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RFI Global’s 2022 Post-Pandemic Consumer Banking Expectations Report, prepared for FICO, confirmed that the pandemic has aggravated financial hardship for retail banking consumers in Malaysia, with 1 in 2 experiencing a drop in income. It has also revealed that many are motivated to search for better banking offers, and that the inclination to switch lenders has increased year over year.
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Disruptive impacts from the pandemic differed across the region.
While a considerable 23-30 percent of Australian and New Zealand respondents experienced a negative impact, 50 percent of Malaysians, 40 percent of Singaporeans and 63 percent of Indonesians saw a decline. Respondents in Thailand suffered the biggest blow, with 70 percent saying their income had been reduced.
The report uncovered that more than 1 out of 4 consumers across the region (27 percent) and nearly half (49 percent) of Malaysian respondents have deferred loan repayments. While nearly 1 in 3 (31 percent) in India and nearly half in Thailand (47 percent) deferred loan repayments as a result of COVID-19, this was much less common in Singapore (12 percent), Australia (9 percent) and New Zealand (7 percent).
Despite the uncertain financial climate, the majority of Malaysian retail banking customers plan to maintain or boost their investments (77 percent). Most are looking to maintain or increase savings (82 percent), and many will consider changing banking providers this year.
Increase in customers’ intention to switch banking providers
Surprisingly, while the report indicates that most customers were highly satisfied with their main banking providers, up to 20 percent of APAC banking customers who responded said they plan to change banks in 2022. In contrast, only 10 percent said they changed banks in 2021.
This increased propensity to switch lenders is highest among the mass affluent (defined as the high end of the mass market or those with at least MYR200,000 total investable asset holdings).
In Malaysia, 5 percent of retail banking customers and 5 percent of mass affluent customers switched in 2021. That is set to at least double this year, with 10 percent of retail customers and 14 percent of the mass affluent saying they are very likely to switch.
Top reasons cited by Malaysian respondents include a change in personal circumstances (31 percent), consolidation of accounts to where they now have a deposit account (25 percent), a desire for access to better investment and wealth management products and services (24 percent), as well as a change in where payroll is deposited (21 percent).
Financial impacts felt by even the wealthiest of Malaysians
Amongst mass affluent banking customers in Malaysia, 43 percent experienced a decrease in income due to the pandemic, with half of overall retail customers negatively impacted. Nearly half of the mass affluent (46 percent) deferred loan repayments as a result, just 3 percent lower than the wider retail banking market in Malaysia.
This disruption to income has left 2 in 5 affluent Malaysianssaying they intend to reduce spending (40 percent), just as 39 percent of Malaysia’s retail banking customers plan to do.
Across APAC, the mass affluent are more likely to step up their borrowing compared to the wider market (16 percent vs 8 percent). In Malaysia, specifically, more of the mass affluent plan to increase borrowing (19 percent) than retail banking customers (6 percent).
The report further revealed that 80 percent of the mass affluent are opting to maintain or boost their investment levels with banks, versus 77 percent of Malaysia’s overall retail banking market.
Impacts of the Pandemic on banking intentions
Consumers are changing their banking behaviors, in response to the financial impact of the pandemic.
More than 4 in 5 of Malaysia’s retail banking customers will either increase or maintain their savings (82 percent). Across the region, the sentiment to maintain or increase savings was highest in New Zealand (94 percent) and in Indonesia (87 percent).
Despite a dip in borrowing plans year over year, the level of borrowing for APAC retail banking customers still remains higher than pre-pandemic times as consumers deal with the lasting effects of the disruption.
“The pandemic has clearly exacerbated financial hardship for customers regardless of income class,” said Aashish Sharma, Senior Director of Decision Management Solutions for FICO in Asia Pacific. “As borrowing and spending habits contract, customers will be on the lookout for avenues to grow their wealth and boost their savings. Banks must be able to proactively identify customers’ needs, and pivot their approach to alleviate financial anxieties while ensuring their products suit customers’ affordability and funding requirements.”
Gravitating towards Digital
Many Malaysian respondents (47 percent) still consider the proximity of branches and ATMs as a top determinant for a main banking provider; however, the report highlighted the importance of providing digital services. As many as 72 percent of APAC retail banking customers chose a fintech product over the option to use their banks’ main services. This was highest in Malaysia (94 percent) where customers did so as they wanted ease-of-use, time savings and easier application processes.
Comparing 2021 to 2019, APAC consumers are increasingly gravitating towards digital channels at every stage of their application journey: initial enquiries and research (up 14 percent), follow-up enquiries (up 15 percent), and banking applications (up 15 percent).
How Banks can Ensure the Customer is at the Center of Actions and Decisions
- Transform operations and data silos through the use of sophisticated analytics technology and centralized management platforms.
- Make data-driven decisions by predicting, analyzing and optimizing customer interactions in real time for an event-based, profile-driven approach to relationship management.
- Develop precise insights into optimal interactions and offers that would work best for customers ● Create a digital twin (a type of virtual model used for simulation purposes) to leverage this continuous learning and test out radical new approaches and strategies in a low-cost, low-risk environment.
- Deliver hyper-personalized offers and customer actions in a scalable way
“Banks must understand their customers’ needs on a deeper and more granular level, or risk losing them to competitors and alternative providers,” said Sharma. “Maintaining customer satisfaction alone will no longer suffice; customer experiences must be radically enhanced. Customer-centricity will be key to consistently delivering hyper-personalized experiences and retaining customers.”
Survey Methodology
This survey was conducted in 2021 by an independent research company adhering to research industry standards. 1003 Malaysian adults were surveyed, along with 12,885 consumers in Australia, New Zealand, Singapore, Indonesia, India and Thailand.
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