only will this enhance financial inclusion, it could potentially also help mobilise untapped savings, enable more efficient financial transactions, and make credit more readily available and affordable to small businesses. emerging asia fares poorly in financial inclusion even among emerging markets. • less than 15 % of asian smes have bank credit lines, compared to 24 % in latin america and 28 % in eastern europe. • in indonesia, for example, only about one out of every three persons aged 15 and above has an account with a financial institution. ironically, emerging asia ’ s relative under - development could turn out to be an advantage. the innovative adoption of digital technology by the financial industry is enabling these economies to leapfrog into more advanced channels for providing banking services. • a growing number of asian customers, especially in countries like china and india with rapidly developing technology infrastructure, are using mobile banking apps for payments and funds transfers, even before customers in more advanced economies. • in india, bank accounts can be linked to biometric identity cards issued under the national aadhaar initiative, enabling millions who otherwise lack the formal documents required to open a bank account to have access to basic banking services. of course, technological innovations pose threats as well as opportunities to asian banks. as in the us, a number of fintech entities in asia are making inroads as lower - cost alternatives to banks. among the fintech services that have enjoyed the greatest success are mobile money and online payments. • in the philippines, gcash has become a popular mobile remittance services provider that leverages on the network of its telecommunications parent. • in china, transaction volume through third - party payments providers has surpassed rmb 4 billion. alipay, which dominates the market, has over 700 million registered accounts. bis central bankers ’ speeches the competitive challenge posed by fintech players to asia ’ s banks should not be overstated though. the banks are fighting back – developing online platforms to complement their physical branches. we can expect the asian banking landscape to continue to transform as banks adapt innovations enabled by fintech to stay relevant and competitive. conclusion let me sum up. the three driving forces present both challenge and opportunity for banks in asia. • economic growth will be slower in the next decade compared to the last two. but the composition of that growth in an increasingly middle class asia will benefit modern services like banking. • financial regulation will be tighter and will constrain all banks. but asian banks will be affected less in

smaller china growing by 10 % added 10 years ago. the asean - 4 – indonesia, malaysia, thailand and the philippines – are projected to grow by at least 4 % per annum on average. it could be as high as 6 % if asean becomes more integrated and these countries successfully implement structural reforms to raise productivity and competitiveness. the asian development bank projects that by 2030, the sum of the gdp of china, india and asean in purchasing power parity terms could even exceed that of the us and europe combined. for banks, it is not just the size and growth of the asian economies that matter. it is the composition of that growth and demand. two trends are noteworthy for asian banks : the rise of the asian middle class and the regionalisation of asian corporates. bis central bankers ’ speeches rising incomes and the agglomeration effects of urbanisation will significantly expand the ranks of the asian middle class. • in asean, the middle class is projected to make up two - thirds of the population by 2030, compared to less than a quarter in 2010. this rapid expansion of the middle class will spur demand for a wide range of goods and services. modern services, such as telecommunication, banking and finance, have higher income elasticities of demand compared to traditional services. this means that as income rises and wealth accumulates, the demand for financial services – be it consumer credit, wealth management, or insurance – will rise more than proportionately. as asian economies develop and integrate further, asian corporates will expand and internationalise. they will need more funding – not just traditional bank credit but debt and equity financing. they will need more cash management and transaction services. asian banks who have been serving these corporates in their home markets will follow them as they regionalise their businesses. financial regulation the second driving force that will shape banking in asia is financial regulation. the global financial crisis has spurred far - reaching financial regulatory reforms. the ones impacting banks most will be the new basel iii rules. • basel iii calls for an increase in both the quantity and quality of capital that banks must keep as a buffer against unexpected loss. • basel iii will also put in place a new global liquidity standard. banks will be required to hold enough liquid assets to survive a 30 - day period of cash outflows. there are also efforts underway in advanced jurisdictions to reform banking structures. the details vary but the overall thrust is to separate retail banking from riskier activities like proprietary trading and investment banking