Asia switching trust to local banks since crisis
When it comes to winning trust among Asian customers, local banks are gaining the upper hand over global ones these days.
The number of customers who prefer to deal with local institutions has jumped significantly since the global financial crisis, according to a study by McKinsey & Co of nearly 20,000 Asian consumers across 13 markets this year.
'It's a trust issue,' said Kenny Lam, a partner at McKinsey, who added that if banks go into a market with a 'swagger,' customers no longer welcome it.
Indian customers showed the highest preference for dealing with a local institution: 95 per cent of respondents said they preferred a home-grown bank. This was 20 percentage points higher than the results in 2007, the last time the company conducted a similar study.
In mainland China the number jumped 12 percentage points to 87 per cent, in Hong Kong 21 percentage points to 76 per cent, and in Taiwan 17 percentage points to 68 per cent.
After witnessing the meltdown of global banks during the financial crisis, consumers feel it is safer to bank with local institutions that have the backing of the government, said Lam. The crisis saw the Lehman Brothers minibonds fiasco and several international banks withdrawing in part from Asia.
Royal Bank of Scotland gave away its mainland retail and commercial banking business to Development Bank of Singapore in December last year, while GE Money, the financial arm of US conglomerate General Electric, agreed to sell its car and personal loans business in Singapore in January.
Lam said there has been a trend among banks preferring to identify themselves as an 'Asian bank' instead of a global giant. The implied message is that the banks have a broad network as well as knowledge of local consumers' needs.
A parallel change in consumer attitudes is that they have become less loyal, not only because of their diversified needs, but also to spread risks.
The average number of respondents' 'banking relationships' across Asia rose 22 per cent, to 3.3 banks, between 2007 and this year. In some segments, this increase was even higher. Mass affluent customers in developed Asian markets such as Japan, South Korea, and Hong Kong reported having links with 4.7 banks in 2011, a 31 per cent increase over the 3.6 they had in 2007.
While consumers say they want to consolidate their banking ties, they continue to shop around because banks are not delivering the products and services that can lock them in, said Lam.
For the first time since McKinsey started conducting the survey 13 years ago, customers' use of bank branches has dropped, while internet and mobile banking has increased.