Business Analytics - Establishing Rapid Inroads into Asia

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Business analytics (BA) is typically implemented to gain insights into and reveal patterns about consumers' behavior. It utilizes statistical technologies such as data mining, clustering and regression modeling to discover relationships in data that can determine the probable outcome of future events and allow for users to take preemptive actions if necessary. Often, such analytics are able to make predictions that are otherwise not apparent or too complex to be identified using core analytics software.

What does the Future Hold for the Insurance Industry?

Tags: insurance, it priorities, asia/pacific

While the industry’s resilience was undoubtedly tested during the economic fallout, insurers have nevertheless weathered the economic malaise with immense vigilance and fervor. Although today's global economic climate may still be fraught with unpredictability, profound challenges and changing regulatory landscapes, new business opportunities abound in both matured and emerging insurance markets.

Now is the opportune time for insurers to revolutionize their business strategies and architectures in an effort to steer themselves back to a growth trajectory. Insurers that are staying one step ahead of the competition are those that are able to create a more dynamic business framework via the assistance of technology, take on operational improvement initiatives, explore alternative distribution channels while staying customer-centric, and place more rigor on compliance and risk mitigation techniques, amongst others.

This year, as the world emerges from the global financial upheaval, IDC Financial Insights is taking the opportunity to reconvene the Asian Insurance Congress 2010, a knowledge-centric and networking conference for insurers across this region. This Congress will be the platform for industry executives to engage with prominent thought leaders as they share their views and experiences in building up successful operations in the rapidly growing and diverse insurance markets in the Asia/Pacific region.

Join me at this Congress in Singapore on 26th August to hear industry thought-leaders share their views on:

Hope and Optimism for 2010 and Beyond
- Regulatory Measures: Steering Insurers onto More Stable Ground
- Industry Outlook: A Sneak Peek of Future Opportunities
- Ready for the Upturn: Crafting the Winning Formula for Insurers
- Rethinking Your Business Operating Model
- Embracing a Tech-Savvy Culture: Panacea to Business Sustainability and Efficiency
- Increasingly on the Radar: Corporate Governance and Risk Mitigation
- Beyond Fraud Management 101: Elevating Fraud Detection and Prevention to New Levels

A Corporate Blueprint for Effective Business and Technology Processes
- Core Systems Enhancements: Out with the Old, In with the New?
- Change Transformation Initiatives: Adopting Process Reengineering to Optimize Business Performance
- Streamlining Data Processes: Transforming Noise into Valuable Information
- Adoption of Alternative Technology Delivery Models: Has this Gone Mainstream, or are we still at the Bleeding-Edge of Adoption?
- Alternative Technology Consumption Models: A Case Study

Strategic Approach Toward Fostering Market Sustainability
- Customer Centricity: Your New Age Marketing Tool
- Business Analytics: Unlocking the Benefits from Customer Segmentation
- Ensuring an Effective Agency Channel Management
- Alternative Distribution Channels: Moving to Higher Gear
- Core Fundamentals in Managing Bancassurance Relationships

Growth Opportunities from Alternative Lines
- Micro-insurance: Beyond Social Protection to Bottomline Benefits
- Product Innovation: Positioning your Insurer to Capture Opportunities in Health Insurance

This is definitely an event not to be missed by insurance practitioners and service providers. Attendance is complimentary for professionals from insurance organizations. Do visit http://www.idc.com.sg/insurecongress/2010/ for more information and I look forward to seeing you there!

IDC Financial Insights' AFS Congress returns with a stellar line up of speakers from the FSI industry

Tags: financial services, afs congress

On February 25-26, as many as 500 financial industry practitioners across the region are expected to converge in Singapore for the 6th Asian Financial Services (AFS) Congress.  This year's  Congress, which takes on the theme "Prescriptions for the Upturn - What Next?", is based around lessons learned from the recent financial crisis and how banks should set themselves up for the return of less turbulent times.

