Business Overview - Global Financial Services

By M. Isi Eromosele

Consolidations....Convergence.....Globalization

Changes in the financial services sector are taking place globally. Despite the recent global economic downturn, no financial institution wants to be left behind. Firms must decide not only how to survive in a volatile domestic marketplace but how to survive in the new world of global financial volatility. Apart from the general economic downturn and the mismanagement that had occurred within the financial sectors, there are three other major trends that have had tremendous effects on the global financial services industry. They are:

• Consolidation - through mergers and acquisitions which is being driven by the need for critical mass, economies of scale and the desire for increased market share in lucrative emerging markets around the world
• Convergence - results from competitive pressures to offer a broader range of products and services, including non-traditional products. To protect and grow their business in both the commercial and retail sectors, financial firms are positioning themselves as providers of choice for clients’ multiple financial services needs.
• Globalization - will continue as the world economy recovers and established markets mature, emerging markets develop as the Internet and telecommunications technologies provide access to global markets

Financial services companies now have to create new revenue streams, enter new markets, gain market share and reduce operational costs. In addition, customer expectations are changing. They are better informed and more demanding. Companies should therefore transform their management strategy to become more customer centric than product focused.

Heightened competition, regulatory changes and market dislocations are common in today’s global financial environment. The higher cost of obtaining new customers is causing financial institutions to look for new ways to improve customer service and appeal to customers. Financial services providers must empower their clients - both internal and external - to make strategic decisions intuitively.

In implementing new business models, financial companies need to ensure efficient processes are put in place to decrease costs, meet long-term objectives, generate new revenues and result in increased customer acquisition. To formulate an effective and profitable convergence strategy, financial services institutions should undertake six key steps:

• Complete a self-diagnosis and choose target market segments - Financial institutions need to start with a thorough understanding of their existing customers, markets and capabilities as well as a strong sense of what role non-traditional investment products will play across the organization.
• Understand customer needs and dissatisfaction by segment - While mass market customers are generally satisfied with their investment providers, many feel they need advice and guidance. Financial institutions can capture a greater share of investment revenue through innovative bundling, starter investor accounts, special purpose products and by providing low-cost basic investment advice
• Develop innovative product and services - While financial institutions have traditionally designed products and services with strict product line definitions, consumers tend to view the market through a needs-based lens. Companies need to adapt to this.
• Improve products and distribution economics - Financial institutions need to examine their value chains to determine how they can leverage their own systems and distribution channels to improve the economics of different products, while adapting their sales and delivery models to regulatory and licensing requirements
• Determine an appropriate brand strategy - Many customers view their financial institutions as a trustworthy transaction partner, but not as a partner in managing and advancing their financial well being. Financial institutions need to implement financial planning sophistication to serve these customers, which requires significant investment in developing in-house capacity or co-branding with other institutions
• Select the strategy to deliver the value proposition - In determining its delivery approach, a financial institution can choose between two approaches. The first is to target the middle market with a range of service offerings, including investment products sold as core products. They will control much of the value chain, either through ownership or focused alliances. The second is to provide customers with convenient access to a broad array of products offered by third parties.

The overriding business objective in implementing the above is to establish and nurture client relationships using an integrated and guided approach to acquiring new customers. This would need to be done in a way that creates dramatic productivity and efficiency on the operations end, while delivering unsurpassed responsiveness and satisfaction to their clients.

M. Isi Eromosele is the President | Chief Executive Officer | Executive Creative Director of Oseme Group - Oseme Creative | Oseme Consulting | Oseme Finance

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