Financial Institutions

The Atheneum Expert Platform™ encompasses renowned professionals specialized in the Financial Institutions Industry, ranging from C-Level financial officers and bankers to managers in all of the complementary functions that contribute to the performance of these institutions. With overly 13,000 career banking, credit union, pension fund, investment and insurance executives plus strategic alliances with distinguished organizations and advisory boards, Atheneum Partners’ dedicated team of professionals provides clients with unmatched access to the most current and comprehensive intelligence in the Financial Institutions Industry.

Atheneum experts have an impressive track record supporting investment and innovation opportunities in the areas of banking, diversified financial services, insurance and real estate, including private and public companies and institutions. Expert Sessions play a key role in helping clients to: understand the impact of financial regulation and volatility worldwide, develop and diversify product portfolios, acquire best practices in cost and resource allocation, identify main drivers and barriers to market penetration, evaluate regulatory changes, and devise optimal marketing techniques to reach specific market segments.


Automotive Finance Industry – Highlights and Top Trends from Dr. Olaf Neitzsch

Dr. Neitzsch, for the start and in a “nutshell”, could you please give us a short general overview on the Automotive Finance Industry?

Yes, sure! Automotive Finance is on the one hand a global industry but at the same time has to adapt to legislation and business environments in specific local markets.
Main players in that industry are the Financial Services Divisions / “AFC” (1) of Global Automotive Groups / “OEM” (2) as well as “independent” universal banks / finance companies which could serve numerous OEM / brands / dealers in specific markets.

In general, the large Global OEMs have a very integrative approach with their AFC, and that concerns ownership, strategy and tactical actions. Here we could mention especially Toyota Motor Corporation, VW Group, Renault – Nissan Group and Ford Motor Company as well as the two premium groups Daimler and BMW – all of them covering their numerous Automotive Brands. General Motors is somewhat specific: although one of the “Top 3” OEM in car sales and having had their own AFC named “GMAC” for a long time – in the last few years they have changed  ownership and strategy several times – so it remains to be seen how that plays out for them long-term. Also, Hyundai – Kia Group has only entered a few markets so far with its own AFC; in many others they work with external providers, so there is still some potential to be captured. Usually, all these AFC go into “larger” (3) markets and support their OEM there.

In “smaller” Automotive Markets, those AFC which focus on the brands of their own OEM could find it challenging to achieve the necessary scale for a Business Case. So, especially in smaller markets, local Universal Banks / Finance Companies often cover Automotive Finance and work directly with OEM and / or the car dealers.

It is important to note that “Automotive Finance” means not only Retail Finance but also includes Corporate / Dealer Finance as well as related services such as Leasing, Fleet Finance and Insurance “packaged” with Finance products.

In Developed Markets, what financial support is expected by both OEM and Dealers?

In Developed Markets both OEM and Dealers expect an “integrated” approach by the Automotive Finance supplier and that means:

  • Delivering both Retail and Corporate Finance products
  • Support not only during “good” times but also during “bad” times, such as market depression and financial difficulties in the Dealer Network
  • Cooperating very closely with OEM and Dealer Network regarding mid and long-term strategies but also a flexible and “sense of urgency” approach on short-term tactical actions

As the OEM is their Shareholder, the AFC has these three above mentioned priorities in their “DNA”. However, even in smaller Markets where OEMs cooperate with “independent” providers, OEMs expect no less – so either the Universal Bank delivers or the OEM considers changing the partner or  somewhat “adjusting” KPI due to the local market environment.

How is that in Emerging Markets?

In general, clients in Emerging Markets expect the same level of service, if not even higher, at least in the mid-term. So, especially in the larger Emerging Markets, the leading OEMs already have their AFC there and they deliver the same kind of services to the Dealer Network and to their Retail Customers.

However, when a new market is entered, usually not everything can be done at once with a “Big Bang”, but rather a staged step-by-step approach is deployed, setting priorities. That being said, if in Developed Markets it took 50 years to come to today’s levels, in New Markets it should be done not in 10 or 20 years but in 5 – provided the local market environment allows for a Developed Market level of efficiency (4).

Tata Motors of India acquired Jaguar Land Rover and Zhejiang Geely of China took over Volvo Cars. How do players from Emerging Markets drive changes in the Automotive Industry in general and how does this affect Automotive Banking?

That’s an interesting one! Let’s first recap: Jaguar and Land Rover, both beacons of the British Motor Industry for a long time now, at some point run into problems and were acquired by Ford Motor Company at a time when FMC was the most profitable company globally – not just in the car industry, but of all. However, later on Ford also had problems and that US Motor Giant had to sell … and sold to an Indian Company. It was a similar situation with Volvo Cars, that synonym of Swedish Steel and toughness, so it became part of FMC but in 2010 was sold to Geely.