Hot topics that will be featured in the Congress include: where value can be build in the period of uncertainty; how Asia's institutions should create and rebuild their franchise; what technology investments have been pushed to the top of the agenda; and, where the opportunities for business transformation and operational innovation lie.

Here are a selection of presentations lined-up for the AFS Congress:

Weathering the Perfect Storm: Sustaining Growth During Market Turmoil
by Ray Ferguson, Regional CEO, Singapore and SEA, Standard Chartered Bank
The financial tsunami has resulted in the decline of revenue or even the failure of some institutions worldwide. While some may have failed, others are showing signs of turnaround. How do you sustain growth during the crisis and more importantly, gear your processes and resources to capitalize on the recovery? Standard Chartered Bank will share the lessons learnt from the financial crisis and how they managed to perform well during the turbulent period.

Tomorrow's Retail Bank: A Path of Transformation
by Michael Lor, Group CEO, EON Bank Group
Amid the financial crisis and dip in global consumer spending, Asia remains profitable and offers an avenue for growth. How can financial institutions leverage on the opportunities presented during this crisis? EON Bank will be sharing their journey of transformation and insights on the potential pitfalls.

The Top 10 Strategic Initiatives for Asia/Pacific Banks in 2010 - Investing for the Comeback
by IDC Financial Insights' regional team of analysts
This session highlights the business and technology issues that will be relevant to the recovery of Asia/Pacific's financial institutions, and how these priorities bear on the plans of technology providers that serve the banking industry.

At the break-out sessions, hear from other industry thought-leaders as they share their views on:

This is definitely an event not to be missed for executives in the  financial services industry.

For a full description of the agenda and speakers, you can visit AFS Congress 2010 or register here

I look forward to see you there!

Hong Kong Bankers Prepare for Growth as Economy Starts to Recover

Tags: asia/pacific, banks, risk management, economic crisis, hong kong

IDC Financial Insights Asia/Pacific hosted 12 CIOs and IT heads from top Hong Kong banks at our recent Hong Kong Banking Roundtable. This was a closed-door session providing a platform for bankers to deliberate on the critical business, operational, and technology-related issues impacting their businesses, and forms part of a series of roundtables that IDC Financial Insights organizes across the Asian region.

Here, the consensus view was that the economic storm clouds seem to have cleared, with a glimmer of sunshine streaming through.

Latest Hong Kong Monetary Authority (HKMA) data indicates that Hong Kong has pulled out of its deepest recession since the 1998 crisis, and is currently joining Singapore on the road to recovery. The territory's seasonally adjusted GDP expanded 3.3% quarter on quarter in 2Q09, three times as fast as analysts had forecast, and finally ended four straight quarters of contraction.

Nonetheless, still wary of the fragility of the economic situation, Hong Kong bankers are placing concerted efforts to look for sustainable business growth - whether to consciously control expenses to fatten margins, to continually broaden customer engagements, or to undertake initiatives to strengthen payments and transaction services business.

With that in mind, topics that currently preoccupy business and IT divisional heads at the Hong Kong banks center around IT optimization, distribution channels, customer centricity and analytics, and compliance and risk management, most of which are tied to the omnipresent need to manage cost and unlock more value from customer engagements.

Technology optimization sees a focus on application portfolio management to reduce the cost of maintaining business suites, interest in Web-delivered IT services, and always with an eye on a quick turnaround on investments.

Meanwhile, a saturated, competitive market like Hong Kong where almost 200 banks and deposit-taking institutions jostle for wallet share means that creating an integrated and consistent customer experience across all delivery channels is key. Here, banks have entrenched internet banking presence but a weaker toehold for retail mobile banking, and point to the need to prepare themselves for the inevitable wave of mobile adoption.

The call for wider and deeper customer engagements sees increased investments in analytics to slice and dice customer data and accordingly redefine product design and marketing. Elsewhere, shareholders' push for more prudent risk management, reinforced by regulatory pressures, compels Hong Kong banks to review their internal risk control systems and reexamine technology investment in risk detection, avoidance, and management solutions.

