Retail Banking Technology in China

Transcription

1 A Datamonitor report Retail Banking Technology in China The Future for Distribution Channels Published: Dec-03 Product Code: Providing you with: Analysis of the financial services and technology environment, market drivers and sizing for FST and distribution channel spend Use this report to... Appraise the market or benchmark your channel spend in China using In-depth current and forecasted data on channel spend across five categories Analysis of changes in the financial services customer base and the impact of these changes on future distribution channels in retail banking Forecasted market spend data across 5 distribution channel categories, including competitor usage of distribution technologies Action points on the future of retail banking technology and key actions needed to form successful strategies for both vendors and banks themselves

2 Retail Banking Technology in China - The Future for Distribution Channels Introduction Chinese banks are being bombarded with increased demands on their business and operational models. They need to defend market share but evolving customer demands are making it harder and harder to do so in a cost-effective manner. The areas of financial services technology and distribution are critical as banks focus on points of interaction between them and the customer base. Key findings and highlights Distribution channel spend in China will outpace average FST spend at 15.7% CAGR against average growth of FST spend of 13.1%. ATM deployment will continue and increase in geographic spread, but spend will remain behind branches at USD738 million and USD783 million respectively. Ebanking will continue to grow strongly at over 20% CAGR to The need for information is key in considering market strategies, distribution channels are no longer about the hard sell or simply routing products onto customers they must also control and facilitate the flow of information to customers. Not only to provide for complex products but to facilitate cross-sell and drive ROI for the channel itself. The twin drivers of defense of market share and defense of profitability, creates a need for speed to market, and speed that is cheap. Some headway has been made in terms of reducing costs in China, but there is room for improvement. Vendors must position packaged solutions that have reusable technology capabilities across channels. Reasons to buy Appraise the market or benchmark your channel spend in China using in-depth current and forcasted data on channel spend across five categories Understand future channel usage from an end-customer perspective, plus benefit from our conclusions on changing demands to put your knowledge ahead of the market Access key action points on channel opportunities and retail banks future channel demands together with concise analysis of success and failure points in China Contact us... From Europe: tel: fax: tcsales@datamonitor.com From the US: tel: fax: ustcmarketing@datamonitor.com From Asia-Pacific: tel: fax: apinfo@datamonitor.com

3 Sample pages from the report Action Points and acknowledge that the efficient branch will remain king Branch networks should not be scaled back, rationalized and consolidated into secondary distribution channels. Branch and office networks remain vital and primary distribution channels in the eyes of customers, despite the cost burden that weighs heavily around banking competitors necks. Banks should focus on retaining branch networks but increasing the efficiency of these operations, partly through intelligent application of other channels such as ATMs, ebanking and Contact centers but also Channel Strategies through branch renewal and reform strategies. Customer to bank interfaces must be updated and integrated with all distribution channels to present bank operatives with a full picture of the customers characteristics and transactions. The branches key are less comfortable in choosing long term savings and investment products, advantage as a distribution channel is that is can be used effectively to sell complex requiring financial advice and the level of trust and security that face-to-face contact products and services and facilitate cross-sell of the entire product range. However provides. this can only be achieved with effective information flows, something that Chinese banks currently fail on. Future focus Experience within international markets and in China suggests concludes Information flow should be considered critical to business success and that branch and office networks remain a critical component of overall included in core business stratagies strategies. Despite the obvious requirement of cost reductions, Chinese Channel Strategies The need for information is critical to retail both banks business must and retain distribution a strong strategies. branch network to provide the ability of Distribution channels are no longer about personal the hard interfaces sell or simply with customers. routing products Downsizing of branch networks will onto customers. Distribution channels must continue also to control drive and cost facilitate reductions, the flow although of the likes of ICBC and other Figure 12: ebanking is increasingly in important in terms of percentage of information to customers. Complex products banks that need have complex recently cut information networks and are unlikely to engage in any further, total distribution channel spend, 2003 customers need to be kept informed, not major, only to reductions. manage financial situations but also to facilitate cross-sell opportunities for the institutions themselves. Differing distribution channels have differing capabilities What is more and strengths likely is that and retail weaknesses banks will in strive to utilize branch networks 100% 5% terms of information provision, requiring careful in a more thought efficient in application and effective but all must manner, be 90% utilizing them 5% for advance CRM 7% 5% linked via multichannel integration. Data and centers information and disparate gathering, systems cross in place selling 80% and customer 15% segmentation. 16% Other Channel regional markets must be consolidated and Competitors merged into will a centralized be required data to warehouse update the 70% customer to bank interface, to structure. allow a critical improvement in information flows, both inward and outward. ebanking 60% 36% 34% Branch interfaces must also be integrated with all other distribution Call center 50% channels to form a standardized, single 40% information store of customer s ATM Banks need full back-end and multichannel transactions integration and characteristics. to exploit the long-term Branches 30% will also introduce self service Branch potential of ATMs counters and information booths based on 20% advanced ATM 38% infrastructure to 38% The phenomenal expansion of ATM networks free up in China customer and the service increasing agents reliance for of more 10% value added and revenue customers on cash dispensing machines generating rather than activities. 0% branches creates a number of new challenges for banks, of which the biggest is clearly that of back-end and Source: Datamonitor D A T A M O N I T O R multichannel integration. Although some of the more technologically advanced banks e-channels are now building fully integrated IT infrastructures for the future, a large proportion of ATMs remain offline and not connected to any datacenter; something that poses ebanking doing the basics well CRM strategies must work in tandem with distribution strategies Banks in China have, for the most part, implemented only basic transactional Distribution Technology in China ebanking services so far a result of A the key high development concentration of financial of state control services over markets the is that competitors can no longer Datamonitor (Published 12/2003) Page 61 financial sector and the antiquated technology simply push infrastructures products onto of the Chinese state banks. consumers For and that strategy and operational This report is a licensed product and is not to be photocopied these banks, Datamonitor believes that tactics the must short-term be customer priority centric. needs As to be such effective customer relationship management (CRM) execution of first-generation ebanking is a services, crucial part since of business they are operations. unlikely to generate Competitors must be able to gather as much sufficient critical mass in the near information term to justify as possible large-scale about investment customers in and nextgeneration ebanking technologies. based Nevertheless, on customer significant characteristics investment the will present be and in the future. CRM must be able to apply products and services required in order to ensure that the encompass basics are done the entire well, business so that the but Internet distribution can channels are critical to the CRM function, if not as the spearhead of process, retail delivery channeling strategy, not at only least products as an but effective also inward and outward information flow. service channel. Chinese competitors are beginning to acknowledge that customer information is vital and that increased spending on customer facing technologies should be balanced with effective back office operations, particularly in the field of information Distribution Technology in China management. Datamonitor (Published 12/2003) Page 49 This report is a licensed product and is not to be photocopied Chinese banks have historically tended to build many disparate localized systems in each of the micro regions in which they operate, these banks are now starting to rationalize and consolidate these systems. ICBC has begun to consolidate 44 data centers in 2 and aims to complete in by the end of Bank of China has followed suit and is progress of cutting a huge 1040 separate data and information centers into 33 and intends to decrease that number to five in the next five years. % of total Distribution Technology in China Datamonitor (Published 12/2003) Page 45 This report is a licensed product and is not to be photocopied Contact us... From Europe: tel: fax: tcsales@datamonitor.com From the US: tel: fax: ustcmarketing@datamonitor.com From Asia-Pacific: tel: fax: apinfo@datamonitor.com

