewhere, the region has seen an increase in the number of neobanks, with 68 cumulative platforms in 2021 H1. India had the highest number with 14, followed by Australia with 13. By 2020, the figure would have risen to 64. Banking Payment Context (BPC) and Fincog's Digital Banking in Asia Pacific report provide data on APAC neobank customers.
Neobanks are direct banks that operate entirely online and do not have traditional branch networks. The APAC region has seen an increase in interest in neobanks as a result of the growth of tech giants looking to capitalise on the region's technological advancements. The region is increasingly emulating developed markets such as Europe, where platforms such as Revolut are prevalent.
The population's demand for online banking services has also contributed to the growth, particularly during the coronavirus pandemic, which kept the majority of people confined to their homes.
Apart from the pandemic effect, user growth can also be attributed to neobanks' product offerings. They have positioned themselves to provide financial products that assist individuals in achieving short-term financial objectives such as saving and stock trading. Interestingly, the products are offered without reference to radius yield curves, base rates, or withdrawal rates, despite the fact that they offer a superior value proposition.
Additionally, neobanks pose a significant security risk to their customers, and the rapid growth of their customer base can be attributed to an improved regulatory environment. The majority of authorities have a reputation for enacting stringent regulations in order to protect consumer funds. Additionally, the region is known for its predominantly youthful population. Notably, neobanks appeal to younger, more tech-savvy generations.
Several fintech companies in the region have embraced the super app model, which is more appealing to consumers. Super app platforms make use of unique customer data and touchpoints that have been analysed and leveraged to enable rapid proposition development. The majority of consumers prefer to manage all of their financial needs through a single platform.
The rapid growth of neobanks is also inspiring traditional banks to follow suit. Globally, traditional banks have been making strides toward digital platforms, but the coronavirus pandemic accelerated the trend.
However, traditional banks continue to face challenges such as an outmoded technology architecture. Typically, new technologies are implemented on top of an existing bank's infrastructure, complicating it. As a result, in order to maintain control of their customer base, the majority of traditional players are developing innovative technologies to combat the threat posed by neobanks.
The APAC neobank sector's challenges
While neobanks are gaining users in the region, the sector continues to face several constraints. Factors such as lack of trust and reluctance to switch from established, influential traditional brands to an unknown provider continue to be a barrier.
Additionally, the region has a sizable rural population that is unaware of challenger banks' existence. Additionally, a portion of the rural population is unfamiliar with the operation of neobanks.