Despite tight budgets, banks will still spend on technologies that allow them to blunt the adverse effects of the crisis, build business despite the slowdown, and operate efficiently in a crisis environment. This is according to independent research and advisory firm Financial Insights, an IDC company, that has today released its report, 'Asia/Pacific Banking in 2009: Opportunities amid a Crisis'.
The report highlights pockets of growth in lending in several Asia-Pacific markets, shifts in customer deposits which allow aggressive banks to gain market share, and opportunities for generating fee income.
"A thorough review of the market reveals some opportunities for revenue growth, and for further expansion of customer base and product portfolios despite the economic crisis," said Michael Araneta, senior research manager, Financial Insights Asia Pacific. "The environment however is by no means bright and rosy, and significant risks need to be considered. Market conditions are volatile, causing opportunities to shift quickly. The game will be won by those agile and capable enough to execute strategies efficiently," Araneta continues.
Key findings
The IDC report stated that deposit mobilisation will proceed impressively in under-banked countries such as India (where industry deposit growth is expected to be at about 20 per cent year-on-year in 2009) and Vietnam (estimated to be 11 per cent). In most other Asia Pacific markets, however, it will be about acquiring market share from competing banks, or attracting customers away from savings and investment alternatives.
The report also recognised some areas of challenges and opportunities. "While some fee income sources like corporate finance, underwriting, credit cards and wealth management sales will be affected by the market slowdown, opportunities to generate service-based fees, such as those charged on transaction accounts, fund transfers and cash management, will remain robust," noted the report.
IT initiatives and risk management
Financial Insights noted that banks' strategic IT initiatives have been realigned to reflect the opportunities in the market. "Despite tight budgets, banks will still spend on technologies that allow them to blunt the adverse effects of the crisis, build business despite the slowdown, and operate efficiently in a crisis environment," said the advisory firm. "For example, while banks need to continue investing in origination solutions for loan expansion, they also need to invest strategically in modelling and analytics. Investments in scoring, modelling, and analytics will help in key areas such as decisioning, pricing, servicing, fraud prevention, and even collections and recovery."
"New business objectives and requirements are being used to justify traditional technology projects like core banking upgrades," said Araneta. "The chase for deposits will hopefully help rebuild the momentum for core banking system projects in the medium term. Business and IT teams will consider the scalability of their current core systems as the bank's deposit base expands, and as new deposit products need to be brought to market."
"Overall, the financial crisis is expected to bring risk management back into focus," he said. "Technology teams should be ready to address risk management issues related to their work, including risks inherent in technologies under implementation, project implementation issues, as well as risks associated with vendors and technology partners."
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