The global economic crisis has left Asian consumers increasingly mistrustful of foreign banks, with many preferring to use local institutions, according to new research from McKinsey.
The study, published in the latest McKinsey Quarterly, comes at the same time as many multinational banks are focusing heavily on growing their presence in Asian markets, amid a rise in the number of wealthy individuals in the area.
Based on interviews with 20,000 consumers, the research found that eight in ten people in emerging Asian markets and 63% in developed Asian markets believe it is important to deal with a local institution.
In China and India, which are expected to see large rises in the number of millionaires over the next four years according to research released this week by Swiss private banking group Julius Baer, this figure is even higher. Eighty-seven percent of people in China and 95% of Indians preferred using a local bank.
The study also found that preference for using local banks was “especially pronounced in the upper-mass-market and mass-affluent segments across Asia”. In Hong Kong, for example, where Deloitte expects almost half of the population to hold more than $1 million (€701,117) by 2020, McKinsey said 76% favoured local institutions, up 21 percentage points on 2007.
“We speculate that these changes reflect Asian consumers’ anxiety over the safety of foreign banks in the aftermath of the financial crisis,” wrote Kenny Lam, principal in McKinsey’s Hong Kong office, and Jatin Pant, an associate principal in the Mumbai office.
Attracting new consumers is likely to be increasingly challenging for international banks from Europe and North America that are expanding their Asian operations.
“Multinationals face a clear challenge in repositioning their brands: they will need to invest in much deeper localisation of products, services and the overall customer experience,” said Lam and Pant.