By Morgan Davis, Rebecca Feng, Addison Gong, Matthew Thomas, Elliot Wilson and Chris Wright
When Asiamoney published its first issue in 1989, China’s state-owned banks were still local institutions, often barely distinguishable from the government. Japan’s megabanks, as we know them today, did not yet exist. Instead they were smaller players in a market enjoying a domestic economic boom. Fax machines were considered the height of technology.
The region has changed dramatically. Chinese banks now take the top four spots in the list of the world’s largest banks by assets. Industrial and Commercial Bank of China, which has $3.9 trillion of assets, is the biggest bank in the world. Japan’s megabanks are also huge, now dominant in their domestic market – and desperate to escape it. Southeast Asia’s banks are increasingly regional and increasingly tech-savvy. Fax machines have made way for mobile apps powered by artificial intelligence.
Technology companies have also muscled in on the act. Ant Financial, a subsidiary of Chinese e-commerce company Alibaba, has achieved a customer base unthinkable to even the world’s biggest banks. It claims to have more than one billion customers. WeChat Pay, a local rival, boasts similar numbers.
These firms have not yet managed to steal credit lending business from banks, in part because of tight regulations, but they have upended payments. Kakaobank, a South Korean purely digital firm, is also threatening disruption, although it more closely resembles a conventional bank than those Chinese tech companies.
These disruptors have made banks increasingly nervous about their own technological capabilities. Singapore’s DBS has led the way with digital transformation, going well beyond lip service to make technology a crucial part of its business.
Where DBS has led, plenty of others have followed. Several bankers interviewed by Asiamoney pointed to the Singaporean firm as a clear influence; others saw the greatest threat coming from Ant Financial, WeChat and other technology companies.
The chief executives of China Merchants Bank, E.Sun Commercial Bank, Ping An Bank and the UnionBank of the Philippines are among those who tell Asiamoney in the following pages about their absolute commitment to digital.
Siam Commercial Bank is in the middle of a startling transformation, promising to cut its branch network by two thirds in a bid to become a digital institution.
We’ve seen banks endure wars, plagues, revolutions, economic crises and political changes. But these factors have not truly changed the nature of banking- Tian Huiyu, China Merchants Bank
The trade war between China and the US is much less of a concern to the bank CEOs we interviewed. They see it as a temporary blip, something that can be overcome. Not so for technology changes.
“Banks have been around for centuries,” says Tian Huiyu, China Merchants Bank’s president and chief executive. “We’ve seen banks endure wars, plagues, revolutions, economic crises and political changes. But these factors have not truly changed the nature of banking. Technology has the potential to change everything. It will totally disrupt the business model.”
There is much that divides the 30 financial institutions Asiamoney decided are worthy of profiling in our anniversary issue. Some bestride the globe, others are domestic upstarts. There are state-owned banks, privately owned banks and firms that would shudder to even be described as banks. But there is also plenty that unites them.
Despite the development of ever more esoteric forms of securitization or the reliance on wholesale funding markets might have appeared to shift the model, banking has always at heart been simple: take deposits, make loans.
Banks will continue to do that, but they will now face greater competition – not from those trying to take their entire business, but those merely trying to chip away at small parts of it. The CEOs we spoke to are all aware of this. They are all anticipating stark changes in the long run. But crucially, almost all of them seem ready.
However, not all banks will survive this disruptive era. No doubt some of these 30 will fall by the wayside or not live up to their current leaders’ expectations. There are plenty of banks in the region that face tests in the years to come – and we make no apologies for picking out five that we, and the market, will watch nervously as they try to find the leadership, strategy and execution that could put them into the top tier of Asian financial institutions.
Not all of the institutions profiled over the following pages existed when Asiamoney was first published 30 years ago. But they have all made great contributions to Asia’s banking systems, and they all deserve to be watched closely in the coming years.