So, coming back to your question: although Jaguar Land Rover and Volvo Cars are not large manufacturers but rather fit into special niches, the fact that a Giant and founder of the Global Automotive Industry – Ford – had to sell to Indian and Chinese companies shows that the world is changing! Both Tata and Geely are far from being Global players yet, but they could use JLR and Volvo as a test in Global Markets and, if successful, and if building up a sufficient “war chest”, they could repeat such acquisitions in the future with a larger OEM, establishing a real global footprint.

In Automotive Banking however, that has no impact as yet. On one hand, both Tata and Geely have no global AFC as they are not a global player themselves yet. On the other hand, both JLR and Volvo Cars have a very diverse structure to support their Finance needs, differing from market to market: in some large markets they established their own AFC, in some smaller markets their long time existing AFC was closed after ownership change, in some they are served by independent external banks and finance companies. But as I said above, if Tata and Geely really were to go Global, all that could change and they could also become a player in Automotive Finance.

According to a PwC Study, there is a backdrop of Macroeconomic uncertainty and major transitions are under way that will transform Auto Manufacturing over the next 10 years. With this transformation approaching, how will OEMs build Market Share and Profitability in the short-term and how should they position themselves for long-term success?

First let me say that I will focus on the Automotive Industry in general without going into technical details of Manufacturing.

Let’s first address Macroeconomic uncertainty. During my 25 years in the Industry, I have seen many ups and downs, booms and recessions, sometimes on a global scale and sometimes limited to specific regions. In general I think today we have no more or less uncertainty than 10 or 20 years ago. And if 10 years ago someone was too certain, then something unexpected hit and all the plans fell through like a house of cards – see the “Firestone” problem which hit Ford very hard in 2000 or the 2008 Global Finance Crisis hitting all OEMs brutally! Of course, OEMs cannot really influence the Global Economy, but they must prepare. How? Global Reach and Flexible Structures are key! Global Reach means that an OEM plays in all global key markets, not only with sales but also with (local) production, so they are better “buffered” if in one region recession hits, leading to a falling Car Market, because such an OEM can accelerate in other regions instead. The same applies if that recession region were to come back to growth, the OEM could increase production and sales there again. OEM with a strong global reach are, for example, Toyota Motor Corporation and VW Group; rather weak examples in this area are PSA Peugeot Citroen and FCA Fiat Chrysler, and level of global reach is one reason why these 4 OEM are either at the top of the automotive league or just average.  Flexible Structures come into play when there is a global downturn and it is necessary to adjust capacities for a certain time and to ramp up production afterwards once again. That flexibility is required in production (e.g. using external Assemble Capacities in peak times instead of opening a new plant or increasing / decreasing number of shifts) but it is also necessary in sales (e.g. having some flexibility to increase / decrease Car Stock in the Dealer Network (5) or directly at the OEM; or increasing / decreasing tactical Sales Support (6) depending on how Supply and Demand balance or not).

Major Transitions: besides the importance of new Production Systems and sharing Platforms, Powertrains, Engines and Modules between Brands and Car Models within the Group, I would just mention a few points (there could be a full article on each of them) which are crucial to being successful:

  • Products & Innovation
    • Needs strong CORE Brands (Client must desire it, not just buy because of pricing)
    • Needs to LEAD in future SUCCESS Technologies (e.g. Hybrid, Hybrid Plug-in, Electric Cars) AND still make a profit with these products mid-term
  • Local production & local content purchasing
  • Group’s Integration of Manufacturing, Sales and Financial Services

Having spoken about points for long-term success and being prepared for the future, these are heavy investments which do not pay off immediately. To fund them, the OEM needs some present Profit Generators and today, whether we consider that “progressive” or not, these are still gas guzzling pick-ups, SUV and large Limousines.

Let me give you two iconic examples: Toyota started to develop the Hybrid Technology very early on, at a time when nobody could be certain if that would become the next big thing – today they start reaping the rewards of that courageous decision! Ford has already had  an absolute profit machine in their portfolio for decades – and that is the gas thirsty “F-150” pick-up which does not really seem to be the “transitional thing” but has already saved Ford through several crises!

So to summarize my answer to your question: a successful OEM must master the fine balance between generating cash and profit today and investing into the future – not easy but that distinguishes the leaders from the average!

Many Automotive Industry studies discuss the changing face of Retail based on evolving consumer demand. Can you explain this change and how it plays out for all participants?

Yes, there are changes. It’s important to put them into context to the whole Industry, to their weight and to either their regional or global relevance, so let’s take a “balanced” view.

