Southeast Asia’s banking sector is at a pivotal moment. As digital adoption accelerates across the region, banks are under increasing pressure to transform their business models, modernize legacy systems, and deliver customer-centric experiences—all while navigating complex regulatory environments and rising ESG expectations. Drawing on insights from 120 senior banking leaders in Southeast Asia, this deep dive explores the unique challenges and opportunities shaping digital transformation in the region, and offers actionable recommendations for banking leaders looking to thrive in a digital-first era.
Customer expectations in Southeast Asia are evolving rapidly, driven by the proliferation of digital-first challengers and the influence of global technology giants. According to recent research, 76% of Southeast Asian banking leaders say customer centricity is driving key decisions within their organizations. Improving the customer experience is the top digital transformation priority for 24% of banks in the region, closely followed by growing revenue through new products and services (22%).
Banks are increasingly focused on leveraging data to create richer, more personalized customer journeys. Forty-two percent of Southeast Asian banks are prioritizing the integration of customer data across systems to better understand and serve their clients. Community engagement is also a significant focus, with 38% of banks citing it as a top customer experience priority—an area where many believe they are ahead of their competitors.
Despite strong ambitions, nearly half (49%) of Southeast Asian banks admit they have yet to make significant progress implementing their digital transformation strategies. The top barriers? The COVID-19 pandemic and regulatory challenges, each cited by 43% of respondents, have had a profound impact on transformation efforts. The pandemic accelerated the shift to digital channels, a trend that is expected to persist, but also exposed gaps in operational agility and digital readiness.
Regulatory complexity remains a significant hurdle. As digital banking matures, regulators across Southeast Asia are introducing new frameworks to address risks such as cybersecurity, data privacy, and financial crime. While these measures are essential for building trust, they can slow the pace of innovation and require banks to invest heavily in compliance capabilities.
Legacy technology is another major obstacle, with 37% of banks identifying it as a key impediment to transformation. Outdated core systems limit the ability to launch new products, personalize services, and respond quickly to market changes. Modernizing the core—through cloud-based platforms and intelligent technologies—is now seen as a critical enabler of both operational efficiency and customer experience innovation.
Operational transformation in Southeast Asia is increasingly centered on deepening customer understanding through intelligent technology. Forty percent of banks are prioritizing investments in AI, machine learning, and advanced analytics to gain actionable insights and respond to the growing threat from digital-first challengers. Thirty-eight percent are focused on using data and analytics to obtain a richer understanding of their customers, while 35% are investing in modern, cloud-based core banking systems.
These investments are not just about technology—they are about building the agility to innovate at speed, deliver new products, and create seamless omnichannel experiences. Banks that can break down data silos and harness real-time insights will be best positioned to anticipate customer needs and differentiate themselves in a crowded market.
Sustainability and social responsibility are rising up the agenda for Southeast Asian banks. Sixty-five percent of banking leaders say ESG (environmental, social, and governance) is a key driver of their digital transformation plans, and 69% believe their ESG strategy is giving them a competitive advantage. More than half (54%) feel significant pressure to improve their ESG credentials, reflecting growing expectations from customers, employees, and regulators alike.
Diversity, equity, and inclusion (DEI) is another area where Southeast Asian banks are leading globally. Forty-two percent of respondents report that their organizations have made DEI commitments, well above the global average. Embedding ESG and DEI into transformation strategies is not only about compliance—it is about building trust, attracting talent, and unlocking new growth opportunities.
Southeast Asian banks are confident in their ability to compete, with half believing they are ahead of the competition on all fronts. However, 36% acknowledge they lag in offering traditional products through new channels and delivering personalized services. The rise of digital-first challengers and global tech entrants means that banks must continuously innovate to maintain their edge.
Southeast Asia’s banks are at a crossroads. The winners will be those that move beyond incremental change to embrace rapid, customer-centric transformation—modernizing their technology, reimagining their operating models, and embedding ESG and DEI at the core of their strategies. By doing so, they will not only meet the demands of today’s digital-first customers but also unlock new opportunities for growth and leadership in the region’s dynamic financial landscape.
For more insights on digital banking transformation in Southeast Asia and around the world, connect with our experts at Publicis Sapient.