4 Retail Banking Technology in China - The Future for Distribution Channels Table of contents ACTION POINTS SUMMARY How to use this section - Do not fall behind the market in terms of growth in technology spend - Packaged solutions and resusable technology will be important - All channels must be able to cope with increasingly complex transactions and products - But banks should be wary of over-extending new channels - and acknowdlge that the 'efficient' branch will remain king - Information flow should be considered critical to business success and included in core business stratagies - Banks need full back-end and multichannel integration to exploit the long-term potential of ATMs - Banks must participate in shared ATM networks in order to maximize cost and revenue benefits - Banks must implement a technology standardization program INTRODUCTION What is this report about? Who is the target reader? Custom Research Financial services industry environment - China's economic environment - Market characteristics - Forigien influx and the state of play Financial services technology sector environment - General techolgy situation in China - Market sizes - Drivers for transformation of distribution channel technology strategy - Challenges for transformation of distribution channel technology strategy Data appendix CUSTOMER FOCUS: THE CHANGING CUSTOMER What is causing the changes? Products and services demanded - Savings and investments and implications - Channel usage map and implications DISTRIBITION CHANNEL STRATEGIES Current distribution channel spend Channel usage now and in the future - ATM networks - Branch and office networks - e-channels - Call/Contact centers - CRM Market size forecasts Data appendix ACTION POINTS APPENDIX Research methodology FS - Retail savings and investments Research methodology FST - Product and services definitions - Preparation of first draft data - Coverage of secondary and published sources - Primary industry interviews - Forecast methodology - Data finalization, cross-checks and verification Future readings Custom research Contacts LIST OF TABLES Table 1: Key competitors within the Chinese banking market, 2002 Table 2: Total FST spend in Asia-Pacific, segmented by country, USD m, Table 3: Total FST spend in China, segmented by Financial services sector, USD m, Table 4: Retail banking technology spend, segmented by activity, USD m, Table 5: The reliance on cash-based deposits is decreasing Table 6: Distribution channel technology spend, segmented by channel, USD m, Table 7: Forecasted retail banking technology spend, segmented by activity, USDm, Table 8: Forecasted distribution channel spend, segmented by channel, USD m, LIST OF FIGURES Figure 1: Datamonitor's core consulting capabilities Figure 2: Timeline of WTO impact on financial services Figure 3: The convergence of IT and business strategy Figure 4: China is one of the fastest growing markets in terms of financial services technology spend, 2003 Figure 5: China appears to be the most attractive market for FST vendors, 2003 Figure 6: Retail banking is by far the largest sub sector of overall Chinese FST in 2003 Figure 7: FST spend on distribution is extremely important and represents the nearly 40% of total spend at the end of We believe China will live up to its hype and be one of the key technology markets in Asia. If we can get past the IP problems and get to the bottom of the situation banks face, we see no reason why we cannot succeed in the market... Major Technology Solution Vendor

5 Figure 8: Figure 9: Figure 10: Figure 11: Figure 12: Figure 13: Figure 14: Figure 15: Figure 16: Savings and investments needs continue to diverge with complex products set to grow at extraordinary rates to 2007 Channel usage map per financial activity Channel usage map: drivers and constraints from the customers perspective Branch spend is still an important factor of FST strategies but lags behind in terms of growth, 2003 ebanking is increasingly in important in terms of percentage of total distribution channel spend, 2003 ebanking value creation - banks in china lack ebanking sophistication in comparison to regional peers Channel spend within retail banking remains an extremely important component of total FST spend in ebanking and ATM networks will be the growth drivers to 2007 Datamonitor's core consulting capabilties...only by understanding the preferences and trends in the end-customer base - the financial services users - can banks and vendors hope to position distribution channels effectively. Knowledge of market constraints are useful, customer knowledge is vital... Simon Pearse, Datamonitor Analyst

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