Ken research announced its recent publication on “Retail Banking Country Snapshot: Malaysia 2016,” which offers insight on retail banking sector in Malaysia, which is highly concentrated upon the current account, savings, mortgage and personal loans markets which includes both market-level data and information from global retail banking insight survey. Furthermore, the report offers an in-depth analysis of consumer approach towards the financial sector and how it has evolved over a period of time including who are dominating the market and what factors persuaded them to make such decisions. Likewise it includes the shrewd investigation of the extent of consumers using internet and mobile channels to do their research on financial products.
Driving exponential development in retail banking is turning to be challenging across Asian emerging markets (EMs), including China, Malaysia, Indonesia, Thailand and India. The slowdown in the pace of growth is brought by slowing GDP growth in countries such as Indonesia, Thailand and China, turning credit cycles in Thailand and Malaysia and continued volatility in currency and commodity markets.
Despite the relative slowdown, the absolute scale of the opportunity is anticipated to be very large. The growth will be fuelled by the extension of access to financial services to an additional 250 million households and the increasing need for financial services from another 90 million households as the transition from the mass market to the mass affluent segment.
Institutions that make the right move in four significant areas of opportunity across these markets will grow at a much faster pace than others, often by two to four times. For example, “winner” banks in Indonesia may be able to grow their risk-adjusted retail revenue by 10 percent per annum over the next five years while the “laggards” will fight to grow more than 2 to 3 percent per annum
Adoption of digital channels, products and business models
We believe that digital-led / digital-only products and business models will see much greater proliferation across EMs over the next five years. Its pace and impact will be somewhat market-specific.
Banks that have been early investors in data infrastructure, big data analytics and internal agile management practices will be at a significant advantage when the digital segment starts driving banking revenue pools in “digital-ready” markets across Asia. China is already undergoing such a phase of transformation, with Malaysia, India and Indonesia to follow next.
Untapped opportunity in small- and medium-sized enterprises (SMEs)
SMEs drive financial growth in most EMs and represent a significant financial services opportunity however; getting SME banking right is often difficult, given organizational and operational challenges.
EM banks that get the SME segment right generate significant financial benefits with a typical return on equity upward of 20 percent and a well-balanced loan-to-deposit ratio of 80 to 120 percent.
Sustainable growth in retail credit
Retail credit is anticipated to remain a major component of retail banking revenue growth, contributing 20 to 30 percent of total growth across markets in emerging Asia; however, a number of these markets have started seeing deterioration in credit quality that often looks poised to get worse, given the negative macroeconomic outlook and alarmingly high debt-to-disposable income ratio in some markets such as China, Malaysia and Thailand.
Building next generation risk-management capabilities while pursuing growth initiatives will be a key to sustainable performance in retail credit.
Development of an affordable banking proposition
The affordable banking segment incorporates the unbanked population along with the section of the mass market that is presently underserved by banks. Serving this section has long been treated as a commercially unviable strategy and is often done for the sake of social good, but near-universal access to mobile phones, rapidly improving digital infrastructure, availability of new data sources and prudent regulatory actions are changing the dynamics of this segment.
We believe that a mobile-led banking proposition delivered via partnership with existing distribution channels (retail stores working as transaction points) and leveraging alternate data sources for managing risk can be a game changer in this segment. Non-bank payment-led models such as M-Pesa, WING, TrueMoney and Paytm have so far created big impact in this space than banks, but banks have now started focusing on this segment as their core customer segment.
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Ankur Gupta, Head Marketing & Communications