The roundtable further sought feedback from participants on their growth strategy and technology initiatives for the short term. Here, the graph below outlines the strategic imperatives at Hong Kong banks over the next 12 months. There appears to be no letup in the focus on risk management and compliance, cost management and operational efficiencies. Banks are working on reining in cost and making the most out of limited resources via undertakings such as improving  processing turnaround times and throughput, reducing process redundancies, and perhaps integrating solutions onto fewer platforms in their drive to weed out inefficiencies.

The Hong Kong banks are also unique compared to peers around the region in that a core imperative includes market expansion - presumably with an eye into China, given plentiful opportunities in the mainland as it avoided the worst effects of the global downturn and still grew a robust 7.1% in 1H2009.

Note: Full insights are captured in the report entitled "Market Analysis: Hong Kong Banking Update 2009" (Doc #FIN219780). This covers discussions from the roundtable as well as the future strategy and technology undertakings of the participating banks for the upcoming months ahead.

Banks Turn the Spotlight on Vendor Risk

Tags: economic crisis, financial services, banks, asia/pacific,

In recent months, we received several inquiries from banks about how they are best to ascertain the business and financial viability of their vendors. The intent of the inquiries could partly be attributed to how banks are working to avoid another spectacular issue as that seen out of the former Satyam. Banks have more clearly  understood how technology failures, including the failure of technology vendors to deliver, can have dire implications for business continuity, bank reputation, and business strategy.

Indeed, the economic crisis has put in question the viability and sustainability of vendors' businesses. While several financial technology vendors have reported strong results despite a tumultuous economic environment, most players have shown their weakest performance in years. The pace of vendor consolidation has gained more speed. Early this year, we stated that 2009 will see 12 of the top 100 financial technology firms acquired or declaring bankruptcy, higher than the industry average over the past five years.
Vendors have been more mindful of fee structures and engagement margins. Banks justifiably have to be on guard for vendors drastically cutting staff levels (especially in banks' outsourcing partners), as well as those showing declines in SLA compliance and performance.

Although the fall of Satyam is not necessarily attributed to weak financial performance, the Satyam saga easily proved that lapses in reporting are possible. Financial institutions have thus intensified their scrutiny of the financial reports and balance sheets of their vendors. The lack of transparency is correctly considered a significant risk in itself. Vendors though have themselves responded with improved transparency. Disclosures made by vendors to current and potential clients have become more detailed to include other client references, new wins, and other metrics for performance and delivery.
Regulatory mandates have also scaled up to reflect the new regime of vendor transparency. There will be a greater push to report vendors' banking relationships (are vendors themselves clients of the banks they serve?) — something that we note especially in India. Although the most recent regulatory guidelines coming out of Asia/Pacific regulators speak more to data integrity, data privacy, and information security, the focus on effective governance of vendor relationships has indeed been heightened. We expect that in the medium term, more specific guidelines on vendor due diligence and monitoring will be put in place, following IT risk guidelines in Singapore (Internet Banking and Technology Risk Management Guidelines) and Hong Kong. This is similar to the developments we saw in the United States, where the Gramm-Leach-Bliley Act's mandates for privacy and integrity of customer information gave way to vendor due diligence and vendor risk management rules.

The Post-Crisis CXO

Tags: asia/pacific, banks, economic crisis, financial services

The post-crisis landscape will be a much different place for financial services institutions. Will the banks and insurers that survive the downturn be managed by a new breed of leaders?

What will the post-crisis CXO look like? We ask this question as we evaluate a good list of up-and-coming CEOs, COOs, CFOs, CIOs. In the Asia/Pacific region in particular, we are seeing that the average age of CXOs in the financial industry has fallen quite significantly. This is something worth noting, considering that we are talking about an industry composed of many different kinds of organizations - from large international and regional players, to dynamic domestic champions and small, family-run organizations.

Several qualities will be common among the industry's new leaders, foremost among which is, of course, competency in risk management. We have seen over the past years how risk management executives have become more prominent, playing ever more critical roles in the organization. The crisis will serve to underscore the need for astute risk management skills. Some other "new" qualities worth noting: marketing savvy and a keen appreciation of technology as a value-creator.

