July 2013

The Importance of Wallet Share in Asian Banking
When we look at transaction banking metrics in Asia, there is a natural inclination to look at everything through the lens of market share. Who is gaining, who is falling, and where are the banks on that always important league table of rankings?

East & Partners has been conducting its twice yearly Asian Transaction Banking (ATB) report for more than a decade, and over time it emerges that another metric has gained in importance and that is wallet share.

Looking back pre-Global Financial Crisis it is clear that in the early part of the last decade, primary relationship market share was the dominant metric as competitor banks focussed on new customer acquisition.

At that time, primary providers could count on getting an average of 76 percent of the share of wallet their customers spent on transaction banking services. In the May 2005 report one bank received more than 88 percent wallet share.

Times have changed, and with them wallet share metrics. Asia’s Top 1000 Corporates, researched in East’s ATB program, have shown – over time – an increased willingness to engage with secondary banking providers and share their wallet with them.

In 2005, for example, secondary transaction banking providers took at average 11.4 percent of customers’ wallets. The best of breed figure was 18.5 percent, and the lowest was 5.3 percent.

Contrast that with East’s most recent ATB report, the research for which was conducted in May 2013. In this round of the program, primary provider wallet share is at 56.7 percent, with the best of breed result at 74.0 percent.

Among secondary providers, the best result is now 24.4 percent – more than double the average figure from 2005.
One bank – the same transaction banker which had 18.5 percent secondary wallet share in 2005 – is still the best of breed, but has lifted its wallet share to 34.5 percent. The lowest wallet share recorded by a secondary provider in May is 18.9 percent, higher than the best of breed result from 2005.

While there is no doubt that the size of the transaction banking pie has increased in size since 2005, primary providers are just not getting the same size piece of pie as they used to.

Customers are increasingly banking “way from home” in transaction banking and are clearly comfortable doing so. From their perspective, it makes good risk management sense and perhaps drives some price tension among their providers.

The trend also speaks to the competitive nature of banking in Asia. Foreign banks aspiring to penetrate the Asian business banking markets are typically following their national corporates up into the region with trade and debt products, and then moving to add some transaction banking products to the mix.

One bank doing this, with some success, is Australia’s ANZ. At one time an Australian ANZ institutional customer in Asia would typically have used ANZ for trade finance, but used the transactional solutions of another bank.

Now, ANZ has improved its transactional capabilities in the region, and is beginning to grab secondary transactional banking market share.

Banks which are doing this are benefitting from the ongoing momentum for secondary wallet share, a trend which East’s research suggests has some distance yet to run.

East & Partners Asian Transaction Banking Program

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