6 August 2018

From high street to main street

Banking is a people business, so it may come as no surprise that I like talking to people. As I travel, drivers are a good source of conversation, and they invariably have a finger on the pulse of what's happening around them.

While I have access to a lot of economic and client data across the 67 markets where HSBC operates, quick conversations like these often provide me with a good (and often very accurate) read of what's going on in a certain region or market.

On my recent trip to Singapore as I made my way from Changi Airport to the city, I had the opportunity to get the inside take on Southeast Asia and Singapore’s wealth story.

View of Singapore’s business district

One of the things my driver told me was how the type of guests he picks up from the airport is changing.

In years gone by, the face in the rear-view mirror may have been a European business person meeting colleagues at their company’s regional head-office in Singapore; it’s now also Indonesians, Malaysians or Thais. Whereas it may have been Japanese parents looking at international schools in Singapore, couples from the UAE are now doing the same. And whereas it may have been Australians taking in the tourist sights, it’s now mainland Chinese.

Looking out the car window, the manifestations of this wealth sweeping into Singapore are very visible: cranes building high-end condos litter the skyline, every second or third car is a prestige make, and high-end retail shops such as Chanel, Hugo Boss, Jimmy Choo and other luxury brands are in all the malls.

Of course, these changes are in response to Singaporeans’ growth in personal wealth. For example, almost 50% of Singapore’s population have between US$100,000 and US$1million in wealth1, and the city state has one of the highest GDP per capita in the Asia-Pacific region.2

But the change in Singapore reflects not just its people’s growing prosperity but also what’s happening across Southeast Asia. At the heart of the wealth change is the simple proximity to opportunity. In other words, people are getting closer to jobs, education and healthcare, and financial services because they’re moving closer to cities.

With 49% of ASEAN’s 650 million people now living in cities3, we are right at the tipping point of urbanisation and, therefore, the region’s wealth.

The number of middle class households in ASEAN is forecast to top 120 million by 2025, roughly doubled compared to 20104. Meanwhile, disposable incomes are gradually rising - from US$3,000 in 2010 to an expected US$9,000 by 2030.5

The increased wealth will drive consumption which could reach US$2.3 trillion by 2020.6

It is happening already. ASEAN citizens are buying more prestige goods, they are travelling (Singapore, Bangkok, Jakarta, Kuala Lumpur and Manila airports are among the busiest in the world), they are studying overseas (82% of Singaporeans are interested in sending their children abroad for university7) and they are increasingly getting health insurance.

At the heart of the ASEAN demographic is a young, tech-savvy and increasingly agile workforce whose preference is towards doing all things through digital platforms. This is backed up by a recent Google report showing ASEAN’s digital economy is expected to grow to US$200 billion within the decade – up from roughly US$30 billion in 2015.8

So what does the rise in wealth across Southeast Asia mean for banking in Singapore? Actually, quite a lot.

As the city state becomes an increasingly influential offshore wealth hub, the rising middle class in ASEAN are seeking to tap international banking expertise and solutions. 

This is in line with their appetite to grow their wealth via more sophisticated investments both at home and abroad, to get protection via insurance, to secure access to more relevant and better-quality healthcare, and to support family members as they move overseas in search of better education and lifestyles.

And this phenomenon is not just limited to Southeast Asian citizens. Across Asia including China and India, a growing number of affluent people are seeking to invest some of their wealth in Singapore.

Singapore is one of the world’s most prominent financial centres. It is the largest FX centre in Asia and the third-largest globally. It is likely to become the number two offshore wealth centre by 2020, primarily driven by growing affluence in Asia9.

Singapore is also taking a leading role in fintech development, with support from the Monetary Authority of Singapore.

So if the opportunity is so large, what is HSBC doing about it?

As an Asia-focused bank that has been in this region for 153 years, HSBC is already alive to the opportunity and we intend to do even more to support our customers.

In June, our global CEO, John Flint, announced an even greater commitment to Asia in the areas of wealth, insurance and asset management, focusing on ASEAN, in particular Singapore.

Within the Singapore context, we intend to become a ‘scale market’ – which essentially means we want a greater stake in banking all Singaporeans.

It will start with retail banking propositions -- for example, catering to ‘borrow first’ Millennials at the beginning of their independent lives, and supporting them through their child-rearing and wealth-accumulation years, and ultimately offering a springboard to our private banking platform once they are ready for more complex wealth solutions.

The key to having a banking interaction with all Singaporeans will be through us placing digital tools in the hands of our customers. To achieve this, we have pledged to invest US$15-17 billion globally between now and 2020, in growth and technology.

Most of the investment will be for our own platforms. But where we don’t have the capability ourselves, we will utilize the innovation ecosystem that has been created within Singapore to partner with external FinTech firms to create the digital scale we need.

But our ambition doesn’t stop there.

As I mentioned earlier, retail banking is a people business, so our ambition is to blend three things: digital innovation, a customer-centric philosophy, and brilliant, helpful employees. If we get all three things right, we will earn the right to bank Singaporeans and those from the region who choose to bank in Singapore.

A contribution piece by Charlie Nunn, Chief Executive, Retail Banking and Wealth Management, first published in the Business Times Singapore on 12 July 2018.

  1. Credit Suisse Global Wealth Databook 2017 page 159
  2. https://data.worldbank.org/indicator/NY.GDP.PCAP.CD
  3. http://www.aseanstats.org/wp-content/uploads/2017/11/ASEAN-Statistical-Leaflet-2017_Final.pdf
  4. https://www.mckinsey.com/industries/public-sector/our-insights/understanding-asean-seven-things-you-need-to-know
  5. HSBC Global Research, The AEC, November 2015; see also http://www.asean.org/storage/2012/05/56.-December-2015-Fact-Sheet-on-ASEAN-Economic-Community-AEC-1.pdf
  6. According to Accenture: https://www.accenture.com/t20150523T033705__w__/us-en/_acnmedia/Accenture/Conversion-Assets/DotCom/Documents/Global/PDF/Dualpub_9/Accenture-ASEAN-Consumer-Research-CPG.pdf
  7. HSBC Value of Education 2017
  8. https://www.thinkwithgoogle.com/intl/en-apac/trends-and-insights/e-conomy-sea-unlocking-200b-digital-opportunity/
  9. http://image-src.bcg.com/Images/BCG-Transforming-the-Client-Experience-June-2017_2_tcm9-161685.pdf