THE recent global financial meltdown has forced financial services institutions (FSIs) to go back to basics and look at the real drivers of sustainable growth.
With 2010 said to be the “Year of the Comeback” for Asian FSIs, it is a crucial time for these institutions to identify emerging trends and capture new opportunities.
Many FSIs do not realise that they are losing growth momentum and experiencing mounting liabilities.
Today, traditional revenue pillars such as consumer credit, mortgages, and commercial real estate are turning into major liabilities.
Banks for example have invested heavily in meeting the needs of baby boomers in the past.
These customers are now pushing out plans to retire, revisiting their portfolios and spending less. Income from interests and fees associated with this generation is at greater risk due to a reduction in applications for loans and the transfer of wealth to the next generation.
Fortunately, Generation Y (Gen Y) has emerged as the next target market that will impact FSIs, particularly retail banks.
Gen Y, also known as the millennials, are those born in and after 1980. This generation is expected to transform every industry they are associated with.
Today, Gen Y makes up about 40% of the Malaysian workforce. Their numbers are growing.
Their increasing disposable income means they will supplant baby-boomers and silvers as the largest customer segment by population. Malaysia’s FSIs need to recognise this untapped market to capture first-mover advantage.
What could be more compelling than opportunities to lead the market, increase revenue and set the pace for future growth?
According to a global study conducted by Cisco Internet Business Solutions Group in October 2009, banks can potentially boost revenues by up to 10% by embracing Gen Y consumers.
The study revealed that Gen Y consumers trust their banks. Despite the challenging financial market last year, they relied on their banks to be primary advisors for their financial priorities, where top concerns were debt reduction, expense management and financial education.
Younger customers also want banks to address their needs on social and technology platforms like mobile devices, video, and social networks.
The same study highlights that nearly 40% of Gen Y consumers are interested in interacting with an advisor via video, compared to 17% for boomers and silvers.
This highlights the importance of connectivity and relationships for this demographic.
While online presence and strategies are nothing new to Malaysia’s FSIs, the Gen Y characteristics have introduced a new set of expectations.
Malaysian FSIs need to think and plan out-of-the-box to get the attention of and achieve success with Gen Y customers.
Investing for the future
Identifying innovative ways to engage with customers will ensure banks are on the right track towards sustaining growth in this highly competitive landscape.
A report by PricewaterhouseCoopers last year stated that the future belongs to organisations that can spot abilities to add value to market segments where customers are willing to pay for their products.
It is about the courage to act on these insights and invest in some businesses while making the decision to shrink others.
Modern FSIs that are prepared to reap new market opportunities are those that are quick to realign to better serve their most profitable customers – differentiating themselves from the second tier players.
Where Gen Y is concerned, personal financial management (PFM) services are central to emerging revenue growth opportunities.
Targeting a group that is unique in demand, self empowerment and engagement, PFM tools are likely to attract the younger crowd, and generate higher profits, balances, product and service consumption, and loyalty.
Innovative capabilities are key in helping customers gain control and improve consumer relationships.
It is also necessary to develop and elevate an online financial services community comprised of family, friends and peers centred on the common objective of better financial management.
Companies that understand and engage this generation on their level will achieve brand loyalty.
It is time for local FSIs to transform their organisations by better connecting data systems between locations, improve communications among branches, effectively reduce physical transactions and provide secure self-service applications and multiple delivery channels.
Appropriate utilisation of modern networking and collaborative technologies is probably the fastest way to advance the capabilities of FSIs. But technology alone is not the answer. Such investments can only bear fruit when they are planned and incorporated in a strategic manner to redefine an FSI’s operations and environment – not only to become Gen Y ready, but also to reduce cost, improve productivity and increase revenue.
Any technology investment has to drive an impactful shift on the overall business approach. Eventually, merely getting connected is no longer sufficient.
The future places great emphasis on the creation of an integrated value proposition that meets the needs of Gen Y to help manage their finances, debt and spending by offering professional advice in an automated fashion.
As the world around us develops at a pace faster than anyone can imagine, we must be agile and willing to keep up, else we get lost in the transition.
It is important for FSIs to stay current with their customers, across all demographics, to become the bank for everyone’s future.
