How integration of payment apps with social media boosts neo-banking

A new report has found that the early adopters of digital payments hail from China and India. The integration of financial services with social media services offered by Alibaba and WeChat has helped 93 per cent of consumers in China migrate to digital payments or neo-banking services.

Likewise, the popularity of Paytm in India has helped 50 per cent of Indians utilise next-gen services, according to the report by market research agency Kantar.

A neo-bank is a digital bank without branches, with the digital operations reaching consumers via mobile apps and personal computers. Though Alipay, Paytm, WeChat Pay, Nubank and the likes have created a revolution in the digital payments space, their impact on the traditional retail banking market is yet to be fully felt. In a survey of 3,000 bank customers around the world, Kantar found early adopters prominently hailing from China and India.

Chinese consumers are the champions of digital payments with almost everyone (93 per cent) with a bank account doing business with one or more of the local neo-banks — Alipay, WeChat and JD Finance.

Though the integration of payment apps in social media platforms tends to play a significant role in aiding the movement, the report notes it does not provide the full picture, given the significant level of penetration enjoyed by Alipay and JD. India has the second-highest market penetration at 50 per cent, according to the report, followed by Brazil at 35 per cent. Within other more traditional banking markets, neo-bank penetration is considerably less than 5 per cent in the US at 2 per cent, and in Singapore, it is less than 1 per cent.

The report shows Chinese retail banking differs significantly from other markets: on average, customers make use of at least two of the three key digital payment banks — Alipay, WeChat or JD. This level of use is unparalleled, according to the report.

In India, the tough fight between digital payment majors Airtel and Paytm was showcased, with Airtel at 15 per cent versus Paytm at 46 per cent usage.

Reg van Steen, the lead author, points out that in China, India and Brazil, neo-banks have made the leap to the mainstream.

Elsewhere, consumers are still just “checking them out” or “cherry-picking” particular benefits.

Highlighting customer appeal and trust, the report shows neo-banks in Brazil, China and India have established an equal footing with traditional banks, and that neo-banks are liked more than they are trusted by their own customers. This could be because neo-banks tend to invest strongly in brand building and are overt in their efforts to deliver an engaging, innovative, and often responsive customer experience.

Existing banks appear to be closely following what the neo-banks are doing and are quick to imitate app features and benefits. However, neo-banks moving away from providing typical banking services are expected to hold them in good stead. Airtel Payments Bank has partnered with private sector general insurance company HDFC Ergo to launch a mosquito disease protection policy.

At just ₹99 per annum, the policy provides cover against seven common mosquito-borne diseases. The policy is currently available to 40 lakh remittance customers of Airtel Payments Bank.

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