Japan’s slow-growth tech market is Asia’s biggest — but not for long. Japan is expected to spend US$248 billion and on tech goods and services in 2017, which is the largest among all Asia Pacific countries. Measured in yen, growth will be low: 1% in 2017 and 0.4% in 2018.
China’s tech market will continue to shift from hardware to software and services. Forrester projects that China’s tech market spending will grow at 7% in yuan renminbi in 2017 (3% in US dollars). Hardware markets will continue to mature; state-owned enterprises will continue to replace foreign products with local alternatives; and cloud adoption will reduce the need for capital expenditures.
India’s tech spending will maintain the highest growth rate in Asia Pacific. India’s total tech purchases will increase by 8% in 2017 and by 10% in 2018 in rupees (5% and 8%, respectively, in US dollars). A robust economy, combined with government-led initiatives like Digital India and Make in India, will spur increased investment in the software, services, and outsourcing segments.
As we move closer to the end of January 2017, one thing’s for sure: digital financial innovation shows no signs of abating in Asia Pacific, and a series of financial technology (fintech) startups continue to put Singapore and Hong Kong firmly on the innovation map. Just last week Next Money held its Fintech Finals 2017 (FF17) in Hong Kong, and the Monetary Authority of Singapore (MAS) also announced that it will hold the Singapore Fintech Festival 2017 in November, the second year in a row that the regulator will be hosting the event.
FinovateAsia 2016 in Hong Kong and the Global Fintech Hackcelerator in Singapore last year gave us a glimpse into how fintech in the region will develop in 2017:
Asia’s governments are playing a pivotal role in driving fintech investment. MAS has committed nearly $160 million through 2020 to the Financial Sector Technology & Innovation (FSTI) scheme to fund infrastructure and deliver fintech services aimed at establishing Singapore as a smart financial center, as part of the Singapore government’s Smart Nation initiative. The Hong Kong government has announced a $370 million Innovation and Technology Venture Fund aimed at encouraging private venture funds to increase their investments in technology startups through a matching process. Both MAS and InvestHK have established dedicated fintech teams.
Digital disruption has hit retail financial services in Asia Pacific (AP). In 2014, fintech investments in AP totaled US$880 million and skyrocketed to a staggering US$4.5 billion last year. Just as payments innovation has been a darling of venture capital investors in the US, the picture is not so different in AP as payments took the largest share of fintech investment deals at 40%. This is followed by lending at 25%. However, the next frontier of disruption doesn't lie in payments and lending. FF16, AP's first fintech competition, featured an array of fintech finalists offering a wide array of capabilities that signal what is to come in digital disruption in financial services.
We observe that the next frontier of digital disruption for the financial services sector will take place in investment, security and authentication as:
Data access, predictive analytics, and machine learning drive investment innovation. Exploding volumes of data are driving new, disruptive products and services in retail financial services. While predictive analytics isn't new, it has now entered the mass market, becoming more ubiquitous to retial investors. Smaller, nimbler players such as 8 Securities are now using algorithms to help customers derive insights from data, making predictive analytics more affordable and accessible. There are also B2B fintech companies such as BondIT and ShereIT that help financial advisors and brokers maximize their clients' portfolios.
From discussions with our clients in the financial services industry (FSI) in Asia Pacific, we’ve noticed that their digital agenda has changed dramatically over the past 18 months, shifting from a consideration of acquisitions and distribution channels to a broader business transformation imperative.
In fact, leaders at banks and insurance firms are increasingly realizing that:
Customer experience is fast becoming the only competitive differentiator.
Banks and insurance have to accelerate their ability to innovate and deliver new sources of value to customers faster.
A recent Forrester survey found that business leaders in the financial services industry (FSI) saw 34% of revenues in 2015 generated through digital products and services or products sold online. Their expectation is that this digital quotient will surge to more than half of their business by 2020, leading to a digital arms (and capabilities) race against a new breed of competitor. JP Morgan CEO Jamie Dimon accurately sums up the new competitive dynamic when he notes that “there are hundreds of startups with a lot of brains and money working on various alternatives to traditional banking.”
Our inaugural invitation-only summit in Singapore on Friday, April 15 will bring together an intimate group of senior executives from banks, insurance companies, and fintech firms to share Forrester’s latest FSI digital business research and facilitate a discussion with industry leaders. Our team of esteemed analysts will lead the discussion; here is a snapshot of the topics that will be presented on the morning of the summit:
Frederic Giron (Vice President and Research Director serving CIOs – Singapore): Accelerating Digital Business In Financial Services
Oliwia Berdak (Senior Analyst serving eBusiness and channel strategy professionals – London): How To Organize For Digital Financial Innovation
Randy Heffner (Vice President and Principal Analyst serving application development and delivery professionals – Dallas): APIs Take Center Stage In Financial Services
The answer: In the markets included in our latest Asia Pacific Online Retail Forecast— China, Japan, South Korea, India, and Australia — total online retail revenues will nearly double from $733 billion in 2015 to $1.4 trillion in 2020. For perspective, $1.4 trillion is about the same amount spent online in 2015 in every market that Forrester forecasts across the globe combined.
