Asian banks face threat from tech firms: Report

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Jul 03, 2019 06:00 am

HONG KONG : Asia-Pacific banks must radically reform and slash costs or eventually be forced to put themselves up for sale, as rapidly increasing competition from technology firms moving into banking transforms the sector, consultancy McKinsey said.

Asian banks' average return on equity - a measure of profitability - fell to 10.1 per cent last year from 12.4 per cent in 2010, and could be as low as 6.4 per cent in 2023 if new digital banks can build scale rapidly and take significant market share from incumbents, the consultancy said in a report published yesterday.

The report comes after the Monetary Authority of Singapore on Friday said it would issue up to five digital bank licences, complementing action across the region where regulators are tweaking rules to facilitate online-only banks, which are often run by technology firms.

In Hong Kong, eight so-called virtual banks are set to launch services by the year end. Last month, Hong Kong's five largest banks including HSBC Holdings slashed minimum balance fees, a move analysts attributed to the looming competition.- REUTERS