As seen in the graphs above, the most important GDP growth is expected to come from developing countries (especially in Asia). This translates in an important increase for financial services as there is a direct link between GDP per Capita and Household Liabilities. On the other end, the economic and regulatory situation in Europe and the US is not as positive for financial services: the deleveraging of US households as well as stress of the economic crisis in both US and Europe will negatively affect the growth potential for banks.

Which further highlighted Citi’s choice to actively invest and test its innovation effort in Asia instead of Europe. As mentioned by Jonathan Larsen in this interview in the Wall Street Journal:

WSJ: Why did you decide to roll out this “smart banking” model in Asia first?
Mr. Larsen: The global crisis has been more of a factor in the U.S. and less of a factor in Asia. We’re also looking at the possibility of bringing it to Russia, Poland and New York. We don’t have a timeframe though.

How important is Asia Pacific for Citi? It was the largest contributor to net income last year and one of its fastest growing group (for the consumer group).

So what is Citi launching in Asia? No less than its smart banking branches, mobile banking, mobile payments (partnership with operators), mobile stickers.

Promotional video for Citi but gives a glimpse of various functionalities of the new branches: self services kiosk, interactive wallm, remote client servicing…

Also interesting is how important non branch channels are for Citi:

Nearly 98% of all our transactions in Asia are now via non-branch channels. What branches used to do can virtually all be done by electronic means now. We do though understand that many clients still want to bank in a branch.

But it does not prevent Citi from increasing the number of its smart banking branches. One data point I would like to know is how many people a typical smart branch serves vs a “normal” one.

Will Asia lead innovation in front of Europe and the US?
Shock factor headlines? Sure but there might be another difference at work. What is fueling a lot of innovation in Europe and the US is the environment of smaller companies that are willing to challenge incumbents on banking, payment, lending etc. Individually they may not have the power and size of big financial institutions but they are agile enough to innovate their way to become more of a threat/opportunity for existing institutions. If there is such an environment in Asia for financial services startups, I would be really interested to know more about it.