E-commerce: Of course, today automotive consumers have a complete and easy way to access information. They can compare brands, dealerships, car models, specs, pricing and special actions. So, before they even hit the Dealer Showroom, they are very well informed and can negotiate as empowered partners. As that is the case for all OEMs and brands, it does not really shift the balance between them, unless somebody had in the past tried to “play with closed cards” – he would now lose to the players who value long-term customer satisfaction over short-term gains. Now looking at Direct Sales via the web: cars are not books or shoes, so Automotive Sales work somewhat differently, and  the after-sales process is even more important,  for example regular inspections, warranty repairs and servicing. During the last decade some OEM already looked deeply into the possibility of Web-based Direct Retail Sales, but did not go ahead with it for a number of logistical, organizational and “political” reasons (it’s not possible to go into all details here). Tesla Motors is an exception, but they are a small niche player and they are new, without Dealer Network “asset & liability”. So, I cannot predict what will be in 2045, but for the next decade I do not foresee dramatic shifts away from retailing via the Dealer Network.

Ownership: Especially in Western European urban areas, we have recently seen that “desire” and “convenience” of owning a car is somewhat fading. For example, in London, Paris and Berlin one has to deal with traffic jams and shortage of parking facilities, so it’s faster and more convenient to go by public transportation, to take a Taxi or, when you really need a car, to take a “rent-as-you-go” vehicle. And during their holidays, they fly to the south anyway. So, if not everyone who could afford a car wants to own one,  that means, of course, less Retail Sales. On the other hand it means more Fleet Sales, but taking into account that these “rent-as-you-go” vehicles are often rather small and E-powered vehicles. So, overall, less Retail but a bit more Fleet still means less Total Sales. However, at the moment that is a development seen mainly in Western Europe, not in China, USA or other Regions. As “old” Europe does not rule the automotive world anymore, (as we will see in the next paragraph), I would call the global impact “limited” so far.

New Technologies: Of course consumer demand will go even more into Hybrid, Hybrid Plug-in, Electric Cars and other new evolving Technologies, but so far I don’t see how that would really change the way Cars are sold and serviced in Retail and Fleet, at least not over the next decade.

Impact on Automotive Finance: As Finance is closely related to Car Sales, even “bundled”, the trends described above also have an impact on the AFC. So, the Client considering Finance will also collect information on that before entering the Dealer Showroom. If in Western Europe less people intend to own a car, this would mean less Retail Finance but on the other hand increased Fleet Finance for all these “as-you-go” Fleets. As for New Technology Cars, they are also bought with credit or leasing, so it does not change the total picture … even more … sometimes OEM and AFC jointly launch special programs to attract consumers to these vehicles which often are more expensive than the same models with conventional engines.

By 2030, what three Countries do you predict will be on Top of the Global Automotive arena and why?

First let me say that we should look at Sales, at Production and also at the Global Players regardless of their country of origin. When predicting what will be in 15 years from now, we should take into account strengths and weaknesses (present) as well as opportunities and threats (future development).

Sales (7): It is not difficult to foresee that China will be No. 1 and the USA No. 2 – China is already “THE Giant” and is still growing; the US is “a Giant” but already saturated (just the usual ups and downs depending on how the US economy is going). As No. 3 in 2030 I would not pick a country but a group of countries having some market similarities. Today that would be the EU, but as they are saturated as well, I think the “B-R-I” (Brazil-Russia-India) have the long-term potential, even if facing some specific challenges presently.

Production (8): Of course China as No.1; their production is almost in parallel with their sales. As the US is losing capacities to Mexico, I would see them at No. 3 and “B-R-I” would go up to the No. 2 spot, also overtaking Japan and Germany.

Balance of Sales and Production – Importers and Exporters: China is almost the only country with a real balance and should stay so. “B-R-I” as a group is almost balanced today, and by 2030 could even be exporting. The US is an Importer today and will be even more so by 2030. In general, the OEMs increasingly shift production from their countries to Emerging Markets, often within a region, so by 2030 we will see that: Mexico supplies the US; Thailand, Vietnam and Indonesia also produce for Japan; and Czech Republic, Slovakia, Romania and Turkey supply the German, UK and French markets!

Players (9): As with China, here we have two “easy” predictions at the top: VW Group and Toyota Motor Corporation will make No. 1 and No. 2 between them, just trading places several times during the next 15 years. They are the two giants today, each of them having some weaker and some stronger spots, but clearly the leaders in the industry. At No. 3 there could be a “Dark Horse” emerging, for example a Chinese Player teaming up with an “old” OEM. If not, than we have four potential candidates: GM, Renault – Nissan Group, Hyundai – Kia Group as well as Ford. I would bet on Hyundai – Kia, as during the last decade they got up a great momentum: in Developed Countries they increased reputation and market share steadily and in Emerging Markets they grew aggressively. So, I think Hyundai – Kia could make it to No. 3 … and last but not least … recently Pope Francis started to drive around in a new Hyundai “Papamobile” – what else could be  better support!?!


