Bangkok Post

By invitation, the new growth challenge for Thailand's banks

In Thailand's increasingly competitive banking market, local banks are aggressively finding ways to differentiate themselves.

Par Edmund Lin and Shinji Yamamoto

First published on septembre 18, 2007
min


In Thailand's increasingly competitive banking market, local banks are aggressively finding ways to differentiate themselves. But as they manoeuvre to capitalise on new opportunities, they would do well to absorb the finding of a recent survey by Bain & Company. The survey rates retail banking customers throughout the Asia Pacific with the view that building and retaining a loyal customer base is key to sustained profit growth. We asked survey respondents to rate on a scale of zero to 10 how likely they are to recommend their bank to a friend or colleague. Those giving a top score of 9 or 10 were classified as promoters. Respondents answering with a lukewarm 7 or 8 were passive, while 6 or less marked a detractor. Subtracting the percentage of detractors from the percentage of promoters yields a bank's Net Promoter Score (NPSSM), a metric that provides an accurate picture of customer loyalty. The sobering result: among 10 industries we examined, Asia's financial-services companies ranked near dead last. Companies that anchor their growth plans to a loyal customer base consistently outgrow their peers. Loyal customers are less likely to shop for a better deal from competitors, purchase more products and services and talk up their bank with friends. Bain's analysis shows that a 5% increase in customer loyalty can raise the long-term value of customer relationships by 75-90%. To convert detractors and passives into promoters, successful financial-services companies master three disciplines. First, they invest in customer relationships, not just acquisition. Second, they adapt to shifts in local market conditions. Finally, they imbue the entire organisation with a passion for pleasing customers. Investing in customer relationships is a priority for banks trying to build a base in Asia's emerging markets. The biggest new opportunity is China, where savers hold 325 million individual accounts, valued at nearly $1.8 trillion. Face-to-face interviews commissioned by Bain with 7,500 bank customers in 20 cities found that their business is up for grabs. China's fast-growing population of relatively affluent consumers currently accounts for more than half of all bank profits, but these discriminating clients are most likely to switch their financial-services provider. China Merchants Bank is writing a new script to capitalise on such opportunities. One of a new breed of joint-stock-company banks, the bank recognised that it would have to set itself apart through innovation. The bank became one of the first to offer fixed-rate mortgages, giving customers willing to open long-term accounts some of the lowest rates in the industry. In 2005, deposits grew nearly 24%, while profits jumped at a double-digit rate. In the Bain NPS survey, China Merchants garnered a solid score of 19%. Banks that put customers at the heart of their restructuring efforts can lay a solid foundation for future expansion. In Japan, for example, nimble Shinsei Bank wins rare plaudits, with an NPS of 7% versus an average of negative 69% for the sector. Shinsei spent five years overhauling operations to improve customer satisfaction, and now has more than five times as many promoters as its competitors. Though it has one of the smallest branch networks in the industry, Shinsei makes its presence known where it matters most. The bank provides the greatest number of ATMs in the Tokyo metro system, in post offices and in convenience stores across the nation. What's more, Shinsei doesn't saddle customers with punitive fees that typify the industry. Sixty-two percent of Shinsei's promoters cited the low and no-fee policies as the number-one reason they would recommend the bank to friends and colleagues. This customer-centred approach is ultimately a tool for business transformation, providing a filter through which every department, branch, or employee can be held accountable. Successful organisations identify the customers they understand best, designing unique product offerings for them. They deliver on their promises by focusing on flawlessly executing customer interactions. Finally, they continuously monitor this contact and internalise feedback to develop their capacity to delight customers again and again. Consumers across Thailand will reward banks that make customer service their abiding mission. Edmund Lin and Shinji Yamamoto are partners at Bain & Company in the firm's Singapore and Tokyo offices, respectively. They are leaders of Bain's Asian Financial Services practice.

In Thailand's increasingly competitive banking market, local banks are aggressively finding ways to differentiate themselves. But as they manoeuvre to capitalise on new opportunities, they would do well to absorb the finding of a recent survey by Bain & Company. The survey rates retail banking customers throughout the Asia Pacific with the view that building and retaining a loyal customer base is key to sustained profit growth.

We asked survey respondents to rate on a scale of zero to 10 how likely they are to recommend their bank to a friend or colleague. Those giving a top score of 9 or 10 were classified as promoters. Respondents answering with a lukewarm 7 or 8 were passive, while 6 or less marked a detractor.

Subtracting the percentage of detractors from the percentage of promoters yields a bank's Net Promoter Score (NPSSM), a metric that provides an accurate picture of customer loyalty. The sobering result: among 10 industries we examined, Asia's financial-services companies ranked near dead last.

Companies that anchor their growth plans to a loyal customer base consistently outgrow their peers. Loyal customers are less likely to shop for a better deal from competitors, purchase more products and services and talk up their bank with friends. Bain's analysis shows that a 5% increase in customer loyalty can raise the long-term value of customer relationships by 75-90%.

To convert detractors and passives into promoters, successful financial-services companies master three disciplines.

First, they invest in customer relationships, not just acquisition. Second, they adapt to shifts in local market conditions. Finally, they imbue the entire organisation with a passion for pleasing customers.

Investing in customer relationships is a priority for banks trying to build a base in Asia's emerging markets.

The biggest new opportunity is China, where savers hold 325 million individual accounts, valued at nearly $1.8 trillion. Face-to-face interviews commissioned by Bain with 7,500 bank customers in 20 cities found that their business is up for grabs. China's fast-growing population of relatively affluent consumers currently accounts for more than half of all bank profits, but these discriminating clients are most likely to switch their financial-services provider.

China Merchants Bank is writing a new script to capitalise on such opportunities. One of a new breed of joint-stock-company banks, the bank recognised that it would have to set itself apart through innovation. The bank became one of the first to offer fixed-rate mortgages, giving customers willing to open long-term accounts some of the lowest rates in the industry.

In 2005, deposits grew nearly 24%, while profits jumped at a double-digit rate. In the Bain NPS survey, China Merchants garnered a solid score of 19%.

Banks that put customers at the heart of their restructuring efforts can lay a solid foundation for future expansion. In Japan, for example, nimble Shinsei Bank wins rare plaudits, with an NPS of 7% versus an average of negative 69% for the sector. Shinsei spent five years overhauling operations to improve customer satisfaction, and now has more than five times as many promoters as its competitors.

Though it has one of the smallest branch networks in the industry, Shinsei makes its presence known where it matters most.

The bank provides the greatest number of ATMs in the Tokyo metro system, in post offices and in convenience stores across the nation. What's more, Shinsei doesn't saddle customers with punitive fees that typify the industry. Sixty-two percent of Shinsei's promoters cited the low and no-fee policies as the number-one reason they would recommend the bank to friends and colleagues.

This customer-centred approach is ultimately a tool for business transformation, providing a filter through which every department, branch, or employee can be held accountable. Successful organisations identify the customers they understand best, designing unique product offerings for them.

They deliver on their promises by focusing on flawlessly executing customer interactions. Finally, they continuously monitor this contact and internalise feedback to develop their capacity to delight customers again and again.

Consumers across Thailand will reward banks that make customer service their abiding mission.

Edmund Lin and Shinji Yamamoto are partners at Bain & Company in the firm's Singapore and Tokyo offices, respectively. They are leaders of Bain's Asian Financial Services practice.