banks in asia pacific continue to increase their investments in innovation in retail financial...

Copyright The Asian Banker 2010. All rights reserved 1/1 Copyright The Asian Banker 2010. All rights reserved 1.2.0.082010 Copyright The Asian Banker 2010. All rights reserved 1/1

Asian Banker Research

Banks in Asia Pacific continue to increase their investments in innovation in retail financial services Banks will intensify the focus on innovation in customer relationship management, payments and network distribution

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Singapore, November 12th, 2010

http://www.theasianbanker.com/bankmetrics

Copyright The Asian Banker 2010. All rights reserved 1/2 Copyright The Asian Banker 2010. All rights reserved 1/2

Key discussion notes

Key innovation periods in retail banking in Asia Pacific

Key operational building blocks of successful innovative banks in Asia Pacific

Does your banks have a (formalised) innovation strategy?

Areas of potential disruptive innovation affecting retail banking in Asia Pacific

Challenges in innovation in retail banking


TeamsCulture of Innovation

Clear Core Business

Market Competition

Internal Competition

Department Structure

Processes

Key Building Blocks of

Successful Innovative

Banks

•Teams that understand both the business and technology side of banking

•Teams that are together for more than 10 yearsCulture of testing and learning

Clear understanding about core businessClear role of executives in customer value delivery

Open markets that foster stiff competition Countries with low net interest margins

Empowerment System that encourages healthy competitionTeam and individual based incentive systems

Low institutionalisation and flat hierarchiesShort communication paths

Disciplined innovation processes Ability to bring pilots to mainstream market inception

Successful innovation requires banks to align key areas

Key operational building blocks of successful innovative banks in Asia Pacific

Source: Asian Banker Research


Compared to other industries innovation strategies are rare in Asia Pacific, and innovation happens often on an ad hoc basis

Southeast Asia South Asia North Asia0%

5%

10%

15%

20%

25%

19%

15%

21%

Pe

rce

nta

ge

of R

esp

on

de

nts

(%

)

Does your banks have a (formalised) innovation strategy?

Source: Asian Banker Research, N=53


• Swiped plastic cards will eventually be replaced by “NFC” wireless payment options at POS terminals.

• Trials with using fingerprint technology have been unsuccessful so far, hence the mobile phone is seen as the likely successor.

• A specific sector of customers have shown their willingness to pay fees for high-value services, further encouraging a two-tier branch system.

• This new business model includes moving customers to alternative channels and charging fees for each and every branch transaction.

Payments

Social media

Branch banking

• First institutions target to go beyond social media's usual purpose as marketing and customer communication tools.

• Emerging P2P payments trend on social networks are a concern, as is the fear of further disintermediation. (see box below)

• The mobile phone has the greatest potential to reach out to the unbanked and deliver value-add services to existing clients.

• Customers have embraced mobile services such as microfinance options, P2P and P2B payments, e-wallets, and remittances.

• Non-bank players are pushing into the retail financial services space, slowly eating up market share traditionally dominated by banks.

• This includes P2P payments, lending via loan auction houses, and e-commerce and e-money services including deposits with non-banks.

Mobile phone

Loyalty and rewards

Disintermediation

• Loyalty programmes will move away from product-bound rewards systems and towards a relationship-based model

• Each transaction, purchased product or availed service will contribute to the client’s standing in the programme.

Source: Asian Banker Research

Areas of potential disruptive innovation affecting retail banking in Asia Pacific

Payments and mobile banking are regarded as potential disruptive innovation areas


These slides are part of a full report available for free download

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banks in asia pacific continue to increase their investments in innovation in retail financial...

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