Sweetening customer service and maintaining market share should be keeping New Zealand-based banks occupied but trimming costs must be paramount, says IBM.
Most Asia-Pacific banks' current revenue is coming from existing mature business, says IBM. However, over the next five to seven years, IBM expects revenues from current markets to decline, so cost-reduction will be essential to survival in the traditional financial services sector.
“This is the scary part, reduced revenues. That’s what keeps CEOs awake at night,” says IBM Asia-Pacific executive Lam Wei Choon. “The present players, with the aging and mature lines of business, if they do not restructure and consolidate or attract new lines of business, they perish and are history,” he says.
Wei Choon says IBM’s Global Services division has been active in the Asia-Pacific banking sector for some time. He says the market in Australia and New Zealand is mature and the main banks face a challenging future. The main banks are so large that they cannot realistically take over their main rivals.
Banks also face new online players nibbling away at their business, or instead, they can take them over themselves and become a “financial services supermarket”, says Wei Choon, as is happening in Australia through various takeovers.
IBM’s Global Services division, he says, has seen more changes in the past five years as in the 40 years preceding it. Indonesia has seen 105 banks disappear since 1997. Malaysia has seen 54 banks consolidate into 10. The Taiwan government is set to slash bank numbers. Many finance companies have quit Thailand. Korea is addressing “long term inefficiencies” and China is embarking on deregulation.
IBM's talks with bank CEOs reveal common fears - how to cut costs, how to manage risk in the next crisis, how to seek new revenue, how to keep increasingly disloyal customers, how to market their brand or seek a new one, and what are the right technologies to use.IBM has developed a Network Financial Institution Model, giving banks a framework of best international practices. The model looks at alliances and partners, getting to know customers - “the biggest challenge” - finding the right channels at the right costs, Wei Choon says.