The Southeast Asia commercial banking market size was valued at $3,063.41 million in 2021, and is projected to reach $16,341.98 million by 2031, growing at a CAGR of 18.3% from 2022 to 2031.
A commercial bank is a kind of financial institution that carries all the operations related to deposit and withdrawal of money for the general public, providing loans for investment, and other such activities. These banks are profit-making institutions and do business by offering loans and earning profit from premium sources. The two primary characteristics of a commercial bank are lending and borrowing. The bank receives the deposits and gives money to various projects to earn interest (profit). The rate of interest that a bank offers to the depositors is known as the borrowing rate, while the rate at which a bank lends money is known as the lending rate.
Commercial banks facilitate business transactions by making use of checks, bank drafts online transfer possible. Moreover, commercial banks make the business transactions possible by providing digital payments offerings. In addition, commercial banks offer consumers and small to mid-sized businesses with basic banking services. Furthermore, it increases global trade among various countries. Therefore, these are some of the factors propelling the market growth. However, the amount of collateral securities required by commercial banks before offering loans is usually high which the borrowers may not be able to provide. If people do not have the necessary collateral securities with which to borrow money from the banks, the commercial banks are reluctant to provide loans. This tends to hamper the market growth. In addition, risk of robbery and frauds are some of the major factors limiting the growth of Southeast Asia commercial banking market. On the contrary, commercial banks play a major role in the growth of the economy by creation of credit, which leads to an increase in production, employment, and consumer spending, thereby boosting the country economy. Therefore, this is a major factor expected to provide lucrative growth opportunities in the coming years.
Based on product, the commercial lending segment attained the highest growth in 2021. This is attributed to flexible long-term lending offered by commercial loan options that acts as a major driver in the market. In addition, the market is expected to increase collaborations between digital lending organizations and FinTech companies for payment collection. Furthermore, the local and international fintech players have been actively rising in Southeast Asia commercial banking industry.
Based on country, China attained the highest growth in 2021. This is attributed to China witnessing the fastest technological advancement in the region in terms of adopting Artificial Intelligence in banking and financial institutions.
The report focuses on growth prospects, restraints, and trends of the Southeast Asia commercial banking market analysis. The study provides Porter’s five forces analysis to understand the impact of various factors, such as bargaining power of suppliers, competitive intensity of competitors, threat of new entrants, threat of substitutes, and bargaining power of buyers, on the Southeast Asia commercial banking market.
The Southeast Asia commercial banking market is segmented on the basis of product, application, and country. By product, it is segmented into commercial lending, treasury management, project finance, syndicated loans, capital market and others. By application, it is classified into healthcare, construction, transportation and logistics, media and entertainment, and others. By country, it is analyzed across China, Indonesia, Cambodia, Malaysia, Singapore, and Rest of Southeast Asia.
The report analyzes the profiles of key players operating in the Southeast Asia commercial banking market such as CIMB GROUP HOLDINGS BERHAD, Malayan Banking Berhad, Citigroup, Inc. , Public Bank Berhad, DBS Bank Ltd, HSBC Group, OCBC Bank, United Overseas Bank Limited, PT Bank Mandiri (Persero) Tbk., and PT.Bank Rakyat Indonesia (Persero) Tbk. These players have adopted various strategies to increase their market penetration and strengthen their position in the Southeast Asia commercial banking industry.
Others segment will grow at a highest CAGR of 21.7% during 2022 - 2031.
COVID-19 impact analysis
In Southeast Asia, a resurgence of new COVID-19 cases after an initially well-controlled outbreak in countries such as Singapore and Indonesia, prompted governments to take stricter measures in containing the virus. All countries in the region had various degrees of movement and business restrictions. Commercial banks in the region had to face slowdown of business during the pandemic. However, governments & regulators, such as the Asian Development Bank, World Bank and the banks themselves played a major role to keep supporting economies during the crisis. Moreover, commercial banks were also well-placed to play an important role in supporting governmental initiatives and launch some of their own to support customers in these times. Thus, the COVID-19 had a positive impact on the Southeast Asia commercial banking market.
Top impacting factors
Commercial Banks Increase Global Trade
Commercial banks facilitate international trade and travel by making foreign exchange transactions easier. They help in making overseas payments for their customers. They also assist in international trade by issuing letters of credit to importers and providing travelers’ checks to overseas travelers. With globalization, the modern economy is a border less economy in terms of conducting trade with different countries, there is always need to settle international indebtedness. Commercial banks aid in remittance of cash, exchange one currency for another; aid in export & import by transferring documents and payments; and lend money to government, institutions and other global organizations. The reach of the commercial banks is unlimited and it helps in making world trade easier and compact. Therefore, this is one of the major factors for the Southeast Asia commercial banking market growth.
