The market for personal financial services in Asia’s emerging economies is maturing: customers want more products and better service from their financial institutions. Can these demands be satisfied by local banks? To date, though most of them still offer a "one-size-fits-all" service, they have managed to hold their own against competition from foreign banks and companies specializing in credit cards and investments. Indeed, 95 percent of Asian customers still have their primary banking relationships with local providers.

But the days when a bank in an emerging Asian country could thrive by offering the same service to all customers are passing. Growing numbers of people are seeking financial services tailored to their specific needs—especially in the more profitable banking products—and few local banks have the skills to maintain a lead in such a marketplace. To fight on, these banks will have to follow the path taken by financial institutions in developed economies and manage individual customers, customer segments, products, and channels in ways specific to them.

A growing opportunity in Asia

Despite the Asian financial crisis and the global economic slowdown, the market for personal financial services in Asia is in good shape.¹ Holdings of financial products have increased:...