Mid-tier banks in Asia are focusing on gaining market share from their top-tier competitors according to a treasury management survey conducted on behalf of SunGard by research firm Ovum. The financial software services provider interviewed 50 senior banking executives from tier-two to tier-four banks in 11 countries in Asia-Pacific, Europe and the Middle East.
"Regional differences in priorities emerge when comparing Asian bank strategies with those of Middle Eastern and European banks. The Asia-Pacific region continues to see remarkable growth,” said Daniel Mayo, principal analyst of financial services technology at Ovum. “Mid-tier banks are attempting to gain market share at the expense of tier-one institutions by adopting a range of differentiation strategies such that no one product area stands out as a common investment priority. Thus, bank treasury management solutions will need to cover a broad range of asset classes to help them easily extend the services offered to clients as their businesses expand, and will also require a complete and accurate view of enterprise-wide risk.”
Andrews Woods, executive vice-president of treasury at SunGard’s Ambit Corporate Banking business unit, spoke to FinanceAsia about the new focus of Asia’s mid-tier banks:
What have mid-tier Asian banks traditionally focused on when it comes to business strategy?
Mid-tier Asian banks have focused predominantly on being able to compete with tier-one domestic and international banks who bring new products and services to the market place. While the major players have been able to lead with new products and channels, mid-tier banks have been playing catch-up and have sought to protect their customer base and retail share-of-wallet. They have done this by implementing solutions and approaches to protect their customer base, but also to position themselves to bring more innovative products and services to the market more quickly. In essence, mid-tier banks have positioned themselves for growth.
Why are they now focusing on gaining market share from their tier-one competitors?
As a result of the competitive pressure that these banks are encountering, they have been able to improve their operations and delivery models to the point that they can now offer an alternative to the more established market participants. In addition, the relationship between customers and banks has fundamentally changed, in that historically customers demonstrated loyalty to their bank, and the bank determined the services that would be provided. This balance of power has changed, with the customer now seeing banks as providers of services, and as such the customer can more easily move their business to an alternative bank that can provide the services they require. Due to the increased agility of the mid-tier banks, they are better positioned to align themselves with evolving customer needs, and consequently gain market share from tier-one competitors.
What do they need to do to be able to achieve this goal?
Banks require stable foundations, both in terms of financial might, and operational capability together with agile thinking and processes if they are to capitalise on changing customer and market needs. By ensuring that their processes and controls are positioned to support growth and expansion, banks can reduce the lead time involved in bringing new products and services to the marketplace. Banks traditionally hit technology limitations at different points in their growth cycles, with many having to undertake significant technology investments to position themselves for the next phase of growth. By implementing solutions that provide the necessary scale and control, banks can realise their growth and expansion plans, while continuing to build the value of the bank.
How will the tier-one banks react to this increased competition?
Tier-one banks will consider two main options: improve their existing operations, or in some cases acquire other banks. The option of improving existing operations will invariably include significant technology investment and upheaval, while the option of acquiring can also lead to upheaval in terms of the need to integrate organisations and to consolidate their technology platforms. In all cases, tier-one banks will redouble their efforts to bring new products and services to new and existing customers in order to maintain their market share.
How can SunGard help these mid-tier banks fulfil this ambition?
SunGard solutions, services and people have been a fundamental part of the growth of many mid-tier banks globally. Our treasury solution, Ambit Treasury Management, has delivered agility and innovation to many organisations by enabling them to more easily extend their services to their customers as their business expands.