The opening day of the 49th edition of the Forum of Davos served yesterday as a showcase to reopen the two major debates that have in suspense the banking sector: competition with fintech and mergers as a way to gain size and be more competitive.
Who will survive in the digital era?
The recommendation is clear: only those that generate digital business outside the traditional banking sector will survive in the digital environment . In other words, he urges banks to create their own fintech to survive in an environment of permanent digital transformation.
The managing partner and global head of financial services at Oliver Wyman, Ted Moynihan, said during the presentation of the report that the processes “are still too manual” in an industry whose product is electronic. “Established companies must free themselves from the constraints of their inherited infrastructure and embark on a journey to the future unhindered,” he said in his presentation, collected by EP.
Some bank examples
And for this he cited some examples of banks that have opted to promote this type of structure. This is the case of RBS Group, which will soon launch Bó, a digital offer built with new technology in less than 12 months; the National Australia Bank (NAB), which has implemented QuickBiz, a fully digital solution for unsecured loans; the German insurer Ergo, which has created Nexible, a fintech of its auto insurance business, or Goldman Sachs, which Marcus recently launched in the US and Europe in order to enter retail banking.
The study emphasizes that this way of operating provides them with the same advantages as the new digital operators and that traditional entities also have resources and a customer base that digital native businesses lack.
Faced with those who denounce the high cost of adapting to the new digital reality, the consultant’s study considers that it is affordable and that it is a way to offer a value proposal to the customer to equal or exceed these competitors.
New banking insurance platforms
In this way they consider that the implementation of the new banking and insurance platforms can be built in a year at a cost of between 10 and 60 million dollars (between 9 and 53 million euros) using new technologies, a platform open and third-party services. Pablo Campos, managing partner of Oliver Wyman in Spain, stressed that entities that are capable of integrating “the new” with the advantages of “existing” will be those that survive and even “win” in the future.
Strategic plans of banking
In this context of transformation, the merger with other entities is another axis that is included in the strategic plans of banking, especially in the European Union. Good proof of this occurred in the intervention of the CEO and president of Bank of America, Brian Moynihan, in Davos, who sees it very likely that a large financial institution will emerge in the United States capable of competing with the largest in the sector and that will be fruitful. of a merger process.
“It would be,” he explained, “an unprecedented process in the United States, contrary to what has happened in Europe, where bank mergers have taken place, driven by the regulatory agencies.” Contrary to the opinion of many managers of the financial sector, Moynihan was in favor of having an adequate regulation, or else customers can lose their savings. “It’s the same thing that happens when you do not put speed controls on the roads,” he said.
Financial services and competition
In his opinion, the idea of having unregulated financial services to improve competition would only lead to greater losses. In the round table in which Moynihan participated, which addressed the competition in the financial sector, also intervened the president of the investment bank Blackstone, Stephen Schwarzmann, one of the few people with direct line with the US president, Donald Trump. The latter appealed to the need to establish digital education on a mandatory basis, which will improve the possibilities of companies but also reduce the inequalities that people have in terms of job opportunities.
In the field of mergers between banks, the one that was in the mouth of all the round tables of Davos is the possible integration between Deutsche Bank and Commerzbank, first and second German entities by size, which would create a European colossus. It would be the third largest entity in Europe, with assets of 2 billion euros, just behind HSBC and BNP Paribas. The German Executive, the largest shareholder of Commerzbank, will play a leading role in this merger, with 15% of the capital.
Also published on Medium.