  1. AFC: “Captive” Automotive Finance Company owned by Global Automotive Groups
  2. OEM: “Original Equipment Manufacturer”, in this case Global Automotive Groups which produce, export-import and distribute Cars and Light Commercial Vehicles
  3. Each AFC / OEM has to define what is sufficient “large” for them, for example 500 Thousands New Car Sales / year in the Market could be the point to go in for some, whilst others would look for 1 Million at least
  4. For example, do Credit Bureaus exist and hold sufficient data to allow for a fast Underwriting Process? Also, can Client and Bank close their Contract remotely via the Dealer based Point of Sales or does the local Bank Legislation still require the Client’s Identity to be checked by a Bank employee (“KYC” / “Face-control”)?
  5. Importance of AFC provided Dealer Finance!
  6. Importance of Special Interest Rate programs jointly offered by OEM and AFC / Finance Provider!
  7. Sales 2014 (Mills.): China 23.6, USA 16.5, JAP 5.5, BRA 3.3, GER 3.2, IND 3.0, UK 2.8, RUS 2.5, FRA 2.2, CAN 1.9, S-KOR 1.7, ITA 1.5
  8. Production 2014 (Mills.): China 23.7, USA 11.7, JAP 9.8, GER 5.9, S-KOR 4.5, IND 3.8, MEX 3.4, BRA 3.1, ESP 2.4, CAN 2.4, THAI 1.9, RUS 1.9
  9. OEM Sales 2014 (Mills.): VW 9.9, TOY 9.8, GM 8.0, R-N 8.0, H-K 7.6, Ford 5.9, FCA 4.6, HON 4.4

What innovation strategies will unlock the growth in the financial sector in 2015?

Growth drivers of financial services, Today and Tomorrow

It will be very difficult to not mention ‘Fintech’ when discussing financial innovation of today. The buzz word has captured the attention of the media and, in turn, the media has started a cycle of monetization (conferences, special reports etc). No doubt, financial technology will be a key growth driver for the industry as a whole and over a longer period of time. Financial services companies that have brushed it aside will likely suffer customer attrition, while those that have embraced it will attract more and more ‘mobile’ customers. Some thinkers speculate that new comers coming from outside the financial industry could oust big and slow incumbents, but that is a little too stretched. Finance is, at the very core, a ‘conservative’ industry. But even though ‘Fintech’ is here to stay, it won’t be the main driver of growth for the year at hand, 2015.

Having touched upon the hype of today, which innovation strategies will unlock the growth in the financial sector in 2015? The short answer is the innovation that has been happening at the core of innovative financial services firms, which is to acquire the execution capability to provide cross-border investment solutions and advice in the institutional space, while also providing the ability to replicate something similar for retail investors. These early movers will immediately reap the benefits and growth will come in the traditional forms of increased AUM and fatter fees, not tomorrow, but today.

Asia’s Institutional Appetite for Global Assets

There is much money in Asia that is looking for solutions to invest in global asset classes. China’s sovereign wealth fund CIC (China Investment Corporation) which holds assets of 652.7B USD (end of 2013) of which about 220B is invested in overseas assets, manages about 67% of this through external management. Those Chinese and global advisors who have invested in their network and relationship with CIC and Chinese decision makers will reap great rewards. CIC holdings grew a whopping 13% (77B USD in absolute terms) in 2013.

Japan’s Government Pension Investment Fund (GPIF), the largest of its kind in the world, manages some 137B JPY (1.14T USD, end of 3Q 2014). Its overseas allocation is 13.14% in global bonds and 19.64% in global equities. Recently, its decision to more than double its target allocation of foreign stocks to 25 percent, which came together with BOJ’s shocking decision to ramp up stimulus, was greeted with a world-wide equities rally. Again, those firms who had strategized before-hand and have come up with innovative solutions will stand to benefit.

NPS, the Korean national pension grew 10% in 2014 to 426B USD. Of the 42.9B USD increase, 20B was in global asset classes.

Recently, the Ministry of Employment and Labor of Korea, selected one lead manager to manage its 14B USD holdings. In the past, it used to directly apportion the holdings to about 10 different managers. In the new scheme, a single manager will be making the decision as to which asset manager will get how much, while the firm earns a fee on the total AUM for providing advice and risk management services. This ‘beauty-contest’ to decide which firm will lead was decided based on many criteria, of which allocation and execution skills were key.

