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By M. Isi Eromosele
The worldwide market for financial services is evolving rapidly
and by 2015 is likely to look very different than it does today. New asset
classes such as private equity and hedge funds are attracting a growing number
of investors, shifting the center of gravity in the world’s capital markets.
The payments business – which is a major source of revenue
and profit for many financial institutions – is being restructured, changing
the fundamental economics of banking. Meanwhile, in many countries, the
impending retirement of the baby boom generation is changing the focus of
financial services from long-term accumulation to managed consumption.
Emerging markets such as Brazil Russia India China Europe and North
America should grow modestly versus the rapid growth of Asia ,
Africa and South America .
Although in Europe consolidation is
accelerating as cross border transactions increase, only a few financial
services firms currently have the majority of their business outside of their
home market – a pattern that is likely to change as the imperative to find new
ways to grow increases.
These marketplace drivers are already having a huge impact
on the financial services industry, and are likely to be key drivers in
determining winners and losers by 2015 and beyond.
At the same time, financial institutions around the world
will need to forge the hallmarks of operational excellence in areas such as off-shoring,
taxation and financial reporting, service and process innovation, and in
internal control. These operational challenges are a major source of headaches for many firms; yet they also
present significant opportunities for improved efficiency, service and performance.
Financial institutions intent on being positioned for
success in 2015 must start preparing now. An Oseme Finance report identifies
the major market drivers and operational challenges financial institutions will
likely face over the next three years, and pin-points the strategies and
practices recommended to create the hallmarks of success.
Global markets and a business model to match
The financial services industry is likely to become
increasingly global as firms in mature markets seek new sources of growth in emerging
economies beyond their domestic home market.
Success will hinge on creating an exportable, low-cost
business model specifically designed to serve these new types of customers (low
income, high volume), rather than trying to force-fit the model currently used
to serve more affluent customers in existing western markets.
The need to scale up will be driven by three factors. First,
the need to have a significant balance sheet will be critical in supporting the
major corporate clients and in funding future activities.
Second, many financial products are likely to become
commoditized meaning margins will likely become thinner and economies of scale
more important. Third, the ability to have a multinational market portfolio
could only be sustained by major organizations.
Mass efficiency with focused premium service
Shrinking margins are likely to drive an overall trend
toward commoditization. Operational improvements will primarily focus on efficiency,
self-service and economies of scale.
Yet there may also be opportunities to reinvest some of
those back-office cost savings into premium services for high value market
segments – including ‘mass affluent’ segments that may be underserved today.
In the back office this is likely to drive further the move
to offshore non-customer facing activities. Beyond 2015, the emergence of
industry utilities should become dominant from investment banking to insurance.
M. Isi Eromosele is the President | Chief
Executive Officer | Executive Creative Director of Oseme Group - Oseme Creative | Oseme Consulting | Oseme Finance
Copyright Control © 2012 Oseme Group
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