Tech Can Help APAC Banks To Tap The Unbanked

by CXOtoday News Desk    Jun 22, 2017

unbanked

In a recent poll of chief risk officers from banks across Asia Pacific, 77 percent of respondents said that the inability to accurately assess customers’ credit risk constrains business growth; and by taking advantage of new alternative data sources, delivery platforms and mobile technology, new scores has been created that deliver risk assessments, according analytics firm FICO. 

In Asia, FICO estimates there are 250 million unbanked in India and more than 500 million in China, while a recent estimate by KPMG for Southeast Asia puts the figure at 438 million.

There is a significant economic, social and business imperative to address the issue, with the large majority of banks in the region looking to engage people who currently sit outside the formal banking system.

 Over 40 percent of lenders surveyed said they have customer growth targets of 20 percent or more for the year ahead. A further 14 percent said they needed to grow 15-20 percent, while 7 percent need to hit 10-15 percent more customers.

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“These steep targets reveal the ambitions of banks in the Asia Pacific region, who are eyeing the unbanked and underbanked populations,” said  Dan McConaghy, president for FICO Asia-Pacific.  “And while one immediately thinks of the potential of China and India, it is worth remembering that even in developed economies there are many consumers outside the formal banking system.”  

With more than a billion potential customers in the region, the survey found that 2 in 5 banks said they could grow their customer base by 11 to 25 percent if they could accurately score unbanked customers.

Furthermore, 7 in 10 respondents believe these new customers will be more profitable than existing customers.The survey revealed that the speed of customer growth and reliability of risk assessment is still hampered by labor-intensive underwriting, with 4 in 10 banks admitting their credit assessment is mostly a manual process.