The regulatory landscape coupled with evolving customer needs and behaviours poses significant challenges to private banks to remain profitable in Asia. The industry is following the trend in Europe towards consolidation and operational efficiency with the ambition to lower their operating costs.
Adopting an industrialized business model can help reduce operating costs and operational risks for private banks, as external service providers achieve economies of scale and pass on cost benefits. These providers minimize operational risks by investing in state-of-the-art market practices, making the model appealing to new entrants in the Asian market, who gain instant access to efficient business processes without upfront investment. Small and medium-sized banks can scale efficiently by "renting" transactions, paying only for what they use, allowing them to focus on Front office capabilities without worrying about Back office operations or IT platform maintenance. Third-generation operating models will feature global service hubs connected through a network of excellence, sourcing best-of-breed banking products and services, ensuring risk management integrity, compliance procedures, and maximized Front office effectiveness, supported by a state-of-the-art IT platform and efficient, error-free processes. This study provides a top-down analysis of the Singapore and Hong Kong banking markets, highlighting the vast industrialization potential in Asia.