By Kenny Lam (kenny_lam@mckinsey.com) and Laxman Narasimhan (laxman_narasimhan@mckinsey.com)
Not that long ago, consumers in Asia did most of their banking transactions by walking into their branches; now they are using their computers and mobile phones more and more often. Once, consumers used one bank and stayed with it through thick and thin; now they are splitting their relationships among multiple banks. Once, they sought out credit; now they are eschewing debt.
In this tough, fast-changing competitive environment, retail banks that are top of mind have a distinct advantage. That is one of the conclusions of McKinsey’s most recent Personal Financial Services Survey, based on one-on-one 60-minute interviews with almost 20,000 financial service consumers in 13 Asian markets. McKinsey has conducted the survey, which touches on topics like financial planning, product attitudes and channel usage, five times since 1998. What we found this year is that across Asia, consumers are looking for a new relationship with their banks.
Specifically, the survey indicates five ways that retail banking in the region is changing.
1. Eroding loyalty
Since the onset of the global financial crisis, consumers have become less loyal to their financial institutions. Among the affluent those with assets of $100,000 or more in liquid assets—the average number of banking relationships has increased 22% since 2007. Consumers in Asia are also more reluctant to recommend their banks. In China, only 47% of this year’s survey respondents said they “would recommend their financial institution to a family or colleague,” down from 57% in 2007. Among Vietnam's consumers, trust fell off the proverbial cliff, dropping 40 percentage points (83% in 2007 to 43%); it plunged in Singapore, too, down 29 points, and in India, down 20. Trust rose in the Philippines and Thailand, and stayed about the same in Malaysia and Hong Kong, but in general, regardless of region or individual wealth, the picture is of weak attachment.
2. Preference for local institutions
Why do consumers shop around? Because banks are not delivering the products and services that can lock them in. Customers in nine of the 13 Asian markets surveyed, across both richer and poorer countries, say they would “prefer to deal with one financial institution for all of their needs.” (The exceptions: Indonesia, Korea, Malaysia, Singapore.)
And they would prefer that bank to be local. Consumers in almost every market were much more likely to agree in 2011 that “Dealing with a local institution is important to me.” (Indonesia was the lone exception, but 74% still agreed, down from 76% in 2007). The increase was substantial in both developed markets, rising from 50% to 63% and in emerging markets, going from 70% to 81%. The implication is that, post-crisis, having a global brand may be less of a competitive advantage than before. Domestic players have just as good, or better, chance to compete as the international giants – if they meet consumer needs.