Digital Transformation in Banking: What getting it right means for consumers in Asia. Research by

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2 Digital Transformation in Banking: What getting it right means for consumers in Asia Research by

3 Agenda Banking channel usage trend across Asia Payment tool trends in Asia Fraud issues in Asia Customer satisfaction and churn

4 Methodology of study Banking & Payments Surveys 2018/2017. Annual global surveys of consumer banking attitudes and behaviors. Online study with sampling balanced by country demographics. Covers retail banking, payments and wealth management. GlobalData Banking & Payments Survey sample 2018 Q1 China 2,000 Philippines 5,000 Hong Kong 2,000 Singapore 2,000 India 2,000 Taiwan 500 Indonesia 500 Thailand 500 Japan 500 Vietnam 500 Malaysia 1,000 Total Asia 16,500 Global survey 51,000

5 Bank channel trends

6 Year on year growth,% 12% Credit card balances outstanding Residential mortgage balances outstanding Personal loans balances outstanding Retail deposits Retail banking balances 10% 8% 7,4% 8,4% Growth expected across most retail banking lines of business Capturing this new business requires investment in growth channels 6% 4% 2% 5,0% 6,4% 5,9% 4,7% 0% Retail bank balance sheets across Asia (ex China, India, Japan) Source: GlobalData Retail Banking Analytics

7 Banking channel use accross Asia Pacific, % 60% Branch Telephone Online Mobile 50% 46,8% 47,83% 48,1% 46,8% 40% 37,6% 34,4% 34,4% 39,0% Digital Asia Online banking use has remained consistently high 30% 20% 10% 27,3% 27,17% 21,4% 17,6% 17,6% 12,3% 29,83% 25,23% 19,9% 18,5% 14,0% 12,8% 27,3% 28,4% 19,6% 16,1% Mobile has risen to a close second 0% Weekly or more Monthly Weekly or more Monthly Weekly or more Monthly Source: GlobalData Banking & Payments surveys Banking is already digital across most of South East Asia

8 Daily Weekly Monthly Daily Weekly Monthly 23,3% 29,4% 15,2% Mobile 10,5% 28,7% 19,8% 26,7% 35,3% 11,5% Online 7,6% 36,0% 32,8% 16,2% 11,5% Telepho Telephone4,8% 8,4% ne 30,4% 15,4% 6,9% Branch 3,1% 7,8% 14,9% 80% 60% 40% 20% Malaysia banking channel use, % 0% 20% 40% 60% 80% Singapore banking channel use, 2018 Source: GlobalData Banking & Payments surveys Channel use is trending similarly across ASEAN but Singapore leads the way in omnichannel

9 Branch Telephone Online Mobile Other Branch channel Making a complaint Having a conversation with an advisor 23,2% 29,9% 16,1% 14,2% 34,3% 29,3% 15,6% 16,4% 10,7% 10,3% Branch is prominent in Booking an appointment with an advisor 27,6% 13,0% 31,6% 17,3% 10,6% Troubleshooting Customer service Advice Querying a transaction 16,5% 11,5% 39,7% 23,6% 8,7% But these are high impact occasions that must deliver a superior experience Depositing a cheque 40,2% 37,1% 13,7% 8,9% 0% 20% 40% 60% 80% 100% Prefered channel of activity across Asia, 2018 Source: GlobalData Banking & Payments surveys

10 Branch/in person Telphone Online Mobile Other Credit card 51,8% 14,4% 11,7% 8,3% 6,8% Financial product acquisition Loan 57,0% 15,6% 16,6% 6,4% Everyday banking is digital but product acquisition remains dominated by the branch Mortgage Savings acc 68,2% 72,2% 10,5% 11,1% 3,2% 4,0% 13,7% 5,2% 5,3% Current acc 64,2% 6,1% 17,1% 7,0% 7,5% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Channel of acqusition across Asia, 2018 Source: GlobalData Banking & Payments surveys

11 Preferred channel of arrangement, % Mobile Online Telephone Branch 100% Bridge the digital gap 80% 60% 33,5% 2,4% 38,7% 41,1% 1,9% 4,1% 33,4% 6,7% Consumer preferences have shifted to digital channels Capturing the growth and switchers requires greater digital investment across the product suite 40% 20% 0% Digital gap 41,5% Source: GlobalData Banking & Payments surveys 38,7% 36,3% 38,9% 22,4% 20,4% 17,9% 20,8% Current account Savings account Mortgage Personal loan 38.8% 40.1% 39.9% 36.6% Asia Q: If you had to apply for a financial product today, which one of the following would be your preferred method?

