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Deloitte Touche Tohmatsu
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Hong Kong, 22 May 2006: With foreign banks continuing to place their bets on Asia Pacific, what will it take to come out on top in 2010.
Deloitte Touche Tohmatsu today released a report highlighting the key factors financial institutions should consider to capitalise on the burgeoning Asia Pacific market.
“Driven by explosive consumer demand and political and market reform,” said Mr Steve Butters, Deloitte's Asia Pacific Regional Managing Partner, Global Financial Services Industry, “Asia has realised significant growth over the past five years, which should continue unabated through 2010 and beyond.”
In the report, Taking the spotlight - Asia Pacific financial services in 2010, Deloitte's Global Financial Services Industry group discusses the common trends to help financial institutions make the most of the rapidly changing and dynamic nature of the region as it approaches 2010.
As Mr Butters explains, to succeed in the Asia Pacific financial services industry through 2010, banks must adopt a local presence which is unique to the local market while leveraging lessons learned across geographies to achieve operational efficiencies. “This of course requires a degree of nimbleness and investment savvy to take advantage of the tremendous opportunity the region presents. However, by focusing on five key areas:
- continued cross border investments and consolidation
- offshoring
- retail banking customer
- a new approach to aging demographics, and
- enhanced risk management, transparency and corporate governance;
banks will be in a position to grow their current business.
Building on the recent growth of mergers & acquisitions activity in Asia Pacific, the report looks at what the future trends will be in a consolidating financial services marketplace. In addition, the report focuses on future investment trends by strategic entrants while highlighting the growing prevalence of financial investors such as private equity and hedge funds. In summary, the report highlights resulting effects that such a consolidating environment will have on operations, products and services.
“The good news is that such an environment will likely lead to more competitively priced products and enhanced services for customers. The bad news is that it may create a highly competitive market that bares witness to the survival of only the fittest of today's Asia Pacific players.”
The report also examines the need for financial institutions - both domestic and global - to drive operational excellence through greater offshoring. “As competition in Asia Pacific intensifies”, Mr Butters explained, “it becomes even more important for companies to keep operation costs to a competitive level.”
“Of course the savings for European or American institutions are likely to be greater, as they may not have access to lower-than-average wage rates, common to many Asia Pacific-based companies.”
However, when industry best practice is applied to offshore operations, DTT's GFSI group estimates that the total savings could triple. “Offshoring accounts for less than five percent of an organisation's total operations. To stay ahead, and realise greater savings, financial institutions must strive to optimise and improve their offshoring practices,” said Mr Butters.
Another focus area for banks is to find new ways to serve their retail customers. “Asia's vast and growing population, combined with high savings rates, explosive economic growth, and underdeveloped retail banking services, provide the most significant growth opportunity for banks,” said Mr Butters. “Banks must realise this growth opportunity, by deploying a customer centric model which puts the customer first.”
The report also recommends financial services companies looking to gain or increase their foothold in the region focus on serving the needs of the 50+ market. Mr Butters explained, “the industry has largely served the needs of customers who are accumulating and holding assets for the long term - retiring baby boomers, however, have other needs. Indeed the success of wealth management houses, insurers and retail banks will largely depend on their ability to serve the aging demographic.”
As competition intensifies in the region, companies must implement enhanced risk management, transparency and corporate governance to lower risk and enhance shareholder value. As Mr Butters explains, “increasing regulation, foreign entrants and regional consolidation has resulted in a maturing of the industry; but there is more work to be done.”
“Over the next four years the adoption of IFRS, the most significant change to accounting standards in 25 years; Basel II and its advanced Internal Ratings-based Approach; Sarbanes-Oxley type laws; and anti-money laundering rules - means the winners will be those that are able to best capitalise on their investments in regulatory compliance systems.”
