Asian banking sector -- slowing or soaring?

By Stella Tang

While challenges remain, a number of drivers look set to underpin Asia's banking sector over the next few years.

One of the key hallmarks of Asia's banking sector is intense competition. Despite an already saturated market, new players continue to be attracted to the region, with retail and investment banks, credit unions, advisory firms, and insurance companies all hoping to tap into Asia's strong growth prospects.

Overcoming consumer skepticism

Gaining – and growing – a significant market share of the Asian banking sector is not easy. While large corporate clients are tending to generate impressive revenues for Asian banks, on the retail side, the region's extensive range of customer types makes it difficult for any one provider to gain a dominant foothold.

More broadly, the global economic crisis saw an erosion of consumer trust in banks as secure repositories for personal savings. This trend, which is especially noticeable in countries like Japan, has reduced the number of retail customers willing to deposit money with financial institutions.

Hurdles to cross

In an industry that continues to be dominated by a few key players, new entrants to the Asian banking sector are more likely to seek a foothold in countries including China, South Korea, and India.

Here too though, new participants face potential hurdles. Among them are strict regulatory requirements, economic instability in some jurisdictions, the undeniable potential for fraud and corruption, and the difficulties of building brand and distribution networks.

Coming to terms with change

In Asia, as across the rest of the world, the banking industry is anything but static. The Asian banking sector is especially dynamic as the region comes to terms with a continuous stream of emerging players, new banking regulations, and dynamic shifts within the investment banking industry.

Other broader demographic trends are proving to be powerful forces too. Among them, urbanisation on a massive scale, a burgeoning middle class, and the incredible uptake of mobile technology bringing banking services to the fingertips of millions.

In theory, Asian banks are well-placed to build on their current strengths. They have the home-ground advantage with local knowledge, existing customer bases, and brand awareness.

Nonetheless it won't be easy for individual banks to thrive in this exciting new environment - and meet the challenge of global banks hoping to share a slice of Asia's banking pie. Part of the solution can lie in building strong teams.

People are at the core of Asian banking success

People continue to be one of the Asian banking sector's greatest resources. As Singapore expands its role as a global services hub, competition for quality financial services professionals is intensifying. We have seen financial services leaders in Singapore continue to grow their financial services team as new regulatory requirements continue to bolster demand for risk and compliance professionals.

Similarly, in Hong Kong, senior financial services leaders anticipate expanding their team of financial services professionals. Recruitment activity is being driven by new projects, domestic business growth as well as new market penetration. Demand is particularly high for financial services professionals across the insurance, private equity, banking, private banking, and asset management sectors.

Willingness to adapt is critical

The region's banks must be prepared to adapt and embrace new technologies, new market conditions, and even new team members with diverse skill sets.

Those Asian banks that can continually update their business models in line with reforms, new regulations, and innovative technologies are best placed to deliver maximum protection, value, and satisfaction to their customers.

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