The coronavirus outbreak has resulted in the disruption of business activities globally. With the fear of getting infected, customers no longer prefer going to bank branches or using cash for transactions. In fact, as the need for social distancing remains at its peak, the demand for digitalization has rapidly increased.
Banks are witnessing a significant increase in the demand for digital services, including wealth management and insurance, in addition to the numerous other services.
Hence, in order to fulfill clients’ demand and ward off competition from digital-only startups particularly in Asia’s financial hubs, banks like HSBC Holdings plc (HSBC - Free Report) , Citigroup (C - Free Report) and others are trying to speed up the pace of their digital offerings.
Within Asia, as Hong Kong opened the door for new digital-only lenders amid the pandemic, virtual-only banks like ZA Bank attracted the attention of almost 24,000 people in a program that it started in January.
Moreover, WeLab, backed by Alibaba Group Holding Limited (BABA - Free Report) , is trying to attract customers before the launch of its bank by offering interest-free loans to pay in advance HK$10,000, the amount promised to each resident as part of Hong Kong’s virus relief measures.
Thus, at a time when these digital startups are trying to make a mark in Asia and are raising threat for banks, banking giants are all the more required to rapidly enhance their digital offerings to attract client attention and remain in the business amid the crisis in the region.
Banks have started to introduce video services and fresh mobile features for retail and affluent clients within Asia’s financial hubs.
For HSBC, which gets one-third of its revenues from Hong Kong, the share of its digital retail transactions in the city was almost 94% in March. Also, active customers on its mobile app rose 40% year over year.
Moreover, Citigroup has also been witnessing a surge in digital wealth management transactions in Hong Kong since the outbreak of the virus. In fact, it has already added a "Help" feature to its mobile app and is working on enabling two-way messaging.
Notably, banks have started to realize that by being able to deliver more services digitally, they will become less prone to disruptions in their operations.
Among other banks, Bank of China, which has the largest branch network in Hong Kong, has also accelerated the roll-out of its digital services.
Moreover, in Singapore, DBS Group Holdings recorded the opening of more than 24,000 online equity trading accounts since lockdown restrictions were tightened in the city.
Due to the virus-induced slowdown, banks witnessed a substantial increase in provisions in first-quarter 2020, which negatively impacted earnings growth. However, if banks can enhance digital offerings for their services, the related fee that is generated will likely provide some support to the bottom line in the near term.
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