Banking in Emerging Markets

Insights from four rapid-growth markets

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Our new study of 10 rapid-growth markets includes four countries that are experiencing particularly rapid growth in population and income levels: Indonesia, Malaysia, Vietnam and Turkey.

To better understand the opportunities and challenges in these four markets, Steven Lewis, a Director at EY and the Global Banking & Capital Markets Lead Analyst, spoke with bankers in each country. (Continue reading below the video player for a recap of each market.)

Indonesia: huge potential

By population, Indonesia is the fourth-largest country in the world. The country’s GDP growth is conservatively projected at 6%, and China-level growth rates (8-10%) are possible.

However, a significant portion of its citizenry is unbanked. Banks in Indonesia can cultivate new customer relationships by offering a broader range of products and services and by establishing close connections with customers when they open new accounts.

For businesses, banks have opportunities to support economic growth through micro-lending and Sharia-compliant products for Indonesia’s large Muslim population.

Malaysia: leading the pack

Unlike the other markets in our study, Malaysian banks are already well-developed in terms of infrastructure, regulation and mobile adoption. Banks are robust, but the growth is pressuring prices and creating a battle for talent, particularly in IT.

Fortunately, the high degree of mobile banking adoption is freeing up bank resources. Firms can now focus on providing more complex (and potentially more lucrative) products and services such as savings plans and investment products.

Vietnam: a long-term commitment

Vietnam also has a young population, but banks here will have to make a long-term commitment – potentially up to 10 years – to be rewarded.

The lack of corporate governance among businesses and larger corporations is another challenge, because it reduces bank confidence around lending.

Turkey: young customers are crucial

Every aspect of the Turkish banking economy looks positive, and Turkish banks are seeing high profitability and return on equity.

The Turkish government continues to invest significantly in infrastructure; income levels are rising; and more than half of Turkey’s population is under 30. This demographic loves to spend, behavior which also drives a strong demand for credit.

The Turkish banking industry is relatively advanced, although capital markets financing is still evolving. Market regulation is very favorable to new banks, giving large players the opportunity to build out branch networks.