More customers now prefer local banks: survey satisfaction levels are also up sharply, says consulta

McKinsey & Company, a global management consultancy, said its latest Personal Financial Services Survey suggested that Thai consumers now overwhelmingly prefer to deal with a local bank, with the proportion climbing from 48 per cent in 2007 to 68 per cent this year. Across Southeast Asia, an average of 78 per cent of consumers favoured dealing with a local bank in 2011, suggesting there is scope for Thai banks to capitalise further on the trend.
The company released the survey’s results in a special briefing to members of the Thai Bankers’ Association late last week. The survey polled banking preferences across 12 markets and 20,000 consumers in Asia. It found that Thailand’s top local banks have delivered strong performance since the global financial crisis began.
Dr Jens Lottner, McKinsey’s director in the Singapore office, said: “We are witnessing an interesting rebalancing in the market across Asia, with a clear desire on the part of consumers to deal with local banks.
“In Thailand, where local banks have traditionally dominated, foreign players will now need to build an even more compelling offering that goes beyond having a strong global brand if they want to expand their presence. Or putting it the other way around, this is a unique opportunity for local banks to increase their presence in segments of the markets which traditionally have been a stronghold of foreign institutions like private banking or asset management.”
Thai banks have also seen customer satisfaction levels increase dramatically. The survey found the proportion of Thai consumers who were “completely or very satisfied with their primary bank” rose from 65 per cent in 2007 to 85 per cent this year. But secondary banks also saw a very strong rise in customer satisfaction, up from 28 per cent in 2007 to 55 per cent.

ready to recommend
Thai consumers remain loyal to their primary financial institution. More than 60 per cent “would recommend their financial institution to a friend or a colleague” – a small increase on the 58 per cent of those surveyed in 2007. However, there are some sub-segments where loyalty has been consistently lower, particularly younger customers between 21-29 years of age and middle-income customers.
The survey found that networks of automated teller machines were still a very important criterion for choosing a bank. In addition, ATMs and branches have remained the primary channels for Thai customers to interact with their banks, even if the frequency of visits to the bank branch has declined.
However, this physical infrastructure is becoming less of a differentiator as all banks invest heavily in this area. Between 2006 and 2010, Thai banks opened about 1,200 new branches and a staggering 22,000 ATMs.
The top four banks alone accounted for about 75 per cent of the new branch openings in this period. Bangkok Bank, Krung Thai Bank, Siam Commercial Bank and Kasikornbank have consolidated their positions and now collectively hold 85 per cent of the primary banking relationships of urban households, up from 78 per cent in 2007.
While Thailand is still very much a “bricks and mortar” market, this will change as tech-savvy urban consumers gravitate to new technology offerings for their |banking and finance needs, McKinsey predicts. Already for the first time since the inception of |the survey 10 years ago there has |been a real decline in frequency of branch visits. At the same time, Internet banking penetration |has increased, and even more important, the use of mobile banking in Thailand has more than doubled over the past four years, albeit from a small base.
The survey found that better-off Asian consumers are keen to get more advice and assistance in managing their investments. Across Southeast Asia, 53 per cent of the survey’s affluent respondents said they would like more investment advice, but only one-third of them currently used an adviser.
The McKinsey survey results show the same unmet need for advice in Thailand, with nearly 60 per cent of customers interested in more advice and assistance in managing their investments.
Consumers in other markets in |the region have split their product holdings across more banks, and |loyalty to the primary institutions |is on the decline. Another area to watch is competitor banks with a “branch-light” approach, which could capitalise on the increasing penetration of mobile and Internet banking to make inroads in the |Thai market at the expense of incumbents.
“For the leading Thai banks, these trends mean they will need to find new ways to be distinctive and retain the loyalty of their customers and new means of integrating their branches in a much more competitive multi-channel environment,” said Kenny Lam, the lead partner at McKinsey for the Personal Financial Services Survey in Asia.