Asia’s competitive and challenging financial industry is undergoing unprecedented change, with shrinking margins and returns on equity driven by margin compression, increasing regulatory and compliance costs, and declining cost efficiencies. To survive and succeed, senior management must redefine their operating models.
In Singapore and Hong Kong, more than 50% of operating private banks are small foreign onshore private banks (AUM < US$15 billion). Fundamentally, these banks have three main options to avert costs, target economies of scale, and achieve growth:
- Specialize (Core Business Focus) and restructure/ standardize the Operating Model (includes innovative models of cost sharing through community building)
- Pursue Business Process Outsourcing (BPO) via industrialized third parties
- Extend footprint by acquiring additional assets and front office (as opposed to an exit strategy)
In this article, we will take a closer look at some of the opportunities and challenges a typical foreign onshore bank would face if they opted to pursue BPO. To lay out the fundamental problems and draw up solution options, an illustrative example, Asia Private Bank, is used to represent a typical small foreign onshore private bank operating in Asia.
