Asia's 'mass affluent' drive tech spending
Financial services companies in the region are beefing up their technology systems and removing information silos, in a bid to better serve the mass affluent market--wealthy individuals with US$60,000 or more in onshore liquid assets.
According to the latest report by Datamonitor, wealth management technology spending is set to increase, as financial services companies strive to differentiate their offerings and stay competitive using the latest tools. Global wealth management technology spending across North America, Europe and Asia-Pacific is projected to reach US$28.5 billion by 2012.
Jaroslaw Knapik, financial services technology analyst with Datamonitor, said: "Wealth managers, private bankers and retail banks are no longer talking of standalone strategies for wealthy individuals.
"The trend is towards 'integrated financial solutions', revolving around cross-selling banking, savings and investment products wrapped with advice," he added.
Breaking down the Asia-Pacific market, Knapik told ZDNet Asia that spending in the developed and newly industrialized Asia-Pacific countries, which are Australia, Hong Kong, Japan, New Zealand, Singapore, South Korea and Taiwan, is projected to reach US$2.78 billion by 2012, up from US$2.15 billion this year.
Technology spending in the emerging countries--China, India, Indonesia, Malaysia, Pakistan, Philippines and Thailand--is expected to top US$923 million by 2012, up from this year's US$601 million.
Knapik said front- and middle-office tools, such as portfolio management, financial planning and analytical customer relationship management systems (CRM), lie at the heart of wealth management operations. Financial advisors and front-office staff need to have "more agile, automated" analytical tools that enable client interactions to be more effective from "a cost and time perspective".
For technology vendors, market opportunities targeting the mass affluent are not restricted to the private banking industry but also extended to retail banks, insurance providers, independent financial advisors, retail asset managers and retail brokerage houses, noted the report.
Emerging markets' influence
While current emerging market opportunities cannot compare with the matured economies, the long-term market outlook is bright for countries like India.
"In terms of global wealth management, emerging markets--principally China and India but also Brazil, Russia and the Middle East--remain central to the growth plans of many businesses," said Knapik.
Highlighting India's growing opportunity which is still at an "embryonic" stage, he said: "There were nearly 36,000 high net worth individuals in India at the end of 2005, representing only 0.003 percent of the total population. By comparison, the United Kingdom has roughly 1.6 percent of the population representing high net worth.
"However, growth in India, as in other emerging economies, is relatively high and is expected to remain at a high level at the end of the decade," Knapik added.
Indeed, economic development and progress in the world's second most populous nation has resulted in greater financial awareness.
"The economic growth of India has created a new segment, the newly rich, who are prime targets for wealth managers coming into the market. The typical wealthy Indian prior to the boom would have rarely passed on accumulated wealth after taking a lifetime to acquire it, now individuals between [the ages of] 20 and 40 are developing significant fortunes and actively engaging in financial planning including legacy planning," Knapik said.
Although both China and India could rival today's largest and strongest economies in terms of wealth management market opportunities, the Datamonitor analyst said, the latter holds brighter prospects.
Knapik explained: "India, along with Indonesia, has a good chance of becoming stronger than China due to China's one baby policy which is leading to a rapidly aging population that will require financial support and decrease the relative size of the workforce.
"There is a high probability that Chinese growth will slow once income levels approach those of the OECD (Organization for Economic Cooperation and Development), in line with the Japanese model."