Transformation of Financial Services in Northeast Asian Banks: An Unexpected, but Pleasant, Cultural Surprise

By Jung Kee Hong and You-il Lee


Below Dr. Jung Kee Hong and Dr. You-il Lee explore the new emergence of financial market trends shown in Northeast Asia, such as the rapid growth in bancassurance in Korea and Taiwan. The authors offer an analysis on a common cultural value that Korean and Taiwanese banking customers appreciate, and the main drivers from this common cultural value that stimulate the customers’ cross-buying intentions in their banks.

Following the Asian financial crisis in 1997, the traditional walls between banking, insurance and securities markets were rapidly demolished in Northeast Asian countries. Banks and regulators were inevitably pushed to proclaim liberalisation and deregulation of financial services. The push was mostly coming from multinational financial institutions that were fiercely seeking the opportunity for a hostile acquisition of “unhealthy”, Asian banks. One of the reasons that these implacable multinational financial institutions flagged Northeast Asian banks as “unhealthy” was because these banks were heavily focused on interest-margin business, and not on fee-based business. Therefore, they requested Northeast Asian banks to be sufficiently engaged in fee-based business, such as cross-selling financial products or more specifically cross-selling insurance, which is otherwise commonly known as bancassurance.

The intention of these multinational predators was obvious. They needed to compensate their investment as early as possible, and the fee-based business, like cross-selling financial products, could generate a more immediate profit return to them in a short period of time than traditional interest-margin based business. Moreover, the whole Asian region was under financial default after the Asian financial crisis in late 1990s. The banks and the regulators needed to find a breakthrough strategy to keep their capital investors staked in their boardrooms and also in their local market.

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