Reduced home bias, a common trend for all Markets

In their Global Pension Assets Study 2015, Towers Watson calculated a 6.1% rise in the assets of the top 16 markets reaching a 2014 year-end total of 36T USD. During the last 10 years, the most rapidly growing pension markets have been Mexico (16.1%), Australia (11.7%), Hong Kong (10.0%), Brazil (9.7%) and Canada (7.3), when measured in US dollar terms. Since 1995 bonds, equities and cash allocations have been reduced to a varying degree while allocations to other alternative assets have increased from 5% to 25%. There is a clear sign of reduced home bias in equities, as the weight of domestic equities in pension assets portfolios has fell, on average, from 64.7% in 1998 to 42.9% in 2014.

Innovation of Core Competencies: How to execute is a strategic choice

As the most visible ‘smart money’ in each of the regions, SWFs and pensions have great impact on how wealth managers advise and HNWIs invest. Financial services firms all over the world, both local and global, both emerging and developed, will be competing for the patronage of not just institutional clients but also HNWIs.

Winners will have already answered critical strategic questions: Will it provide execution for all or part of the vast space that is global asset classes? Will it forge alliances or go it alone to create a platform for that chosen space? How much customization and dedicated personnel will it provide to the major SWF and pensions? How much, if at all, can this capability be replicated or mirrored for the retail clients?

Local firms have the clients, global firms have the execution capability. Fintech firms are providing easier and cheaper ways to reach both clients and execution platforms. The innovation challenge is huge: people, IT and networks. It is almost to the scale of reinventing the whole business process and value chain.

In the Now

This megatrend is not in the near future, it is in the here and now: 2015. Firms that innovated their old locally oriented models are experiencing growth. Those that think this is still a future event are quickly losing ground.

“How should Corporate Treasurers handle currency volatility in the markets with hedging?” Interview with Mr. Ashish Advani

According to David Woo of Bank of America Merrill Lynch, an unspoken currency war has broken out, which would make it more expensive for companies to take out insurance against currency flows. How should corporate treasurers handle this currency volatility in the markets with hedging?

The world has been experiencing some form or another of currency wars for the past couple of years. This has led to a significant amount of volatility in individual currency pairs. Each international company has been affected by this and has had to respond in various ways.

Dependent on the currency hedging policies, companies rarely hedge their translation risk. Translation risks are too large and expensive to hedge and can have a very material effect on cash flow of the company. But many companies will hedge transactional risk, also known as Balance Sheet hedging.

In today’s volatile world where we have such currency wars, there is a definite pattern to the direction of the currencies. The emerging market currencies tend to bunch together while the commodity currencies will act in a particular fashion. It is a little bit easier to manage groups of correlated currencies then hedge each risk by itself.

In this environment, it would be wise for companies to utilize techniques such as Value at Risk (VaR) or Cash Flow at Risk (CFaR) which enables companies use statistical functions of correlation and determine an optimum level of risk between the various currencies. Once a company determines such a statistical level of risk, it can use portfolio risk hedges to manage its currency risks. There are a number of SaaS software solutions that one can use to manage currency risks in such fashion.

Will hedging currency with Exchange-Traded Funds (ETFs) dampen volatility?

There is little to no evidence that currency volatility managed by Over The Counter (OTC) derivatives increases or reduces volatility compared to utilizing Exchange Traded Funds (ETF) as a means of instrument used to hedge risk. One of the critical components of hedging is receiving Hedge Accounting treatment so that the volatility of the hedge portfolio does not run through the P&L each period. By utilizing OTC derivatives, the risk metrics are closely aligned to the hedge instrument thereby achieving a close to perfect matching of terms and thus obtaining Hedge Accounting with very little ineffectiveness.

When we use ETF’s we lose a fair bit of the close matching of the terms of the risk (duration, notional volume, etc.) and thus one can experience a fair bit of effectiveness leakage into the P&L when applying hedge accounting. It is therefore advisable to utilize OTC hedge instruments compared to ETF’s for corporate hedge accounting programs.

What are the steps corporate treasurers can take in regards to foreign exchange risk?

I believe that currency volatility is going to remain with us over the next few years. As the world goes though some unprecedented geo-political, as well as economic turmoil, we may see increase in such currency volatilities. I believe we are in the early phases of a sea change in the world with the US Dollar facing an imminent threat to losing its reserve status in the world. Last time this happened in history was when the British pound lost its reserve status around the 1910-1915 era and the world experienced a World War as one of the outcomes of that turmoil. While I am certainly not predicting similar outcome, it will not be a smooth and orderly transition if the US Dollar loses its reserve status.

This is not a time for Treasurers to be indecisive or nervous about hedging the currency risks that the company faces. It is time to seek and obtain the necessary skills required to manage its risks as well as stay continually abreast of the changes that we are experiencing.

