It’s now entirely uncontroversial to make payments, transfer money, and communicate with banks entirely through mobile apps and websites. The rise of online-only challenger banks is a testament. Because of the newcomers to the banking scene recognise that physical branches are becoming increasingly unnecessary, an eccentric reminder of an analogue world.
These developments in Western countries are, well-established. This is a broad statement. Pre-pandemic research from McKinsey suggested that for some emerging Asian countries, digital banking penetration had grown by 300 per cent. There are clearly developing countries whose digital banking adoption has caught up with that of developed markets. Survey from McKinsey found that emerging Asia-Pacific markets saw fintech app and e-wallet penetration reach 54 per cent.
The public imagination tends not to associate such locations with technological advance. This is reflected in one United Nations report. On closer inspection, there are some clear reasons for digital banking’s increased prevalence in the emerging world. On a practical level, emerging markets simply contain young populations. According to PwC, almost 90 per cent of people under 30 reside in emerging markets. Population trends favor the growth of online transactions. The demographic dominance of digital natives has a part to play in the adoption of digital banking across emerging markets. Similar projections have been made by McKinsey in the context of China.
All of this additional wealth comes hand-in-hand with greater demand for convenient banking services. As PwC have recently noted, governments’ desire to boost financial inclusion and reduce the use of cash is fuelling rapid growth in electronic payment. This discussion of the active pursuit of financial inclusion brings us on to another set of reasons for the rise of digital banking. Also, various emerging market governments have a strong economic motive to encourage financial inclusion through digital banking. According to research from HSBC, digital finance is capable of increasing the GDP of all emerging economies by 6 per cent by 2025.
PwC’s recent report on payments transformations points is made through social media, advances in NFC technology, use of blockchain, and mobile money. Reflecting on developments like this, the term emerging isn’t necessarily the most applicable or appropriate way of describing these markets. These new waves of financial inclusion and technological advance clearly show that many of the countries branded as emerging have, in fact, emerged. They are now in a position to capitalise on the future of digital banking services.