12 Payment trends across Asia

13 Cash Payment Value of Transaction (USD Billion) Cash use Increasing in overall value due to economic advancement. Decreasing as a share of payments due to adoption of payment cards and mobile payment. India Indonesia Thailand Taiwan Philippines Malaysia Singapore Hong Kong Cash Payment Value of Transaction Growth (%) 20% 18% 20% 15% 13% 8% 5% 5% 1% -2% -18% -8% -9% -14% -35% -27% India Indonesia Thailand Taiwan Philippines Malaysia Singapore Hong Kong Source: GlobalData Cash Analytics Market share of cash payments is declining Economic advancement is leading to the increase in cash use but overall cash use is declining in the mix

14 318 Card Payment Value of Transaction (USD Billion) Card use Rapidly gaining popularity across Asia. Growth slowing but still impressive India Taiwan Hong Kong Singapore Thailand Indonesia Malaysia Philippines % Card Payment Value of Transaction Growth (%) 248% 220% 239% 116% 85% 99% 44% 55% 52% 46% 43% 63% 32% 53% 31% 47% 31% Card use is rapidly increasing in Asia Payment card use is expanding across Asia with the rise in adoption of payment cards Source: GlobalData Payment Card Analytics by the consumers and the increase of acceptance by merchants

15 Mobile penetration Mobile wallet becoming prevalent in Asia and consumers are embracing it. China leads the world but all of Asia is trending towards greater mobile payments China India Hong Kong Vietnam Taiwan Thailand Indonesia Singapore Malaysia Philippines Japan Consumer with a mobile wallet and usage, % 9% 14% 16% 16% 16% 18% 18% 16% 13% 17% 22% 28% 22% 24% Have one and USE it 30% 35% 37% 41% 46% 60% 65% 12% 16% 11% Have one and USE it Have one but Don t USE it Mobile wallet becoming popular Not only are more people in Asia embracing mobile wallet they are also using them much more frequently compared to markets in other regions due to bypassing card and going directly to mobile in some markets while appreciating the new technology and Source: GlobalData Banking & Payments surveys convenience in other markets

16 Consumer without a mobile wallet and their interest, 2018 Mobile potential Maturity of the mobile wallet environment determines consumer interest. More mature markets have more alternatives, particularly cards that limit mobile payment utility. ASEAN countries are among the most interested in the world. China India Hong Kong Vietnam Taiwan Thailand Indonesia Singapore Malaysia Philippines Japan 7% 9% 10% 12% 10% 14% 10% 16% 16% 17% 17% 19% Mobile wallet/payments interest Markets where mobile wallets have been introduced for a longer period such as China have less consumers to convert while other markets where mobile wallet is just at the cusp of take off such as Thailand and Indonesia are recording greater interests from Source: GlobalData Banking & Payments surveys No m-wallet but interested 22% consumers 23% 23% 24% 29% 30% 30% 32% 33% No m-wallet and NOT interested 44%

17 Reasons why consumers don t use a mobile wallet, % Mobile barriers Security is the main concern for non users of mobile payments baring India and Japan. 32% 22% 14% 30% 20% 12% 17% 27% 30% 25% 22% 21% 10% 4% 3% 23% 29% 23% 22% 8% 8% 18% 4% Customer education around phone security is a must for mobile payments to accelerate China Hong Kong India Indonesia Japan Malaysia Singapore Taiwan Worried if phone got lost or stolen Don t think its better than cash / card Tried but don't see the benefit Mobile wallet interest Markets where mobile wallets have been introduced for a longer period such as China tend to have less consumers to convert while other markets where mobile wallet is just at the cusp of take off such as Thailand and Indonesia are recording greater interests from consumers Source: GlobalData Banking & Payments surveys