We also believe that alongside the rise of these future leaders, the industry will witness an upsurge of today's next-generation banking initiatives such as cloud computing (and its derivations), Green IT, Web 2.0, social networking and its use in financial services and Generation Y banking. It will be interesting to witness how the rise of the future CXO and the rise of new technology will change the dynamics of our industry.

1Q2009 Performance: How are Asian Banks Stacking Up?

Tags: economic crisis, banks, asia/pacific

We are seeing what seems to be three camps of financial performance being released. In the left corner are institutions in countries like South Korea and Malaysia which are still facing lackluster performance. In Korea for instance, whilst the banking industry has turned round the corner in 1Q2009 with most institutions returning to the black on lower-than-expected provisions (Korean banks are estimated to have logged a combined net profit of around US$146 million for the Jan-March period mainly from decreased loan-loss reserve), profit margins are expected to remain squeezed in the near-term. Banks continue to feel the sting of surging NPLs stemming from the slumping economy. We do not expect the market to achieve any form of stability till at least 2010 when loan delinquency rates get sorted out.

Meanwhile, clocking in commendable results despite the persistent global credit crunch and economic downturn are Hong Kong, mainland China and Vietnam. In the former two countries, the banks are generally coping well, being less impacted by their counterparts in the West. The Chinese government's stimulus package - with measures such as extending corporate credit and expanding bank guarantee deposits - has shored up financial stability. China's banking sector has consequently improved on the back of the stronger-than-expected corporate loans growth, deposits, domestic demand and consumption, and rebound in wealth management fees. Over in Vietnam, a recovery in overall lending activities resulted in joint stock banks performing better than expected in Q12009. Though the financial turmoil hit the Vietnamese market hard in 2008, with the government's subsidized loan stimulus program and banks relying on credit activity growth to boost bottom lines, there appears to be some modicum of stability in 2009. 

Nations that are witnessing the most robust 1Q2009 results to-date include India and Indonesia. In India for instance, Yes Bank's profits leaping a stellar 40% in its fiscal fourth-quarter (Jan-March 2009), while that for HDFC Bank surged 34% from the year-earlier period, boosted by higher loans growth. Most banks in Indonesia have yet to release their numbers, though early indications likewise point to a majority still being able to report hearty profits. A number of Indonesian banks have confirmed acquisitive growth plans, including Bank Raykat Indonesia (expectations for net profit expansion of 15% in 2009, with this optimism reflected in channel investments that include rolling out 4,000 new ATMs), Bank Mandiri (targeting a general insurance company acquisition to complement AXA Mandiri's life insurance business), and Bank Rakyat (considering a second tier bank purchase to expand its SME business). 

Microinsurance: Beyond a Positive Social Impact

Tags: insurance, financial services

Of late, microinsurance has been generating increasing interest and momentum here in Asia. For instance, Taiwan's Financial Supervisory Commission (FSC) just this week proposed plans to provide microinsurance to a sandwich class of almost a million Taiwanese who hover near the poverty line but do not qualify to receive government subsidies. Incentives such as tax cuts would be offered to insurers to encourage the development of a variety of microinsurance coverage for accident, health and life.

Meanwhile in India, with over 90% of the country’s poor still not covered by microinsurance, insurers are getting into the thick of action. Allianz for example, partnered with Care International (an organization with extensive experience in microfinance) to focus on the provision of insurance for people who live near the coast and work in fishing, agriculture and plantations.

Microinsurance is not just a vital tool in helping to reduce poverty by providing access to financial services and economic development. It is also about extending protection to the excluded population (i.e. the world’s poor), while still being a financially sustainable value proposition for the insurers (provided of course, they have the right administration and management).

Is your company jumping into the microinsurance bandwagon?

What are some principal challenges being encountered? What is the role of technology as a tool to enable microinsurance programs?

