A Study of Competitiveness of Commercial Banks in East Asia

Abstract

The 4th industrial revolution is changing modern society dramatically from the way people used to live and the mode businesses used to operate. With the trend of digitalization and globalization, the conventional economic activities and financial systems are also deeply reshaped. The banking industry, playing a dominant role in financial systems, is also transformed from “the business of saving money” to “the business of money” and currently “the business of customers”. Nowadays, the bank industry faces two major challenges. On the one hand, brought by digitalization, the rapidly growing business volume challenges the bank’s customer risk estimation. In addition, the strengthened regulatory requirements also raised expectation for higher efficiency and accuracy. On the other hand, brought by globalization, banks also faced the challenge of obtaining a superior position from the local, foreign, and Fintech competitors. Therefore, this thesis focuses on strengthening the competitiveness of commercial banks by decreasing the risk brought by customers and increasing the brand value of banks. Specifically, this thesis addresses the following three main contributions: First of all, an accurate and efficient customer risk-level classifier is developed with neural network at the account opening service, which provides a first-gated risk assessment for customers. Experimental results showed that the proposed method achieved 96.7% accuracy, which surpasses existing methods. Such an automatic and labor-saving risk-level classifier is a crucial step to efficiently mitigate banks’ potential risks and losses, which also benefits the brand of banks. Secondly, to generate more connections with new customers, a bank-oriented study is developed to systematically investigate the impact of bank brand value from macro, meso, and micro levels with multi-variables regression analysis. The importance of the three levels of factors is numerically estimated respectively. Micro-level is found to play the most influential role. Consequently, a further investigation between the micro-level variables and bank brand value is explored. The findings guide the bank managers to optimize resource allocation. By grasping the core of the brand value development, banks can attract more customers so that obtain a superior position in the market. Thirdly, a comparison study of the top banks in China and Korea is conducted. As the key representatives of emerging economies and developed economies respectively from East Asia, both China and Korea show increased importance and influence on the global stage. The findings of this study show commonalities and heterogeneities of factors that contribute to a bank’s brand value in both markets, suggesting that customized strategy should be applied to fit the different economic realities of bank’s-based country.