In our latest report, Asia Pacific Online Retail Forecast 2015 To 2020, (subscription required) we look at the growth in these markets over the next five years and some of the key trends shaping the development of online retail in each one, including the following:
China’s eCommerce market grows despite the economic slowdown. 2015 marked a global eCommerce turning point: China surpassed the US to become the largest eCommerce market in the world, but its economy also dipped below 7% for the first time since 2009. While the days of staggering year over year eCommerce growth in China are behind us, current growth rates are solid and more consistent with other mature markets in the region, like Japan and South Korea.
India is the fastest growing eCommerce market in the region, but is not without its obstacles. The smallest eCommerce market in our forecast, India’s online sales will grow by more than five-fold by 2020 as the number of online buyers and per capita online spending increase rapidly. However, in addition to underdeveloped logistics and challenging last-mile connectivity, India's cash-based culture still poses a challenge for eCommerce firms.
At a recent event in Sydney, Telstra, Australia’s incumbent network solutions provider, provided new insights into its strategic activities under its new CEO Andrew Penn. Overall, Telstra’s strategy remains in line with that communicated last year; we suggested then that for European CIOs and technology managers, Telstra represents an attractive network solutions provider for their organizations’ activities in Asia. But Telstra has evolved since then. Discussions with Telstra executives have provided us with new information and have led us to several new observations:
Telstra’s digital strategy is beginning to take shape but remains fragmented. Like many other telcos, Telstra has created a digital division to develop digital retail offerings for SMBs and consumers. In its current shape, this approach carries some risks, as Telstra’s Global Enterprise Services and Software divisions are also pursuing separate digital activities. As a result, duplicate and potentially contradictory digital offerings could emerge. Although Telstra claims that it is coordinating these activities, the current set-up underlines the fact that Telstra doesn’t yet have a digitized strategy; it is instead pursuing several digital strategies. This could cause confusion for customers, inefficiencies for Telstra, and flawed end-to-end customer journey mapping, thus undermining the value that Telstra can deliver to CIOs as a business enabler.
With recent drops in global stock markets and all eyes on China’s economy, the timing of the China CX Index report couldn’t be more serendipitous. While customer experience (CX) most likely doesn't have a direct impact on all this sudden share volatility, our research shows that there is a strong correlation between CX and revenue growth.
Forrester’s Business Technographics™ data shows that CX improvement is a growing priority for companies in China: 70% of tech and business decision-makers indicated that improving the experience of their customers was a high or critical priority for 2015 and 2016. However, CX Index scores reveal that these aspirations have yet to manifest themselves in actions and — more importantly — results.
Evolved from the inaugural assessment we completed last year, The China Customer Experience Index, 2015 now includes loyalty elements to the mix to gauge how well brands in China are at delivering quality customer experiences that create and sustain customer loyalty. This year, we examined 60 brands across five industries in China: banking, insurance, retail, eCommerce, and mobile device manufacturing.
At a high level, the results of 9,000 customer surveys in China revealed that:
No brands stand out as especially good or bad. The good news: No brands ended up in the very poor category. The bad news: none achieved excellent scores either. The vast majority of brands (80%) rated as just OK; 5% landed in the poor category, and 15% qualified as good.
To successfully grow in Asia Pacific (AP), you must excel at understanding customers’ needs, wants, and behaviors and have the capabilities necessary to transform this insight into improved customer engagement. But that’s true everywhere. What sets the AP region apart are the continued vast differences between markets. Appreciating these market differences, and the impact they have on customers’ expectations, is critical when sourcing enterprise marketing capabilities.
Retaining and delighting empowered customers requires continuous, technology-enabled innovation and improved customer insight (CI). The logic is simple in theory, but that doesn’t make it any easier to implement in practice.
In my recent report, entitled “Applying Customer Insight To Your Digital Strategy”, I highlight the top lessons learned from organizations in Asia Pacific (AP) that are successfully leveraging CI to fuel digital initiatives. It all starts by ensuring that data-driven decision-making is central to the digital strategy. With that in mind, I want to use this blog post to focus on two key lessons from the report:
Lesson One: Establish A Clear Mandate To Invest In Customer Analytics
Successful companies serve empowered customers in the way they want to be served, not the way the company wants to serve them. When building a mandate you should:
■ Expect natural tensions between various business stakeholders to arise. To secure buy-in from senior business decision-makers, start by illustrating the clear link between digital capabilities and data as a source of improved customer understanding. Identify measurable objectives and then link them to three to four scenarios that highlight where the biggest opportunities and risks exist. Continue to justify data-related investments by restating these scenarios at regular intervals.