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.

1. Customise Differentiate with innovative products and services tailored to the particular needs of GBA customers
2. Innovate Create cross-boundary digital and omnichannel experience that work for a variety of customers. 
3. 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”.