The changes are not limited to the market movements and directions but also refers to the new innovations and techniques of hedging along with the multitudes of changes in accounting guidance that are being unleashed upon corporations. Finally, the new laws and regulations that mandate the tax laws that affect cross border transactions also have to be studied in lock step to ensure that the company is in full compliance with its objectives and is not caught unaware.

It would behoove a Treasurer to obtain professional advice in determining the currency risks, evaluating the various techniques of hedging, choosing the right instruments, understanding and obtaining compliance to accounting regulations and guidelines and then executing a series of hedge transactions. Once that is done, it is also important to continually monitor the risks, observe shifts in markets and then adjust the hedge strategy accordingly.

According to Jared Cummans of ETFdb, “one of biggest hindrances for the currency-hedged world is education; investors simply are not comfortable with the idea of hedging their fund because it sounds intimidating on the surface.” What would you say to these investors hesitant to a currency-hedging strategy? 

Granted that hedging can be an intimidating concept to an average investor or company not large enough for having its own dedicated treasury department of currency and hedging expert. It can become an enhancer of risk rather than a mitigation of risk if applied inappropriately. In some rare cases it can lead to a higher risk of bankruptcy if one is not careful.

Yet that should not be the reason an investor or company decides not to hedge its currency risk. One has to realize that a decision not to hedge is a decision to allow risk to control some part of the results of your business. Like most other risks in business, if you do not manage it, it can have unintended consequences for you. A decision not to hedge or a decision to postpone the decision of hedging due to lack of knowledge is not a prudent decision.

Fortunately today in the market, there are quite a few currency services that can be employed to help assess the situation, determine the risk, optimize the hedging strategy, execute the hedges and manage the accounting behind those hedges. There are a number of turnkey outsourced solutions available for the inexperienced or fearful investors / companies that can help in gaining such expertise in a quick fashion and help getting control of the currency risks that can significantly affect the outcome of your business or investment portfolio.

What are the top trends in the global banking and which segments will be the growth drivers?

There are many challenges that banks in general have to face in the year 2015 and in general in the near future. Let me highlight one, which is the nature of their existence as we have come to know so far.

The impact of technology and the emerging non-banking banks, selling an assortment of products and services, are constantly questioning the concept of the universal bank. A bank will be the company that helps us manage our personal finances, safeguard our savings, facilitate our transactional use of cash, and generally offers individuals and businesses quality services at optimized costs.

Today banks are under tremendous pressure to maintain and improve their strategies for growth and value creation. It is clear that the changes affecting the banking industry are dramatic: regulation, specialization, the pressure to gain size and efficiency, and improvements for scale, are all leading to major players needing rethink their strategies to maintain and improve their ability to generate resources efficiently. Traditional ways that banks have grown so far are in doubt.

 From my point of view there will be 4 major trends in the new banking industry:

  • Impact of technology
  • Regulatory aspects
  • Training and skills of managers
  • Business intelligence applied to customer satisfaction

Innovation in banking will no longer be a differentiator, but an element of survival. In this regard it will require the vital capacity of each bank to establish and develop tools for information management. This allows executives to use this information strategically in order to meet customer expectations. It will no longer be sufficient to have a good product or service, moving forward it will need to be backed by knowing in advance exactly who to target and how it should be offered.

There are signs that the banking industry is polarizing. The guarantee of survival will basically be to become a global player, who can efficiently exploit synergies with industrialized management and enlarge capacities for geographical diversification. And secondly, niche players able to offer tailor-made solutions.

The demands for greater transparency and more demanding regulatory requirements and commitment to society will force global institutions to be more efficient; because if they do not business will become increasingly expensive. Only a business a large enough critical mass to absorb these costs may capitalize banks operationally in the medium term.

In general, banks will have to make great efforts to understand and differentiate the needs of its customers by the segment in which it is intending to grow. Creating internal management instruments for key information and a business intelligence tool that allows them to anticipate their needs will certainly add valuable elements.

Within the retail banking business it has been shown that small and medium enterprises are the most profitable, however this can only be achieved by placing focus on a basis of expertise. After acquiring a new customer its profitability becomes higher than any other segment.

Meanwhile personal and private banking is facing a period of high competitiveness where it is very difficult to differentiate between other market players. Only through faith in their professional service and the ability to generate differentiated products may they achieve sustainable growth rates.

Personal banking banks will struggle to attract “premium” customers. These are families and generally high-income professionals, who seek quick fixes and are highly digitalised. They are accustomed to a high quality service and are consumers of at least 5 products or services offered by the bank among which are; the current account, means of payment (debit and credit), financial products for household savings, insurance protection or planning for the future, and all with easy access via smart phone or tablet.

