On the cusp: regional integration in Asia

On the cusp: regional integration in Asia
It’s 2015, the mid-point of the decade and a good time to start looking at major trends in Asian financial services over the next five to ten years. One of the major themes will be regional integration, which is another way of saying the development of cross-border markets. There are at least two important threads here: the ongoing internationalization of China’s currency, and the development of the ASEAN Economic Community (AEC) in Southeast Asia. RMB internalization is really about the loosening of China’s capital controls and its full-fledged integration into the world economy. And everyone seems to want a piece of this action, including near neighbors such as Singapore who are vying with Hong Kong to be the world’s financial gateway to China. The AEC is well on its way to becoming a reality in 2015, with far-reaching trade agreements designed to facilitate cross-border expansion of dozens of services industries, including financial sectors. While AEC is not grabbing global headlines the way China does, we see increasing interest in Southeast Asia among our FSI and technology vendor clients. From Celent’s point of view, both trends will open significant opportunities across financial services. In banking, common payments platforms and cross-border clearing. In capital markets, cross-border trading platforms for listed and even OTC products. In insurance, the continued development of regional markets. Financial institutions will be challenged to create new business models and technology strategies to extract the opportunities offered by regional integration. It’s the mid-point of the decade, and the beginning of something very big.

A bank’s low hanging fruit

A bank’s low hanging fruit
RBS just announced plans of a worldwide reduction of 9,000 posts. This, unfortunately, highlights the myopic vision of cutting sources of costs immediately available, in the attempt of restoring shareholders confidence long past declined. While there is significant time pressure, it is important for senior executives to take a step back and properly review cost-management techniques to ensure sustainability. The problems with the typical cost cutting program lie in the fact that cuts implemented are generally short-term tactical fixes, rather than long-term structural changes. While the current market conditions are acute, building a sustainable cost-management program requires more than sporadic/deep cost cuts throughout the business. Major organizations consistently stumble in cost-management initiatives because they do not properly involve business line experts, who work with the technology, clients and operations staff on a daily basis. Cost cutting in isolation without in-depth knowledge of business line activities can create more problems and costs than it alleviates. An effective cost cutting program aligns the right people with the proper organization, and within the right team structure to develop a sustainable long-term cost-management program. As they embark on cost initiatives, executives have the opportunity to make fundamental changes to the cost base. Banks can create a culture of cost-efficiency that will refocus business lines on sustainable growth and client service and allow stronger institutions to emerge from the credit crisis well positioned for growth.