MFS Topic 1 Introduction to Financial Services PDF

School of Economics, Finance and Banking Universiti Utara Malaysia Marketing Financial Services Topic 1 Introduction to Financial Services A241 BWBBK3053 MA...

School of Economics, Finance and Banking Universiti Utara Malaysia Marketing Financial Services Topic 1 Introduction to Financial Services A241 BWBBK3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 1 Instructor Information: Lecturer’s Name: Textbook: Ritu Srivastava (2023) Marketing of Consumer Financial Products A241 BWBB3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 2 Learning Outcomes DEFINE AND EXPLAIN THE IDENTIFY KEY UNDERSTAND THE SOCIO- UNDERSTAND THE ROLES OF DISCUSS THE CHALLENGES NATURE OF SERVICES AND CHARACTERISTICS OF ECONOMIC, REGULATORY, VARIOUS FINANCIAL AND STRATEGIES RELATED TO FINANCIAL SERVICES, FINANCIAL SERVICES AND AND TECHNOLOGICAL INSTITUTIONS IN MALAYSIA MARKETING INTANGIBLE PARTICULARLY IN THE HOW THEY IMPACT FACTORS SHAPING FINANCIAL AND THEIR MARKETING FINANCIAL SERVICES IN A MALAYSIAN CONTEXT MARKETING STRATEGIES SERVICES APPROACHES COMPETITIVE MARKET A241 BWBB3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 3  Services: an offering in which dominant part is intangible Delivery value – customer satisfaction INTRODUCTION Financial Services: any service or product of a financial nature that is traded in financial markets Market place for financial services: commercial banks, insurance company, investment banks RETAIL Deposit account, CONSUMER loans, card services, foreign Retail Consumers exchange AND services, share dealing services, advisory services BUSINESS CUSTOMERS Corporate Business finance, risk SERVED BY Customers management, cash management BANKS ACTIVITY List down financial services that offered by banks  The financial services sector has recently undergone changes unprecedented in its history THE FINANCIAL These changes have had an impact on both SERVICES the structure of the financial industry and the ENVIRONMENT nature of competition It is driven by the following factors Financial inclusion Increasing demand Stricter regulatory Sustainable finance through mobile Digital banking Rise of fintech for personalized frameworks focus banking and digital services wallets  ENVIRONMENT ANALYSIS: PESTLE Analysis THE FINANCIAL for Financial Service Marketing Politic / regulatory SERVICES Economic Social ENVIRONMENT Technological factors Legal Environmental  Political stability Level of corruption - especially levels of regulation in Financial sector POLITIC / Bureaucracy and interference by government REGULATORY Legal framework Trade regulations & tariffs related to Financial Taxation - tax rates and incentives  POLITIC / REGULATORY 1 2 3 4 Protect Encourage Reduce Attempt to investor, competition amount of address depositors / in the illegal activity externalities customers marketplace  Financial stability maintained by Bank Negara Malaysia Introduction of digital banking licenses to support innovation POLITIC / REGULATORY Focus on Islamic finance expansion Regulatory support for sustainable finance  Economic factors that determine the aggregate demand and aggregate ECONOMICS investment in an economy These economic indicators are usually measured and reported by central bank and other government agencies  Macro indicators - Economic growth rates, Interest rates, Exchange rates, Inflation rates, Unemployment rates, Economy cycle stage, Gross Domestic Product ECONOMICS Micro indicators – Competitors, Customers  Related to the cultural and demographic trends of society Social norms and pressures are key to determining consumer behavior Population Size SOCIAL Age Distribution Socio-economic distribution Geographic population distribution Trend in lifestyle Public opinion and attitudes towards financial services providers and Trend in banking usage  Population growth, urbanization, and tech- savvy younger consumers are driving the SOCIAL adoption of mobile and online banking Financial inclusion efforts target the unbanked/underbanked with mobile banking and digital wallets  Technology's impact on product offering Impact on cost structure in TECHNOLOGY financial services industry Impact on value chain structure in financial sector  Traditionally, financial institutions used paper-based systems for recording customer account details The introduction of computer technology provided institutions with the ability to automate many of the back- office tasks and essentially become more efficient TECHNOLOGY Computerization reduces costs and the degree of human error Offer more products and reach more customers Technology has also enabled financial institutions to widen their access to customers, providing greater convenience  Telephone banking Internet/On-line banking TECHNOLOGY Mobile banking Smart application  Increased access to financial services, technology has also contributed to increasing customer service - A range of methods to access their financial services provider and conduct transactions TECHNOLOGY Enabled marketing efforts to be used to greater effect and efficiency through database management: The institution can identify individual customers and describe what products they buy and how they use them  Copyright, patents / Intellectual property law Consumer protection and e-commerce LEGAL Employment law Data Protection LEGAL Consumer protection Data privacy regulations Cybersecurity laws to safeguard against financial fraud  Climate Change Pollution ENVIRONMENTAL Natural disasters Renewable material and energy sources Corporate Social Responsibility  Environmental, social, and governance adoption as a strategic framework Introduction of green bonds ENVIRONMENTAL and loans to support environmental projects Corporate Social Responsibility integrated into long-term banking strategies  Shift toward customer- Stratified CHANGES IN centric approaches accounts BANK’S STRATEGY: Replacement Increased competition RETAIL BANKING of paper- for loans and based deposits other accounting than banking systems institutions  CHANGES IN BANK’S STRATEGY: WHOLESALES BANKING Multinational Companies Competition intensified- New development in IT became stronger in their banks continued to strive change the bank’s demands by negotiating Increase competition from for competitive advantage approach to the their own interest rates non-bank institutions and in doing so cancel out consumer, wholesale and and cost of services from one another’s efforts corporate markets banks RECENT Digital Banking Rise of Fintech Islamic Finance DEVELOPMENTS Licenses and Innovation Expansion IN THE Adoption of Regulatory Sustainable Artificial Initiatives on Data Finance and Intelligence and Protection and Green Finance MALAYSIA Big Data Cybersecurity FINANCIAL Financial Cashless Society Central Bank Inclusion and E-Payment Digital Currency Initiatives Growth Exploration SERVICES Cross-border Payment ENVIRONMENT Innovations  Banks portray themselves as a “One Stop Financial Services Centre” NEW Banks no longer remain in their traditional APPROACH service market TO BANKS MARKETING Expanded service offerings STYLE Fierce competition, driven by customer demand for efficiency, speed, and technological convenience  The industry tended to go international STRATEGY New competitors entering the financial services market new approaches to servicing corporate RESPONSES TO clients A wide range of sophisticated products were THE introduced under “packaged sales” In response to competition, banks reacted and began to build up their own multi-national presence CHALLENGES OF through their own brand name Banks began to channel their marketing resources THE FINANCIAL towards diversification Wide range of services on offer SERVICES Margins on lending were eroded through competition, fee-based services were increasing ENVIRONMENT Competitions from non-bank financial institutions Information technology impacted on the operations of the banks and became one of the key drivers  International expansion and diversification of services by Malaysian banks STRATEGY RESPONSES TO Focus on fee-based services due to THE eroding lending margins CHALLENGES OF THE Increased reliance on IT and digital FINANCIAL solutions to enhance operational SERVICES efficiency ENVIRONMENT Strong push toward digital transformation, driven by fintech and customer demand for convenience