fintech sandpit
fintech data workbenchAs the economic crisis continues to
unfold, the financial service industry faces serious challenges. The crisis is
rooted in continuous imbalances, including long periods of low interest rates,
rapidly rising asset prices, and massive credit and savings imbalances. The
2007 and 2008 Reports
from the World Economic Forum predicted these changes as
continuous risk to the market.
Earlier decades of exceptional growth and capitalism at its
best have now caused the market to adapt to tighter credit, growing government
intervention, slowing pace of globalization, and no economic growth. With
increasing regulations in the United States and decreasing availability of
credit, the industry faces a significant risk of stunted growth. The global
recession is also affecting the financial sector because of capital markets and
decreased aggregate demand, according to Max von Bismarck, Director and Head of
Investor Industries.
This article will provide leaders, employees and investors
in the financial service industry with five unique and timely trends to keep in
the forefront of their growth strategies for the next five years. These five
key trends will shape the post financial crisis in a holistic and systematic
manner.
GLOBAL BANKING. According to the World Bank, although many
banks such as American Express, Citibank and JPMorgan Chase conduct business in
multiple countries, they are relatively regional in the United States. In order
to grow, the financial industry will have to infiltrate emerging markets. For
companies that have a more aggressive growth strategy, the spread to emerging
markets such as Africa and Asia presents unparalleled opportunities for profit
and increased market share.
IT PLATFORM SHARING. Network World confirms that financial
service firms' business strategies must be altered for the new dynamics and
intricacies of today's market. Immediate access to information and integration
along product lines and geography are a must for future success. With the need
to supply information to a global market, firms must decrease cost. One cost
effective initiative is the use of platform sharing; like cell phone companies
that collaborate with local companies in order to decrease cost and increase
access, financial firms can do the same.
E-BANKING. A special report from The Economist sees that
with 3.5 billion people with cell phones and an expected 10-20% year over year
growth, personal and business banking transactions are conducted through cell
phones more and more. Thus, E-banking capability is quickly becoming an
increasing requirement in order to compete in the marketplace. E-banking
capabilities provide companies with essential flexibility and differentiation
in the market through Internet-based service applications.
MOBILE MONEY. The increase of mobile phone usage in emerging
markets makes mobile money a safe, low cost initiative for the financial
sector. It is an easier way to transfer money to family and friends, money is
sent, and payments and withdrawals can be made without ever going to a physical
bank or payment center. M-Pesa, an early developer of mobile money, concluded
that mobile money "has enormous social and economic benefits."
SELF-SERVICE. Self-service and the customer should be a
primary focus for firms in this new financial service world, according to IBM.
AppViewXS is a self-service portal firms can purchase, so customers can check
the status of their account and gain instant access to available services.
Customer questions and concerns are addressed more quickly, states an IBM
representative. This technology automates many processes; the result is that
staff workload is reduced while representatives operate faster and more
efficiently.
Financial service firms need to have sustainable, steady
expansion in the emerging markets in order to grow in the future. Deloitte and
Touche Research reports that financial service firms have not positioned
themselves to capitalize on more geographically dispersed opportunities. More
than 93 percent of the executives interviewed for this report acknowledged that
their firms "are not operating in a globally integrated fashion."
The same report states that financial firms need to invest
away from veteran or mature markets and toward emerging markets because
"by 2025, veteran markets will be rivaled by other markets with faster
growing economies and increasingly sophisticated financial product
appetites." USA based firms can look toward Japanese and African markets
for expansion opportunities. Kennedy Consulting analysts believe that the
market will rebound from the global financial crisis in 2011, but there will
not be any return to the robust levels prior to 2007 until much later in the
decade; hopefully, the five key trends in this report will help the leaders,
employees and investors in the financial service industry to look toward a
robust sound future.
In addition to growth strategies, in the 2002 Journal of
Business and Industrial Marketing, Henson and Wilson discuss the extreme
changes that have occurred in the financial service industry and how many firms
are trying to develop and execute successful strategies based on innovative
technology and customers. Aside from the regular ups and downs of the financial
world, technology and innovation will always prevail as the win-win for the
financial service industry. Because online banking has become the norm for most
customers, technology will be very important in these firms' strategies.
With the customer at the center of most trends in financial
service firms, creating new values for their current and potential clients
beyond current expectations will be a top priority. The need for convenience
mixed with technology makes mobile money a great initiative in the emerging as
well as the developed markets. Many firms have speed pay, the ability to pay
without swiping the card, as part of their credit card services. An embedded
chip in the credit card enables payments to be made by putting the card close
to the payment processor. Mobile money will be an expansion of payment and
money transfers without the need for a card, the need to go to a physical bank,
or to use Internet banking. Payments, transfers, deposits and withdrawals can
be made with a cell phone.
The World Bank concurs that innovative technology and an
increase in e-business strategies will lead to much lower costs and greater
competition in financial services. Internet and related technologies, the World
Bank affirms, are more than just new delivery channels; they are an
inexpensive, different, and very effective way to provide the same services.
Since financial service firms must grow organically, build customer loyalty,
and accommodate the customers' expanding needs for services and convenience,
partnerships with new technology businesses will allow them to lower their
expenses and be competitive.
Established firms such as Amex, Citibank, and others can
partner with groups such as the wired tech savvy Google Alumni who are not
averse to risk and who own fledgling technology businesses that are reshaping
the industry with a new wave of innovative products, write Spencer Ante and
Kimberly Weisul of Business Week. Mobile Money Ventures is one such fledgling
company that is a provider on the forefront of alternative financial service
products. Small companies such as these are able to provide well-known
financial firms the wherewithal to open in emerging markets where there is a
need for cooperation with other firms in order to attain then obtain the local
customer base.
Today's competition is fueled not just by profitable
customers, but also by the firms that are the most efficient and cost
effective. Procedural and cultural clash will result from expanding into unknown
markets as seen by the history of Citibank in Asia Minor. But in the long run,
tighter regulations, new technology and improved business processes will cause
expanding in emerging markets not only to change the demographics of the
clients (both geographically and core clients), but also to better the global
economy and the future of the financial services industry. Keeping the previous
trends at the forefront of managers' strategic plans, financial firms will
rebound bigger and better than ever.
Comments
Post a Comment