Three-quarters of affluent Asians are highly satisfied with their current financial-services providers, according to the survey. However, a small but growing group of younger customers are demanding better services; if they don't get them from the companies that serve them now they will move big chunks of their business to other firms. Holding on to these customers will pay off because they will generate more fee income than most other customers, McKinsey says. But identifying them is tricky.

Using traditional methods such as tracking their bank balances won't-work; often, a customer's main financial-services provider won't realise how much business it is losing as the customer patronises other firms. For example, a bank won't often know which of its seemingly humdrum , checking-account customers has an insurance policy with a second financial-services provider, a loan with a third, and a credit card with a fourth. The survey, commissioned by the Hong Kong office of the New York-based global consulting firm, was conducted through face-to-face interviews with 5,733 middle income and high-income consumers in 10 Asian countries during May.

It showed that in most of these 10 countries, at least 10% of the more affluent customers had opened some kind of new account - either with their main financial-services provider or a competitor- in the past 12 months. Most important, the new-account openers are young, and could indicate future trends. They use an average of four financial products, compared with three for people who hadn't opened an account in the past year.

The downside: this group is demanding, and expensive. They make about 10 transactions a month, compared with six for people who hadn't opened new accounts. They use ATMs, bank tellers and telephone banking far more than people who hadn't opened a new account recently. But capturing more of their business, on balance, remains a profitable proposition for their financial services providers, McKinsey says. For many banks, this is a new approach. Currently, "they assume that whoever's accessing the ATMs and the call centre all the time, they're not the most attractive customers," says John Ott, a principal at McKinsey. But if you can get them to buy other products at the bank instead of going elsewhere, they become very attractive.

Banks "need to think very differently about their customer base," he says. For banks and other financial-services providers, the trick will be identifying which of those multiproduct customers are most important. Once they have decided who they are going after, the financial services providers must figure out how: which products to offer, and how to differentiate themselves from the competition. "A number of institutions are perhaps long overdue for an upgrade in terms of their customer-relationship management," says Alastair Macdonald, a banking analyst at BNP Paribas Peregrine Securities in Singapore. Most of them know it, and are thinking about ways to improve service and home in on certain customers, he says. Consumers will see the results in areas such as targeted marketing - instead of mailing a brochure about saving for university to every customer, the bank might target only customers who have children.

When chasing customers, financial institutions should also consider that what consumers say they want and how they actually make financial decisions can be quite different, McKinsey says. However, financial institutions don't always seem to realise this. "You do see a lot of people competing on price," says Mike Sherman, senior marketing specialist at McKinsey in Hong Kong, and that's the wrong approach, he believes. Another mis-step: trying to retain all customers. Better to pick a group that wants a product that the institution can excel at and offer profitably-say, customers who want credit cards and might pay more in fees if the tradeoff was more payment flexibility. Trying to think about the one-size-fits-all approach is a mistake," says Mr Sherman. One of the biggest opportunities for financial-services providers is investment products such as securities and mutual funds, which have a low penetration rate in Asia, says McKinsey.

Another potentially sizable area: loans. People in Asia are averse toborrowing money, but they are more likely to do so when they don't think of the loan as a loan. For example, borrowing money on a credit card is more acceptable. Countries in which a wide range of products is offered generally had drivers that persuaded or allowed people to move money out of savings accounts and into those products. In Asia, it's unclear what similar drivers might be. One possibility is the fall in the property market-in many countries it no longer seems the surefire investment it did during the l990s boom. Another could be the rise of government-mandated pension plans - people might be encouraged to move some of their money in those plans into investment vehicles they haven't tried before.

Concerns about how to fund retirement, even in the absence of government plans, should also encourage more people to experiment. To fuel this diversification- McKinsey believes that Asian financial institutions will have to do a much better job of educating consumers. One more area to cultivate: consumers' willingness to pay for financial advice. Another strong contender: non-Asian companies that enter the market, or that buy local.institutions, bringing with them more sophisticated products.

(The Asian Wall Street Journal)