Innovation in Retail Banking: Asia Pacific - The Asian Banker

Street level factors touch the customer and circle around his specific needs and preferences. While customers
in Hong Kong use a wide variety of financial services, from online bill payments over the mobile phone, to
contactless micro payments in the mass transit system to sophisticated investments products, only 20% of
the population in Vietnam even have a bank account and cash is the preferred payment means.
While Westerners are very concerned about privacy and the security of personal information, Asians have
considerably less concerns and are even willing to verify a new account with fingerprints.
As financial products often do not really differ, for example a debit card pays bills, this lack of differentiation
forces banks to turn a plastic card into a lifestyle product. Exclusivity and customisation can make a difference
for the target audience and the “out-group”.
Focusing now on the micro level factors, as this are the only ones a bank can influence, the next chapters
discuss whether formal structures, such as a formalised innovation strategy or a dedicated innovation
department have a major impact on the innovativeness of banks.
4.3 Do banks need an innovation department
It is not surprising that those banks which have a differentiated innovation department are also more likely to
have a formalised innovation strategy. But we do not see a relationship between having a formal strategy, an
innovation department and greater innovativeness in retail banking. 89% of banks in North Asia, and 92%
(Figure 4-2) of banks in South Asia do not have formalised structures but they are highly innovative.
Figure 4-2
Do you have a dedicated department coordinating innovation in your bank
Percentage of Respondents
12%
10%
8%
9%
8%
11%
6%
4%
2%
0%
Southeast Asia South Asia North Asia
Source: Infosys and Asian Banker Survey Results
We believe that the factors mentioned in the chapter 4.2 “Factors which explain different approaches to
innovation” have a bigger impact on innovation than formalised structures. The nature of the competition,
corporate culture and business ownership, and customer needs are the main drivers.
For banks operating in several markets the coordination between countries is more difficult and so
international banks have developed regional structures, whereby regional headquarters supervise, coordinate,
conceptualise and execute innovation. Citibank Asia Pacific provides an interesting example of this. The bank
Innovation In Retail Banking 27