"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," said Henrik Naujoks, Bain & Company's Asia Pacific Financial Services Leader, and co-author of the report "Are You Ready for the Financial Services Opportunities of China's Greater Bay Area?".
"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," he said.
China's Greater Bay Area (GBA) has a population of more than 70 million, a GDP growth of roughly 8% per year over the past decade, and a GDP of approximately $1.7 trillion making it an economy similar in size to Canada and South Korea.
Increased prospects for wealth management, insurance, lending
This combined with rising economic activity, an expanding affluent population and recent policy changes, has increased the prospects for financial services firms across wealth management, insurance, and lending as customers in China and Hong Kong have expressed considerable interest in cross-boundary products.
The report finds the greatest immediate opportunity is in wealth management, as today, less than 20% of GBA retail customers own cross-boundary wealth products, yet around 70% of mainland GBA retail customers expect to buy cross-boundary wealth management products in the next three years for those that do not currently own these products.
Life and property-and-casualty insurance also have potential as it is still nascent in mainland GBA cities with penetration at around 6% in 2019, compared to developed markets, where penetration is about twice that rate.
For lenders, increased mobility within the GBA will likely fuel demand for mortgages and lead to additional cross-boundary opportunities, as around 20% of Mainland retail customers and 10% of Hong Kong retail customers would consider getting a mortgage from an institution across the boundary in the next three years.
The report identifies three important mid-long term actions for financial services companies to implement so they don't fall behind in capturing this emerging opportunity:
- Differentiate with innovative products and services tailored to the specific needs of GBA customers
- Create cross-boundary digital and omnichannel experiences that work for a variety of customers
- Develop an operating model that fosters focus and collaboration for the region to efficiently capturing the new opportunities of the GBA
The research shows that getting omnichannel right and digital customer experience in particular, will be a key success factor for capturing these opportunities. This is because up to 90% of mainland respondents prefer to research and interact with insurance companies over digital platforms and some 60% consider digital the best channel for purchasing, monitoring and trading wealth management products.
Priscilla Dell'Orto, Bain & Company partner and a co-author of the report, said: "Companies looking to make an impact in the Greater Bay Area must remember to develop their products and experience with the customer top of mind.
"Connectivity is the name of the game here and firms should be looking at investing to perfect their omnichannel experience, marketing and digital solutions as customers expect an innovative, connected and seamless experience or else they will sign up with someone else."
At this point in time, cross-boundary wealth management connect and insurance service centers are among some of the key GBA initiatives under active discussion and may come soon.
Herbert Lee, Bain & Company associate partner and co-author of the report, said: "While the GBA continues to evolve, uncertainty remains about the pace and scope of future regulatory and policy changes.
"However, the momentum and customer demand are clear - as is the fact that this is an important moment for the region's financial services ecosystem."
Insights from the research were formed through a survey of 3,000 retail customers and small and medium-sized enterprises (SMEs) within the GBA and interviews with senior executives at Hang Seng Bank, Hong Kong Federation of Insurers and other companies and industry associations, in combination with Bain's years of experience in the region.
More on Greater Bay Area:
Hong Kong: Greater Bay Area initiatives announced in Policy Address welcomed by Insurance Authority and HKFI
China Banking and Insurance Regulatory Commission extends preferential treatment for the Hong Kong insurance industry
The progressive voice of Hong Kong's insurance industry
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