Bain: Prepare for China’s financial services opportunities
Financial services institutions worldwide should get ready to capture the opportunities in China’s Greater Bay Area (GBA): Hong Kong, Macau and nine cities in Guangdong province.
That’s according to Bain & Company’s latest findings which were formed following a survey of 3,000 retail customers and SMEs within GBA and interviews with senior execs at various regional institutions.
China's GBA is ripe for capture
In a report, aptly titled Are You Ready for the Financial Services Opportunities of China’s Greater Bay Area?, Bain points to the characteristics of China’s GBA that make it such an attractive proposition: that it is has a population of more than 70 million, a GDP growth of 8% per year over the last decade, and an economy similar in size to Canada and South Korea (GP of US$1.7 trillion).
Couple this with rising economic activity, an expanding affluent population, and recent policy changes, and you have a region ripe for the taking with increased prospects for financial firms across wealth management, insurance and lending as customers in China and Hong Kong have expressed considerable interest in cross-boundary products.
“Now is the time for financial services companies to take advantage of the opportunities stemming from the Greater Bay Area, in order to ensure that they are primed to meet the customer demand moving forward” says Henrik Naujoks, Bain & Company's Asia Pacific Financial Services Leader, based in Hong Kong.
“It’s clear that customers are interested and see the value in cross-boundary products, so it’s an important time for firms who must start investing in strategic ways to ensure that they are ready to meet the moment.”
Wealth management is primary opportunity
Considering that less than 20% of GBA retail customers currently own boundary wealth products, yet 70% expect to buy such products in the next three years, the greatest immediate opportunity is in wealth management, the report finds.
Life and property-and-casualty insurance also has potential considering it is still in its early life in mainland GBA cities with penetration just 6% in 2019, compared to developed markets where penetration is double this.
Furthermore, a rise in demand for mortgages, fuelled by increased mobility within China’s GBA, will likely lead to additional cross-boundary opportunities. According to the findings, 20% of Mainland retail customers and 10% of Hong Kong customers would consider getting a mortgage from an institution across the boundary in the next three years.
Strategies financial firms can implement
With the aim of helping financial services firms capture this emerging opportunity, Bain outlines three key mid to long-term strategies that organisations can implement.
- Customise Differentiate with innovative products and services tailored to the particular needs of GBA customers
- Innovate Create cross-boundary digital and omnichannel experience that work for a variety of customers.
- Create Develop an operating model that fosters focus and collaboration for the region to efficiently capturing the new opportunities of the GBA
Research shows that getting omnichannel and the digital customer experience right is key to capturing these opportunities, as 90% of mainland respondents prefer to research and interact with insurance companies over digital platforms, while 60% consider digital the best channel for purchasing, monitoring and trading wealth management products. `
According to Bain’s Priscilla Dell’Orto, customers expect an innovative, connected and seamless experience, and so connectivity is crucial. Firms should be “looking at investing to perfect their omnichannel experience, marketing and digital solutions.”
Bain highlights how a number of GBA initiatives within cross-boundary wealth management connect and insurance service centres are in the works and likely to launch soon and despite some uncertainty around the pace and scope of future regulatory and policy changes, the fact remains “this is an important moment for the region’s financial services ecosystem”.
Timeline: India takes unicorn leap with six in five days
We chart an historic week in India’s tech industry, where in just five days, between 5-9 April 2021, the country achieved six new unicorns, bringing India’s total to 10 in 2021 to date, an immense unicorn leap from just seven in 2020 and six in 2019.
April 5: Meesho
India’s first social commerce unicorn, Meesho raised US$300m from SoftBank, Facebook and Shunwei Capital, giving the Bangalore-based startup a US$2.1bn valuation, a threefold jump from its previous funding round in 2019. Founded in 2015 by two IIT-Delhi graduates, Meesho connects producers and resellers, helping small businesses sell through social media. It has 45m customers and has enabled 13m entrepreneurs to start their online businesses with no investment.
April 6: CRED
Founded just over two years ago, Bangalore-based credit card repayment app CRED raised US$215m from Falcon Edge Capital and Coatue, nearly trebling its valuation to US$2.2bn from its January US$80m round. Allowing customers to pay off their credit card debt while earning CRED coins which they cash in for rewards, CRED has grown rapidly during COVID-19, doubling its customer base to nearly 6 million in a year.
April 7: API Holdings / Groww
The first epharmacy startup to gain unicorn status, PharmEasy (API Holdings), which has digitised 60,000 brick and mortar pharmacies and 400 doctors across India, raised US$350m in a round led by Prosus Ventures. Founded by four former Flipkart employees as a way of making investing simple, investment platform Groww became India’s second-youngest fintech unicorn, raising US$83m in Series D funding led by Tiger Global, quadrupling its previous round in September.
April 8: ShareChat
New Delhi-grown social media startup ShareChat, founded in 2016 by Mohalla Tech raised US$502m from Lightspeed Ventures, Tiger Global, Twitter and Snap taking its raised total over six rounds to US$766m and pushing its valuation to US$2.1bn. The funding will be used to grow its user base and short video platform Moj, which launched in 2020 following TikTok’s ban in India. The regional language startup claims 280m users.
April 9: Gupshup
AI-led conversational message startup joined the unicorn club after raising US$100m from Tiger Global giving it a ten-fold valuation of US$1.4bn. The smart messaging platform, which has seen accelerated growth during the pandemic, was founded in Bangalore in 2005 by serial entrepreneur Beerud Sheth, whose online freelancing platform Elance is now listed. Gupshup’s API enables 100,000+ businesses to build messaging and conversation experiences across 30+ communication channels.