I would think that the delivery model to clients would be one issue - in India for instance, the wide dispersal of the microinsurance target population in deep rural areas makes distribution a challenge. To keep distribution cost low, reach prospects and service existing microinsurance clients, these products need to be properly marketed through well established networks, perhaps through leveraging existing microfinance infrastructure.

However, whatever the limitations may be, it seems that microinsurance is fast moving beyond just a social service in Asia...

The Age of The Stimulus: Which Banks Will Win?

Tags: banks, financial services, government

The total price tag for government-led stimulus programs in the Asia/Pacific region will easily tip over US$1.5 trillion by mid-2009. This massive injections of liquidity will up the ante in the already fierce competition of banks. In Thailand for example, Bangkok Bank has proven that bank network reach is still king, as the bank won the right to distribute stimulus checks for over 10 million Thai citizens. A reported price of 2 baht per check is loose change for a giant institution, but is not a  laughing matter either, given the ardent competition for every revenue generation opportunity.

Meanwhile, banks are expected to realign their loan growth targets as governments highlight priority sectors and greenlight huge infrastructure build-outs. Financial Insights Asia/Pacific's average loan growth estimates for 12 key Asia/Pacific markets is now at 8.7%, reduced further from previous estimates of 10.3% in November 2008. We will get a clearer picture of the aggregate and sectoral loan growth numbers by June 2009. However, we are certain that growth rates in 2009 will still be robust relative to the dire predictions in the United States and Europe. Respectable growth rates are expected out of countries with large populations such as China, India, Indonesia, and Vietnam.

Technology implications for banks?

Banks that are able to showcase operational efficiency aside from reach and distribution will win in the governments' cash-to-the-public programs. In the public spending side, key factors of success will be capability to build out lending models and the capability to scale up growth in priority sectors. Further, loan origination systems was a strong initiative for banks in the Asia/Pacific region prior to the crisis, and will be critical area of focus now.

We estimate that about 60% of loan origination systems of the top 250 Asia/Pacific banks were (and are still) outdated and could not cope with an upsurge in lending. Leading banks are expected to invest heavily in modeling and analytics (good news for leading players like SAS, FICO, etc). Building of course on quality data, these investments in scoring, models, and analytics will help in key areas such as decisioning, pricing, servicing, fraud prevention, and even collections and recovery

The full report, Asia/Pacific Banking in 2009: Opportunities Amid a Crisis, is available on the Financial Insights' Web site. 

Banks Focusing on Credit Risk as They Reel from the Turmoil

Tags: banks, financial services, risk management

While the financial tsunami has washed up the shores of Asia/Pacific and losses to the tune of billions of dollars have resulted in banks slashing technology budgets, there is still money flowing into risk-related projects. These are more easily justified as banks seek to plug risk leakages exposed by the recent market stresses. Consequently, risk-mitigating products and techniques to empower banks to manage credit exposures more proactively becoming increasingly important.

The beneficiaries of these accelerated risk management practices? Vendors operating within the credit risk/Basel II field such as Algorithmics, Moody's Fermat, Fiserv, Misys Almonde, Oracle Reveleus, Quantitative Risk Management (QRM), SAP, SAS Institute, and SunGard.

All nine are worthy contenders in their own right. Those that stood out with particularly distinct features and extensive functionalities include Algorithmics, Moody's Fermat, Fiserv, and QRM. Oracle Reveleus, SAP, SAS Institute and SunGard meanwhile boast a varied footprint of client jurisdictions, while Misys Almonde offers rapid web-delivery deployment and is entrenched with clients in emerging markets.

To ensure alignment of strategies, policy objectives, and business processes with their credit risk framework, banks need to shore up on their current credit risk efforts and nominate a risk champion to ensure that risk awareness pervade the entire enterprise. Beyond ascertaining that vendor functionality offerings correlate with their risk management requirements, decisions also need to be made around areas like the extent of customization preferred, the choice of a multiple versus one-system solution platform, and future functionality requirements.

For a further discussion on credit risk offerings in Asia/Pacific and how banks can enhance their risk framework, please refer to Credit Risk Solution Vendors: Who's Who in Asia (Doc #FIN217509).