The success of neobanks in APAC: over 130m new customers onboarded in 2021

By Gaia Lamperti

Neobanks, also known as digital banks, are emerging as a driving (when not a challenger) force in the global financial sector. These institutions are quickly gaining customers’ interest and trust, and particularly in some regions, like the Asian Pacific Countries (APAC), they have registered significant growth in recent months.

According to data featured in the Digital banking in Asia-Pacific report by Banking Payment Context (BPC), the APAC region neobanks added 134.8 million customers in 2021 H1, bringing the cumulative number to 437.2 million, a growth of 44.57% from 2020’s figure of 302.4 million. The region has also recorded a growth in the number of new neobanks, the research found, with 2021 H1 recording 68 cumulative platforms, 14 of which in India, followed by Australia (13).

This BPC report investigates the digital banking market of Asia Pacific by diving into geographic and demographic statistics of a diverse region and looking at propositions of successful players. Among the drivers for the growth of neobanks customers, technological innovation in the region was indicated as a key factor.

For example, with internet penetration at approximately 84%, Malaysia has made significant strides in terms of financial inclusion, with over 85% of people having access to financial services. Thailand comes in second, having the second-highest GDP per capita in South-East Asia mostly thanks to its modernization and boasts over 60% penetration rates of smartphones and internet, with over 82% of the population having access to financial services.

The demand for online banking services among the population accelerated by the Covid-19 pandemic and the competitive product offering of neobanks also were incentives in the sector. As most consumers prefer a single platform to manage all their financial needs, these new platforms are offering super apps utilise unique customer data and touchpoints to offer a more appealing banking experience to consumers.

The overall impression is that the region is increasingly emulating other advanced markets like Europe where platforms like Revolut, the neobank that secured $800 million in funding last year becoming the most valuable FinTech in the UK, are dominant.

While neobanks are not yet to substitute traditional banks, their speedy growth is giving a hard time to older institutions. Most of them are reacting by hopping on the trend and shifting towards digital platforms.

“Typically, when new technologies evolve, they are established on top of a bank’s existing infrastructure, complicating it,” the BPC report says. “Consequently, to keep a grip on the customer base, most traditional players are coming up with innovative technologies to tackle the threat from neobanks.”

Although neobanks are growing in popularity across the APAC region, it is important to notice that they still face challenges related to factors like security concerns, distrust and lack of access as large size of the population is rural and unaware of the existence of neobanks. Regulators are focusing on enacting laws to protect consumers but the switch to unknown providers versus traditional banks remains a challenge.

Key findings of the report:

• Neobanks in APAC onboard 134.8 million new customers in 2021;
• On new customer acquisition by APAC neobanks, 2020 and 2021 has recorded growth of 113.62% from 63.1 million to 134.8 million;
• In total, the cumulative number of digital banks’ customers surges to 437.2 million representing a growth of 44.57% from 2020’s figure of 302.4 million;
• The region has also recorded a growth in the number of neobanks, with 2021 H1 recording 68 cumulative digital banks.