Finacle Blog:Retail Banking in the Asia Pacific: What's Innovative?

Asia Pacific, although impacted temporarily by the new global economic environment, is definitely on the growth path. Consistent increase in domestic consumption and low levels of individual debt is accelerating demand for retail financial services. And banks are innovating to stay ahead of the pack. In fact, according to a recent research conducted across South Asia, Southeast Asia (including Australia) and North Asia, 63% of bankers surveyed said that their banks increased investments in innovation last year, and the focus is unwavering on innovation in channel network distribution and products.

Executives in North Asia, including Hong Kong, Taiwan, South Korea and China, expressed the highest level of innovation among all regions. An Innovation Index shows that on a scale from 1 to 5, banks in the Asia Pacific region regard their innovativeness as 2.6. This number goes up to 2.9 in North Asia, followed by Southeast Asia at 2.5. South Asia is the least innovative sub-region, with banks rating their innovativeness at 2.4.

The research goes on to state that banks whose activities in the area of products, channels, operational processes and customer relationship management were not only innovative but also successful, make a significant contribution to the bottom line in a sustainable manner. Retail executives have come to think of innovation either as process re-engineering, added on products and service applications, or network distribution enhancements. In Asia Pacific, the majority of innovations are driven by unit or product heads who drive new ideas and changes with a minimum of innovation infrastructure and resources behind them such as monetary, structural, organizational or intellectual capital.

At the end the prime goal of innovation remains to be high quality revenue growth. Clearly, there is no better measure of a successful innovation than above market average revenue growth and a sustainable increase in wallet and market share. In fact, the most powerful innovative products banks have introduced in the last 10 years continue to deliver above average market growth and revenue and this is still the case today.

Recently, prototyping is increasingly being seen as an important and useful element for building institutional knowledge to manage innovation; banks often go through multiple rounds of incremental improvements before they have a more significant impact on the competitive position. Most banks follow a tactical innovation approach, meaning the approach is needs-based, reactive and considerably smaller in scope than strategic innovation, which is found to be concentrated on international banks or in small niche markets.

Get your copy of the detailed report on the survey findings here.