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Banks urged to go ‘Back to basics’
and innovation
Leading independent research and advisory firm Financial
Insights, an IDC company, last week announced the release
of a report that assesses opportunities for banks in
the current crisis environment. It highlights pockets
of growth in lending in several Asia/Pacific markets,
shifts in customer deposits which allow aggressive banks
to gain market share, and opportunities for generating
fee income. More insights are revealed in this new study,
“Asia/Pacific Banking in 2009: Opportunities Amid
A Crisis”
‘’A thorough review of the market reveals
some opportunities for revenue growth, and for further
expansion of customer base and product portfolios despite
the economic crisis,’’ remarks Michael Araneta,
Senior Research Manager, Financial Insights Asia/Pacific.
‘’The environment however is by no means bright
and rosy, and significant risks need to be considered.
Market conditions are volatile, causing opportunities
to shift quickly. The game will be won by those agile
and capable enough to execute strategies efficiently,’’
Araneta continues.
Financial Insights notes that banks’ strategic
IT initiatives have been realigned to reflect the opportunities
in the market. Despite tight budgets, banks will still
spend on technologies that allow them to blunt the adverse
effects of the crisis, build business despite the slowdown,
and operate efficiently in a crisis environment. For
example, while banks need to continue investing in origination
solutions for loan expansion, they also need to invest
strategically in modeling and analytics. Investments
in scoring, modelling, and analytics will help in key
areas such as decisioning, pricing, servicing, fraud
prevention, and even collections and recovery.
Highlights of this report include:
Even before the escalation of the financial crisis,
Asia/Pacific banks were already projecting a slowdown
in lending for 2009. Financial Insights have revised
downwards the estimated average loan growth for 12 key
Asia/Pacific markets to 8.7%. However, there are still
significant drivers for lending growth that need to
be considered. These include government mandates and
interventions, dwindling international funding options,
microfinance, and moves by aggressive players to win
market share from weakened rivals.
Deposit mobilisation will proceed impressively in under-banked
countries like India (where industry deposit growth
is expected to be at about 20% year-on-year in 2009)
and Vietnam (estimated to be 11%). In most other Asia/Pacific
markets however, it will be about acquiring market share
from competing banks, or attracting customers away from
savings and investment alternatives.
While some fee income sources like corporate finance,
underwriting, credit cards and wealth management sales
will be affected by the market slowdown, opportunities
to generate service-based fees, such as those charged
on transaction accounts, fund transfers and cash management,
will remain robust. New strategies will need to consider
the ideal mix of fee income sources that the bank is
able to support.
The figure presents Financial Insights’ estimates
of loan growth in India, Vietnam, China and Indonesia.
These four countries are expected to show the highest
rates of loan growth in 2009 compared to other Asia/Pacific
markets.
Araneta continues, ‘’New business objectives
and requirements are being used to justify traditional
technology projects like core banking upgrades. The
chase for deposits will hopefully help rebuild the momentum
for core banking system projects in the medium term.
Business and IT teams will consider the scalability
of their current core systems as the bank’s deposit
base expands, and as new deposit products need to be
brought to market.’’
‘’Overall, the financial crisis is expected
to bring risk management back into focus. Technology
teams should be ready to address risk management issues
related to their work, including risks inherent in technologies
under implementation, project implementation issues,
as well as risks associated with vendors and technology
partners,’’ Araneta adds.
Financial Insights, an IDC company, provides independent
research, custom consulting, and detailed multiclient
studies on the technology issues and challenges facing
the financial services industry. Its global research
covers topics of strategic importance to corporate and
retail banks, insurance carriers, and asset management,
securities, and brokerage firms. Local practices in
Asia/Pacific, Europe, Latin America, and Canada add
in-depth regional viewpoints. Financial Insights is
headquartered in Framingham, Massachusetts, USA. IDC
is a subsidiary of IDG, the world’s leading technology
media, research, and events company. See also The Technology
Report.
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