In regards to the customer opinion, confidence in your personal banker will remain key, but have a prestigious institution away from scandals and a conservative profile will be seen as an added value.

Finally in investment banking, global businesses will be more regulated and transparent. The ability to offer value-added services and advisory for large corporations and institutions will only be available to global banks.

How will digital banking shape the financial sector over the next 1-3 years?

According to Google, 90% of all media interactions are screen-based and we spend as much as 4,4 hours of our leisure time in front of screens every day. Managing our finances are among the top 5 activities that people do on their devices.[1]

Are banks up to the task for this new digital world? How high among our priorities is the digitalization of our industry? Are we following? Or are we leading?

There are 7 powerful forces that are posed to reshape the financial sector over the next 1-3 years:

Incumbent vs Regulatory Innovation

There are currently too many differences among financial markets across the world. In countries like the USA, there are great innovations in mobile payments and social network integration of financial services. Most of these innovations come from individual companies first and then are replicated by their competitors.

In other countries, such as Chile, the innovation comes from the industry as a whole in response to regulatory requirements. This kind of environment has made it possible for instant online fund transfers, funds from check deposits are available the following morning, there’s a national ATM network available to every customer at no cost, etc.

Individual innovation is the engine of forward thinking and of new product development, but regulatory and industrial agreements gives them the power to push these innovations forward.

Mobile only/mobile first

As new generations enter the market, new expectations arise. Millennials expect their financial transactions to be as seamless as checking their status on Facebook, sending a picture on Snapchat or access their files on Dropbox.

The current design of mobile banking is a raw adaptation of the web services that banks have been offering for the past 20 years and that has become obsolete as new technologies emerge.

The ones that will succeed with millennials are those that think of the mobile experience from the ground up, not as a redesign, but a totally original way of thinking. Integration with mobile-only functions as biometric sensors, geotagging, face recognition, etc. will be the base for a new banking experience.

 Account executive role

The account executive has become more of a financial advisor and less of a bureaucrat. Digital transactions allow the customer to be self-sufficient when it comes to day-to-day operations. The account executive must be able to guide their clients in complex financial decisions, offering advice and expertise and leaving the operational load to the back office or the customer himself.

Digital branch

Much has been said about branch obsolescence, but banking digitalization will not make physical locations disappear; it will transform them into digital hubs, where clients can learn to use remote banking, have access to wifi or devices when theirs are unavailable or interact with state of the art ATMs for cash operations, ticketing, card issuing, etc.

Human tellers will probably become obsolete, but that will leave more room for the account executive to fulfill the role previously described and for the client to feel more at home.

New entrants

As mega corporations such as Google, Facebook and Twitter develop new payment platforms, the question every bank should be asking is: Is it easier for a bank to reach as many users as Google or for Google to develop as many financial products as a bank? The answer should be making banks work 24/7 to widen the gap of expertise through innovation and more customized financial products.


As part of the “new entrants” threat, it will become essential for banks to match their brick and mortar presence with their bits and bytes involvement. Ubiquity of a brand is no longer given by a bank’s branch network but also by its presence in social networks, not only through fan pages, but with the development of tools that let you share your goals, achievements and ask or give financial advice. Banks must be where their clients spend most of their time and nowadays that means Facebook, Whatsapp, Twitter, Snapchat, etc.


Finally, advances in digital signature such as fingerprint scanning, iris reading, voice and face recognition and others are changing the document signing landscape, getting rid of the face to face requirement that many countries impose on their financial industries to enforce money laundering prevention.

As a worldwide registry of biometric ID becomes more feasible, the prospect of a 100% paperless bank lurks even closer.

So, as this force looms on the horizon, are we ready to take the lead and start thinking outside the box? Can banks think like a startup? Can we defy our own status quo? The challenge is there and if we don’t take it, someone will… soon.


[1] Google. The New Multiscreen World. August 2012

What is the outlook for the global retail banking industries and which geographies and segments will be growing the fastest over the next 12-18 months?

Retail banking will broadly follow regional economic growth patterns over this period, with special consideration to some of the sensitive geopolitical issues in certain regions.  In the U.S., retail banking performance should continue to stay relatively strong as the economy continues to rebound and loan losses remain moderate.  However, more significant growth expectations should be tempered given the continuing regulatory pressures in the aftermath of the financial crisis.

Western Europe and Japan will generally lag behind the U.S. due to slower economic growth, with Latin and South America performing more on par with the U.S.  China should continue to experience robust growth, albeit at a slower pace than in recent years.  The current turmoil with Ukraine and Russia have the potential to significantly impact economic growth throughout Eastern Europe and Russia and negatively impact the retail banking sector in those markets.