Healthcare segment accounted for the highest market share in 2021.
Risk of Robbery and Fraud
Piling up cash in publicly known places such as commercial banks can attract robbers. There have been prevalent cases of robbers breaking in the banks and emptying the vaults. The increase in internet banking in recent times has as well led to increase in cybercrime. Commercial bank customers are now exposed to criminal attacks through stolen ATM cards, passwords, hacking of accounts, and others. There have been robberies where robbers have stolen millions of dollars through the internet, without physically entering the bank premises. With the rise in internet banking, fraudsters now device more innovative ways to scam and rob people off their money. Commercial banks are investing heavily on their internet and database infrastructure to secure their cyber acts. This adds to the operating costs of the banks, which the customers have to bear. Therefore, this is a major factor hampering the growth of the market.
Commercial Banks are Important for the Economy Growth
Commercial banks are an important part of the economy. They not only provide consumers with an essential service, but also help create capital and liquidity in the market. They ensure liquidity by taking the funds that their customers deposit in their accounts and lending the funds to others. Commercial bank online plays a role in the creation of credit, which leads to an increase in production, employment, and consumer spending, thereby boosting the economy. Furthermore, commercial banks are crucial to the fractional reserve banking system. This allows banks to extend new loans of up to 90% of the deposits they have on hand, theoretically increasing the economy by freeing capital for lending. Therefore, this is a major factor that is expected to provide lucrative opportunities for the growth of the Southeast Asia commercial banking market outlook.
Malaysia would exhibit the highest CAGR of 14.0% during 2022-2031
Key benefits for stakeholders
- This report provides a quantitative analysis of the market segments, current trends, estimations, and dynamics of the Southeast Asia commercial banking market analysis from 2021 to 2031 to identify the prevailing Southeast Asia commercial banking market opportunities.
- In-depth analysis of the Southeast Asia commercial banking market share assists to determine the prevailing market opportunities.
- Major countries in each region are mapped according to their revenue contribution to the Southeast Asia commercial banking market forecast.
- Market player positioning facilitates benchmarking and provides a clear understanding of the present position of the market players.
- The report includes the analysis of the regional as well as global Southeast Asia commercial banking market trends, key players, market segments, application areas, and market growth strategies.
Southeast Asia Commercial Banking Market Report Highlights
By Key market players
Southeast Asia's booming digital economy and supportive regulators have propelled the rise of commercial banks across the region. While initially slow to react, incumbents are now ramping up their efforts to penetrate the growing commercial banking market in the region. Furthermore, loans are expected to rise, as Southeast Asian economies open borders, boost infrastructure spending, and increase product offerings capacity.
Moreover, Singapore's banks are expected to witness faster loan growth and improved profitability as Southeast Asian economies open up for business and travel after two years of COVID-19 pandemic. Loans across the three Singaporean banks — DBS Group Holdings Ltd., Oversea-Chinese Banking Corp. Ltd., or OCBC, and United Overseas Bank Ltd. increased by 8% to 9% year over year in the first quarter of 2022, according to their recently announced results. That was a significant improvement from a 5% loan growth reported each by DBS and UOB in the first quarter of 2021, while OCBC's loans were flat, due to the COVID-19 pandemic.
The three Singapore banks are heavily focused on Southeast Asia and derive most of their earnings from the region. In 2021, DBS generated around 70% of its operating income from Singapore, and South and Southeast Asia, according to S&P Global Market Intelligence data. OCBC and UOB derived around 80% of their operating income from the city-state and Southeast Asia. In addition, digital banking is becoming mainstream and is being driven by disruptive technologies, digital penetration and evolving customer expectation. The COVID-19 pandemic has also given digital banking a significant push.
According to a research report, nearly 70% adults in Southeast Asia were under banked or unbanked. The biggest market is Indonesia, which has around 42 million under banked and 92 million unbanked adults. Also, there is a huge funding gap when it comes to small-sized businesses in the region. Some of the key players profiled in the report include CIMB GROUP HOLDINGS BERHAD, Malayan Banking Berhad, Citigroup, Inc. , Public Bank Berhad, DBS Bank Ltd, HSBC Group, OCBC Bank, United Overseas Bank Limited, PT Bank Mandiri (Persero) Tbk., and PT.Bank Rakyat Indonesia (Persero) Tbk. These players have adopted various strategies to increase their market penetration and strengthen their position in the industry.