Customers of all income levels are increasingly using digital technologies for internet, social media, and e-commerce in Asia – it is not just young people who are doing so – and this is having a profound effect on how traditional businesses are serving their customers. Reinventing business models and creating new opportunities for ballistic growth almost overnight.
The rapid growth in the uptake and use of smart-phones – the device of choice for most (accounting for around 65% of all internet traffic) in Asia is forcing businesses to change – and those that do, are seeing incredible, mind-boggling results. This ‘new world’ reality is not limited to the retail sector. As many bankers who read this blog will know, there are new digital entrants in the market who are making staggering progress in customer acquisition – taking financial services products from what was traditionally, exclusively controlled by Banks and turning the model on its head, by very simply understanding what customers want better than banks, keeping things simple, focussing on people and using technology to deliver a service that works.
In recent years, smart thinking banks and technology companies have launched new ‘Banking’ propositions in Asia. Kakao that had a 40 million strong chat user base in South Korea, launched Kakaobank. The company used its base to acquire more than one million customers in the first five days, raise $3.6 billion in deposits, and issue $3 billion of loans in the first 100 days of business. Kakaobank is now the fastest growing mobile bank in the world with over 5.5million users, $6 billion in deposits and $5 billion in loans.
In a recent report published by McKinsey and Company, it was suggested that ‘approximately 55 to 80 percent of customers in Asia would consider opening an account with a branchless digital-only bank, and those willing to bank digitally would be willing to shift between 35 to 40 percent of their total wallets to the digital account’. It also suggests that ‘30 to 50 percent of those not using digital banking express the likelihood that they will eventually make the switch’
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Are physical stores and branches still relevant?
In the past, the store or bank branch was the main customer engagement channel for retailers, however, based upon the strong evidence I have seen, and behaviour patterns mentioned in my previous post (How to Survive the Future), these days are over. Branches and stores are all about experience, browsing, learning and gathering information, where customers search for the best deal for them, often using their devices to compare offers – there is no difference between the banking sector and the retail sector here.
In Asia (but not exclusively in Asia), there is a clear shift towards digital channels with bank branches only accounting for around 18% of monthly bank transactions. The reality is that customers prefer digital channels for simple routine transactions, specifications and information.
With all this pro-digital data, one might assume that the branch and store are dead – but they are not. There is a significant percentage of customers who use branches and stores for what they consider to be complex transactions, to browse offers, products and get advice – in all cases, convenience, friendliness and relationships between customers and staff are critical. It is at this ‘human-to-human’ point that brands have an opportunity to wow their customers. But wowing is not exclusively reserved for the physical environment. Smart brands are reacting positively to ‘new world’ shopping behaviours. Stores tend to be smaller, facilitating customers buying behaviours, with less staff and plenty of customer-focused technology, augmented reality and ways to connect customers to specialists who are able to advise and assist with specific customer needs.
In Asia, like in all markets across the world, banks and retailers must really get to grips with customers changing behaviours and provide them with the ability to shop in the way they want to – wherever and whenever they wish – creating the correct experiences, incorporating a balance between physical, digital technologies and people.
Can brands still bank on loyalty?
The simple answer is yes. However, unlike in the past, where loyalty was not brought into question, customers are now not only bombarded on a daily basis with information and stimulus from around the world – through social media channels, they are able to make instant comparisons and have multiple loyalty strands. It was once said that if you sell a baby Mercedes to a young man, he will stay with Mercedes forever… in the ‘new world’, this is not the case. Customers are constantly assessing your brand’s performance and if it falls short, or does not move with the times, they will leave. In Asian markets, for instance, about 65 percent of consumers in emerging Asian economies would recommend their bank to a friend or colleague, only around 45% of consumers would do so in Asia’s developed economies. It seems that, as customers become more sophisticated, they are expecting more and more from their bank… and whilst consumers in developing economies are wowed by ‘digital’, those who have been exposed to digital services more, are still not satisfied – they expect more from their bank and retailer and most are falling short of the mark.