Only then will they be able to leap further to greater heights, as what Sun Tzu says in The Art of War – opportunities multiply as they are seized!
With 2010 said to be the “Year of the Comeback” for Asian FSIs, it is a crucial time for these institutions to identify emerging trends and capture new opportunities.
Many FSIs do not realise that they are losing growth momentum and experiencing mounting liabilities.
Today, traditional revenue pillars such as consumer credit, mortgages, and commercial real estate are turning into major liabilities.
Banks for example have invested heavily in meeting the needs of baby boomers in the past.
These customers are now pushing out plans to retire, revisiting their portfolios and spending less. Income from interests and fees associated with this generation is at greater risk due to a reduction in applications for loans and the transfer of wealth to the next generation.
Fortunately, Generation Y (Gen Y) has emerged as the next target market that will impact FSIs, particularly retail banks.
Gen Y, also known as the millennials, are those born in and after 1980. This generation is expected to transform every industry they are associated with.
Today, Gen Y makes up about 40% of the Malaysian workforce. Their numbers are growing.
Their increasing disposable income means they will supplant baby-boomers and silvers as the largest customer segment by population. Malaysia’s FSIs need to recognise this untapped market to capture first-mover advantage.
What could be more compelling than opportunities to lead the market, increase revenue and set the pace for future growth?
According to a global study conducted by Cisco Internet Business Solutions Group in October 2009, banks can potentially boost revenues by up to 10% by embracing Gen Y consumers.
The study revealed that Gen Y consumers trust their banks. Despite the challenging financial market last year, they relied on their banks to be primary advisors for their financial priorities, where top concerns were debt reduction, expense management and financial education.
Younger customers also want banks to address their needs on social and technology platforms like mobile devices, video, and social networks.
The same study highlights that nearly 40% of Gen Y consumers are interested in interacting with an advisor via video, compared to 17% for boomers and silvers.
This highlights the importance of connectivity and relationships for this demographic.
While online presence and strategies are nothing new to Malaysia’s FSIs, the Gen Y characteristics have introduced a new set of expectations.
Malaysian FSIs need to think and plan out-of-the-box to get the attention of and achieve success with Gen Y customers.
Investing for the future
Identifying innovative ways to engage with customers will ensure banks are on the right track towards sustaining growth in this highly competitive landscape.
A report by PricewaterhouseCoopers last year stated that the future belongs to organisations that can spot abilities to add value to market segments where customers are willing to pay for their products.
It is about the courage to act on these insights and invest in some businesses while making the decision to shrink others.
Modern FSIs that are prepared to reap new market opportunities are those that are quick to realign to better serve their most profitable customers – differentiating themselves from the second tier players.
Where Gen Y is concerned, personal financial management (PFM) services are central to emerging revenue growth opportunities.
Targeting a group that is unique in demand, self empowerment and engagement, PFM tools are likely to attract the younger crowd, and generate higher profits, balances, product and service consumption, and loyalty.
Innovative capabilities are key in helping customers gain control and improve consumer relationships.
It is also necessary to develop and elevate an online financial services community comprised of family, friends and peers centred on the common objective of better financial management.
Companies that understand and engage this generation on their level will achieve brand loyalty.
It is time for local FSIs to transform their organisations by better connecting data systems between locations, improve communications among branches, effectively reduce physical transactions and provide secure self-service applications and multiple delivery channels.
Appropriate utilisation of modern networking and collaborative technologies is probably the fastest way to advance the capabilities of FSIs. But technology alone is not the answer. Such investments can only bear fruit when they are planned and incorporated in a strategic manner to redefine an FSI’s operations and environment – not only to become Gen Y ready, but also to reduce cost, improve productivity and increase revenue.
Any technology investment has to drive an impactful shift on the overall business approach. Eventually, merely getting connected is no longer sufficient.
The future places great emphasis on the creation of an integrated value proposition that meets the needs of Gen Y to help manage their finances, debt and spending by offering professional advice in an automated fashion.
As the world around us develops at a pace faster than anyone can imagine, we must be agile and willing to keep up, else we get lost in the transition.
It is important for FSIs to stay current with their customers, across all demographics, to become the bank for everyone’s future.
Only then will they be able to leap further to greater heights, as what Sun Tzu says in The Art of War – opportunities multiply as they are seized!
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