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Chinese banks risk losing $61b revenue in payments by 2025
CARD PAYMENTS GAIN TRACTION IN CASH-HEAVY JAPAN JAPAN
Cash might still be king in Japan, but its share of cash payments is expected to drop from 76.2% in 2018 to 71.4% in 2022 as the country makes progress on its cashless ambitions, according to GlobalData.
Total card payments value is poised to hit $752.6b (¥82.6t) from only $428.1b (¥47.0t) in 2014 to $587.6b (¥64.5t) in 2018. “Expanding payment infrastructure, rising card acceptance among SMEs, and the government’s focus on non-cash transactions are expected to support the growth of the payment cards market,” said GlobalData Payments Analayst Nikhil Reddy. Japan aims to achieve a cashless payment ratio of at least 40% by 2025. To achieve this, the government has embarked on a series of initiatives, including standardising QR code payments and introducing cashless payments at self-service kiosks.
The government also devised a nine-month digital rebate program as a way to both offset the increased consumption tax and encourage more cashless transactions. The rebate rates are 5% at mom and pop stores and 2% at major chains.
Further, restaurants, souvenir shops and popular tourist spots are gradually embracing point-of-sale (POS) terminals. For example, retail chain Aeon also announced plans to install 100,000 contactless POS terminals by 2020.
Many ATMs are also being installed at locations with high footfalls, such as tourist attractions and supermarkets. A payment terminal in Japan
Chinese banks risk losing $61b revenue in payments by 2025
As much as 13% of banks’ payments revenue in China, or $61b, is likely to be displaced by the growth of digital payments and competition from non-banks, reported professional services firm Accenture. Over the next six years, fee payments put 5.2% of banks’ payments revenue at risk in mainland China and 23.9% in Hong Kong, according to the report. Competition from non-banks in invisible payments, where payments are completed in a ‘virtual wallet’ on a mobile app or device, also puts 4% and 2.6% of revenues at risk in the mainland and in Hong Kong, respectively.
Furthermore, card displacement by instant payments, where funds are transferred in real time and from which banks make little to no interest, will put an additional 3.6% and 2% of payment revenues at risk in China and Hong Kong, respectively.
These are expected to further weigh in on banks from mainland China and Hong Kong, which are already dealing with global revenue pressures from declining card transactions. Between 2015 and 2018, revenue from business CHINA
customer credit card transactions dropped 33% globally, revenue from consumer debit card transactions dropped nearly 15%, and revenue from credit cards dropped almost 12%, the report stated.
“The digital transformation underway in payments will have a deep impact on all industry players and banks will have to fundamentally change how they think about their revenue in this area,” said Albert Chan, financial services practice lead for Accenture in Greater China. “The billions of dollars banks previously earned from some of these channels will dry up, so they’ll need to develop new digital business models to compete in this new era. Banks lagging behind risk being relegated to the plumbing of payments.”
In contrast, payments revenue of non-bank financial services in Mainland China are projected to skyrocket to $494b in 2025 at an annual rate of 9.1%, from only about $292b in 2019. Meanwhile, revenue in Hong Kong is set to rise 2.1% to $10.7b from $9.5b. The billions of dollars banks previously earned from some of these channels will dry up, so they’ll need to develop new digital business models to compete in this new era. People’s Bank of China
Which credit card got the most love from Singaporeans? Amongst the card issuers that Singaporeans are subscribed to, American Express (AMEX) recorded the highest satisfaction rate with an overall score of 755, followed by DBS Bank with a score of 737 and PSOB at third with 721, a report by J.D. Power Singapore found. Overall satisfaction rates amongst credit card providers have steadily dropped, with the average score dipping by 6 points to 712 in 2019. Lofty transaction fees and forex rates incurred for overseas transactions drove the dislike. Fears relating to the possibility of fraud also emerged to undermine credit card payments. Cash still accounts for 50% of Singaporeans’ total spending abroad.
On average, Singaporeans shell out an estimated $3,542.3 (S$4,800) every year for their overseas travel activities. SINGAPORE
Credit Card Customer Satisfaction, 2019 Source: J.D. Power
How Alliance Bank is propelling SME growth
The Bank’s relationship managers help clients improve their financial health using various online tools.
The Malaysian economy is largely powered by small and medium enterprises (SMEs), which accounts for 98.5% of all business establishments in Malaysia. They provide 5.7 million jobs or 70% to total employment rate in the country, and contribute 38.3% (RM521.7 billion) to Malaysia’s gross domestic product in 2018.
A 2018 survey conducted by Malaysia’s central bank shows younger firms tend to rely on their own cash, family and friends to finance their business. Such behavioural pattern can be attributed to information opacity, lack of collateral or credit record that leads to difficulty in accessing financing, and high transactional costs. In line with Alliance Bank’s mission of Building Alliances to Improve Lives, the bank continuously develops innovative solutions to help its SME customers manage their business better and accelerate growth.
“Our approach is empathetic and centred on meeting their different business needs. We do this by using digitisation to bring about faster and more responsive customer experience,” said Joel Kornreich, Group Chief Executive Officer of Alliance Bank Malaysia Berhad.
One of such innovation is the Branch-inTablet solution, a digital account opening for individuals and businesses where, using a tablet, customers are able to open a savings account and activate their debit card, Internet and mobile banking in as little as 15 minutes. For business owners, they can open their business account within a day, instead of two weeks. Understanding that what takes businesses further is access to ready funding, Alliance Bank launched Alliance Origination System (AOS), a re-engineered automated loan origination system that disburses funds with best-in-class turnaround time.
“With AOS, we have significantly improved turnaround time for SME loan approvals to nine days, from up to 20 days previously,” explained Kornreich. He added that these digital innovations help to free up their relationship managers so they can spend more time with their SME clients to understand their needs. In doing so, they are uniquely positioned to offer the right financial solutions to their clients.
Complementing the bank’s advisory service, Kornreich announced that the bank will soon launch new diagnostic tools such as the financial health calculator and sectoral benchmarking analysis, enabling SME clients to improve their business finance health.
The Alliance@Work solution meets business owner needs by offering seamless business solutions such as BizSmart ® Online Banking, cash management system, and mass onsite account opening and activation for employees using biometric facial recognition and optical character recognition. One of the propositions include Alliance Cash2Home, a mobile remittance app for foreign workers that provides competitive remittance rates and prepaid reload services.
“We support the next generation of young entrepreneurs who often need help in growing their business. Launched in 2013, BizSmart ® Challenge combines business education, mentoring, and funding of more than RM1.5 million in cash, product sponsorship and media coverage prizes, as well as up to RM5 million in collateral-free financing, for young businesses to help them succeed. The programme has received over 1,700 submissions and empowered over 130 finalists in their entrepreneurial journey,” noted Kornreich.
In 1HFY20, Alliance Bank grew SME loans by 10% year-on-year, surpassing the RM9 billion mark, and growing faster than the industry.
For championing the cause of the underserved SME community in Malaysia, the bank was recognised with its most recent accolade, Financial Inclusion Initiative of the Year - Malaysia Award, at the regional Asian Banking & Finance Retail Banking Awards 2019.
CONTACT
Name: Agnes Ong Position: Vice President, Group Communications Contact Number: +603 2604 3333 Company: Alliance Bank Malaysia Berhad Address: Menara Multi-Purpose, Capital Square, 8 Jalan Munshi Abdullah, 50100 Kuala Lumpur, Malaysia
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