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Friday January 25, 2013
BY DALJIT DHESI firstname.lastname@example.org
PETALING JAYA: More banks are aggressively looking to tap the lucrative Gen Y market, in view of its growing size, to boost their loan portfolio and income base amidst shrinking margins.
The Gen Y population in the country is huge, going by statistics, and it is not surprising that many industry players are positive on this segment, aiming to increase their market share.
Malayan Banking Bhd (Maybank) deputy president and head of community financial services Lim Hong Tat said the market size for the Gen Y population was huge, accounting for about 40% of the total population. It was also growing at a rapid rate of 2.6% per annum.
“We are targeting the Gen Y segment in a big way. Using customer segmentation and life cycle analytics from our CRM database, we have sub-divided this segment into Gen Y (aged below 24 years) and Gen Y+ (between 24 and 29 years of age) to understand the customer behaviour better in terms of their demand for lifestyle banking products and motoring needs.
“The bank expects its loan portfolio and income to expand further by targeting this segment. This young group with earning power and aided by stronger income growth potential will have a higher propensity to borrow and invest and have greater confidence and stronger sentiments for the future, he told StarBiz in an email reply.
Currently, he said Gen Y customers accounted for a significant 25% of Maybank's hire-purchase customer base and was growing by high double-digit figures every year. Lim attributed this to the bank's effort in promoting its Graduate Car Financing Plan with national car distributors Perodua and Proton, as well as entry model vehicles of popular non-national makes like Toyota, Honda, Nissan, Suzuki and Mitsubishi, he noted.
He said the bank has also successfully cross-sold an average of four products to this segment from the mass segment, with core products comprising deposits, personal insurance, credit cards and Internet M2U/mobile banking, hence contributing positively to Maybank's revenue growth and profitability.
Ernst & Young Malaysia partner for Advisory Services Alex Lee said from interactions with banking clients, the Gen Y market, comprising customers aged between 18 and 30, was already a key targeted segment of the Malaysian banking market.
“A number of Malaysian banks have commenced their technological transformation and introduced a range of innovative and interactive mobile-enabled online interface, including social media. Gen Y's appetite for fresh offerings and their wide use of social media has seen banks continuing to focus on leveraging on the Internet and mobile communication channels.
“Some banks have even set-up dedicated Gen Y or youth branches with specialised and interactive services, and a few have also launched mobile banking via smart phone apps,” he said.
He expected banks to continue targeting the Gen Y market along with the other segments of the millennial generation that includes Gen X and Boomers.
OCBC Bank (M) Bhd head of consumer financial services Charles Sik, without divulging the amount of investment, said the bank was investing heavily in the Gen Y group and acknowledged that the segment was important to the bank for three key reasons. Firstly, it provided an opportunity to expand the reach of the OCBC brand as this group was becoming the biggest segment in the country.
Secondly, he believed that banking would evolve along the lines of the norms of the current Gen Y members, that is, banking would be shaped according to the way this group behaved towards borrowing, investments and savings. In order to grow, or even survive, Sik felt the bank should stay relevant to this group.
And finally, for OCBC, he said the bumiputra segment of Gen Y customers represented the biggest group of bankable consumers that it had yet to adequately tap.
Since Gen Y are more lifestyle-driven compared to their counterparts of previous generations, courtesy of their buy-now-pay-later behaviour, this clearly presented an increased market for lifestyle lending products to expand, he said. The same applied to wealth products and banking solutions, as this group tended to be savvier savers and investors.
A key challenge for banks, said Sik, was how best to approach marketing and product relevance when dealing with the Gen Y group, noting that a mindset change and innovation was key.
“Existing methodologies and processes absolutely must be reviewed and refreshed, as organisations tailor their products and solutions to the needs of the current generation.
“As we embrace external innovations in marketing and distribution, banks must equally re-engineer and transform internally in order to cater to these needs. The banks that can do this both in terms of systems as well as a mindset change would have the competitive edge,'' he added.
Meanwhile, Malaysian Rating Corp Bhd (MARC) chief economist Nor Zahidi Alias felt the top of the target list for banks in this segment would be credit card loans.
He said this was because this group tended to be more exuberant in their spending habits, adding that the proportion of the working age population has continued to increase in recent years with the new pool of young workers entering the labour market.
This can be seen from the proportion of the working age population, which climbed to 67% in 2010 from 62% in 2000, and loans for credit cards, which had increased by an average of 12% per annum in the past five years, he said.
Hire purchase was another segment that attracted the Gen Y as transport was a priority upon employment.
On that score, Zahidi added that it was not surprising to see hire purchase loans growing at a strong pace of 14% per year in the past five years.
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