18 Fraud trends across Asia

19 Fraud Consumers having experienced fraud in the past four years, 2018 Japan 9% Singapore Taiwan Hong Kong Indonesia India Malaysia China 13% 13% 16% 18% 20% 20% 25% Fraud exposure is a major concern and a barrier for further digital payment adoption.. Consumers education is a continuous effort. Types of fraud experienced, % 11% 11% 11% 11% 11% 10% 9% 9% 7% 7% 7% 8% 5% 6% 6% 6% 7% 5% 2% 4% 3% 4% 4% 2% 2% 2% 1% 1% 1% 22% 14% 3% 9% 4% 9% 3% 3% 1% 1% China Hong Kong India Indonesia Japan Malaysia Singapore Taiwan Card details stolen on the internet Card/PIN details stolen/skimmed at an ATM Mobile banking details being stolen Card details stolen/skimmed at a merchant Online banking login details stolen Fraud can be reduced in Asia A lot of fraud incidents can be prevented at the consumer level and having well Source: GlobalData Banking & Payments surveys educated consumers in the region will be crucial

20 75% Consumers attitude toward biometrics security measures, % 84% 59% 74% 72% 67% 42% Biometrics Most consumers in Asia are open towards biometrics. Innovative security solutions are more viable in ASEAN than elsewhere. A higher fraud incidence as helped consumers value biometric anti-fraud measures. China Hong Kong India Indonesia Japan Malaysia Singapore Taiwan Biometrics bring great sense of security Most consumers in markets around Asia are open to new ways of security measures including biometrics 64% 64% 63% Happy with biometrics Source: GlobalData Banking & Payments surveys

21 Channel satisfaction and switching

22 Very willing Quite willing Neither willing nor unwilling Quite unwilling Very unwilling Asian average 15,2% 35,1% 32,0% 12,6% 5,0% Pure play digital banks Taiwan Singapore 9,3% 45,5% 28,7% 9,0% 36,9% 32,4% 16,5% 3,2% 9,9% 8,7% Malaysia 21,8% 45,6% 23,0% 8,6% Large sections of the customer base are open to neobanks. India Hong Kong 7,2% 27,4% 27,3% 36,8% 42,1% 19,8% 9,4% 18,3% 6,6% 5,0% Markets with more establish banking traditions are more resistant. China Indonesia 14,1% 30,2% 42,1% 8,9% 41,8% 33,3% 0,4% 8,2% 2,2% 18,7% Incumbents need to be alive to the threat from new entrants. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Openness to digital only banks accross selected Asian markets Source: GlobalData Banking & Payments surveys

23 Very satisfied Fairly satisfied Neither satisfied nor dissatisfied Fairly dissatisfied Very dissatisfied Mobile 36,9% 49,9% 11,0% 1,8% Channel satisfaction Online 35,3% 52,3% 10,5% 1,6% Most banks are meeting customer expectations. Telephone 31,1% 50,4% 14,4% 3,5% Customer experience is generally good. Customer channel expectations are not static and are directly influenced by other industries. Branch 29,2% 52,7% 15,1% 2,3% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Consumers, Asia (2018) Source: GlobalData Banking & Payments surveys

24 Very likely Quite likely Neither likely nor unlikely Not very likely Not at all likely Market overall 6,8% 12,3% 23,1% 35,8% 22,1% Switching Dissatisfied with.. Mobile 6,3% 25,0% 42,2% 20,3% 6,3% A poor experience in any bank channel leads to higher churn. Online 10,8% 29,2% 21,5% 27,7% 10,8% Poor online experience is more of a push factor. Telephone 14,9% 22,4% 32,8% 22,4% 7,5% Branch 11,3% 21,1% 32,4% 26,8% 8,5% 0% 20% 40% 60% 80% 100% Liklihood of switching banks across Asia, 2018 Source: GlobalData Banking & Payments surveys

25 Key trends Asia is increasingly digital in its banking experience, with mobile soon to be the dominant channel Branch interactions are still valued for advice, problem solving and remains the main channel of product arrangement The gap in digital arrangement and preferences needs to be overcome to benefit from the market growth expected Card use is eclipsing cash use but will itself be challenged by mobile payments Security is a major barrier to alternative payments such as mobile but can be addressed by innovation such as biometrics Channel satisfaction matters as a poor experience leads to high customer churn

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