HONG KONG (Reuters) – Asia's internet companies are challenging the region's traditional consumer finance banks, tapering their massive business networks and following a blazed path in China of technological giants Alibaba and Tencent.
The impression in the banking business of companies better known for their messaging applications, sweet emoji and online vacation bookings comes as regulators across Asia and opens their banking sectors to a new breed of digital players.
The shift is in its infancy but contrasts strongly with the banking markets in Europe and North America, where the change is slower and such startups tend to be supported by venture capital funds and financial sector, not businesses.
Asia's technological actors see its advantage in the way they can seamlessly integrate banking services with the user's usual online activities and the technology that comes from the technology.
"If you want to open a bank account (in Hong Kong), you need to go to a department, answer questions for an hour, and you will still not have the account opened without follow-up," said Wayne Xu, president of ZhongAn International. a unit of Chinese online insurance company ZhongAn, set up a virtual bank.
"All the information needed at the counter can, however, already be collected on a mobile phone."
Hong Kong's bank governor last month issued one of four so-called virtual bank permissions to ZhongAn In what could be the biggest shake-up this year in a city dominated by HSBC and Standard Chartered, last week the regulator said it was making progress on four additional applications.
In South Korea, the government issued two bank cards online, one of them for Kakao Bank in 201
"The 45 million monthly average users of our messaging app Kakao Talk is a big plus for us when we advertise our bank, "said a cocoa bank spokesman. He added that the bank uses Cocoa's artificial intelligence technology for its automated customer support systems. The bank had 8.9 million users from March.
Other Asian countries intending to approve online banking are Taiwan – where a group led by a unit of Japanese messaging operator Line Corp has applied for a license – and Malaysia, planning policies by the end of the year. Bank of Thailand governor Veerathai Santiprabhob said the central bank was exploring the problem.
"Big technology companies see this as an opportunity to get new sets of financial services that can be crossed to their existing users," said Jeff Galvin, a Hong Kong-based partner at McKinsey.
Running the shift in Asia is the deep penetration of mobile technology across all aspects of consumer life.
Such trends were forged by Alibaba and Tencent in China, where they increased financial services and ran a revolution in the cashless economy with their digital payment applications.
In contrast, US tech giants such as Amazon and Alphabet Inc, Google, have focused their financial efforts on providing technical and consulting services to established operators.
Asian consumers are far more willing to bank with technical companies than anywhere else in the world.
More than 90 percent of consumers under 35 in China and India would bank with a technology company, according to Bain research, compared to 75 percent in the US and just 51 percent in France. Graphic: Asian Consumer Banks with Technical Firms, click tmsnrt.rs/2X1YkI6
The only online banks in Hong Kong plan to start offering services such as savings accounts, credit cards, personal loans, and travel insurance.
"What we see in Asia are technology companies that move side by side in funding, inspired by or threatened by the examples of Alibaba and Tencent," said James Lloyd, partner and APAC fintech manager at consulting firm EY.
In Asia, the emergence of technological gains in the banking sector comes at a difficult time for the region's established companies, which have begun to reassess the major grid networks that were currently seen as their competitive advantage.
The number of banking businesses in Hong Kong, Japan, Malaysia, South Korea and Thailand has fallen over the past couple of years, falling by between 1 and 7 percent in 2017 from 2015, according to the International Monetary Fund. It compares with a growth of as much as 8 percent ten years ago.
To be sure, older banks in Asia have their own plans to stay interested in the changing room, with some connection with new rivals.
Among the new Hong Kong digital banking licenses is a joint venture between StanChart, Chinese holiday day giant Ctrip and local telco PCCW.
"We believe that the ecosystem we can build together will be a good integration of the lifestyle into a bank," said Mary Huen's managing director of StanChart Hong Kong, and head of the new virtual bank, at a press conference.
Reporting of Sumeet Chatterjee and Alun John; additional reporting by Heekyong Yang in Seoul, Liz Lee in Kuala Lumpur, Chayut Setboonsarng in Bangkok; Editing by Jennifer Hughes and Sam Holmes