From a segment perspective, the mass (or emerging) affluent has the most significant growth potential.   The aging of the baby boomer generation in the U.S. along with the continued growth of the emerging affluent in markets like China and India creates tremendous opportunity for wealth management services.

One other segment that has strong growth potential is the unbanked or underbanked portions of the mass market segment, especially in emerging markets.  As these consumers begin to enter the financial mainstream, there is strong demand for basic banking products, low cost options such as debit-card only products, and online and mobile services, especially among tech-savvy consumers.  For retail banks who compete in this segment, their challenge is to strike the right balance between revenue potential and cost-to-serve while managing the risk of cannibalization within the existing customer base.


What are the top trends in the global Insurance industry in 2014 and which segments will be the growth drivers?

Top Trends in the Global Insurance Industry in 2014

In 2014, businesses will continue to come out of their shell and make their way forward.  In response to pressure from the government, shareholders, suppliers and creditors, budget spending will increase on risk management.  This is not to transfer more away but rather to retain as much as possible.  Businesses will be looking to partner with insurers who offer cost effective risk management and business continuity programs and services aimed at saving them premium dollars and, more importantly, in helping them attain a reputation for distinguished accountability.  This will remain important in 2014 as the scent of fear of corporate greed and dishonesty continues lingering on the trail ahead of us.             

Advancements in technology will continue to drive growth as well.  In 2014, insurers will continue developing applications which allow customers to communicate using their mobile devices.  Securing this personal information and managing it will continue to be a challenge. 

Lastly, insurers will continue introducing new products and enhancing existing coverage offering protection from cyber attacks, as more and more customer’s move on-line.  

What are the top 3 challenges in turning the digital payments opportunity in Africa into an attractive revenue stream?

What is digital payment? It’s the use of a range of technology trends for the buying and selling of goods or services offered through internet or broadly to any form of electronic funds transfer. Some of the known trends accepted in parts of Africa include mobile money, money wallets, ATM cards, wire transfer, credit cards, electronic fund transfer etc.

In West Africa, Ghana to be specific, and some African countries have embraced the digital payment technology. In fact it is a fast growing technology in Africa and it’s creating a lot of competition especially in the banking and telecom sectors. In Ghana, it has become one of the strongest selling tools for the telecoms and the banks. It is bringing about a lot of healthy competition and innovations in these industries. Gone are the days when customers of banks were just sold a current account or a savings account. Now, this continent has come of age. Customers who come to, for instance, the bank leaves with about four products and these include; a current or savings account, internet banking, sms alert and a visa debit card to allow them further their transactions from other point of sale. 

Now a lot of customers of these institutions can do transactions online or on their phones in the comfort of their homes and offices, without going to the bank to queue, and people receive alerts on their phones as soon as a transaction hits their accounts. The growth internet usage and the emergence of smart phones on this continent have also helped making this dream come alive. In Ghana for instance, about 75% of the population are now using mobile phones.

Ghana and for that matter Africa as a whole is enjoying some flexibility with these innovative ways of doing business. But at the back drop of these simple and flexible ways of doing business lay a lot of challenges that is making digital payments in Africa very unattractive and slowing the growth of it.

I have identified the following as my top 3 challenges that are making digital payments unattractive; connectivity, illiteracy and cost

  1. Connectivity:  Internet connectivity is very critical when it comes to digital payment. About 80% of the digital payments depend on the availability of a free flowing internet. In this part of the continent it is a big challenge since some countries in Africa still remain unconnected to the most basic store and forward technologies. Even those who have providers present in their countries, lack the ability to coordinate information. There is no mutual national or international coordination due to political instability in some African countries (everybody wants to coordinate, but nobody wants to be coordinated). Aside some southern Africa countries, the majority of our links are connected via Europe and the Americas. My personal experience, I did a transaction through internet banking and it took three days to reflect. And this is a worry to a lot of customers. Also the monopoly tactics employed by some telecom giants in Africa also hinder the swift operation of digital payments. Some service providers are not allowed to provide the value added services due to the monopoly enjoyed by these telecom giants especially if they have government backing.
  2. The second challenge identified is Illiteracy. The aggregate of illiteracy on the African continent is hovering around 50%. In Ghana for instance, one of the biggest market you can find is situated in Accra central and majority of these traders are illiterates and are finding it very difficult to understand and adjust to the new trends of doing business (ie. Digital payments). They openly oppose the signing on or the usage of these payment solutions. I can’t base my claim on facts but I believe it cuts across the continent hence hindering the rate of adoption to digital payments greatly, considering the percentage of illiteracy on the continent.
  3. The final challenge I consider as a hindrance to digital payments in Africa will be Cost. There is a smart phone boom in Africa and strong demand for digital payment solutions but the high tariff charges and the cost of even educating the masses on the use of these payment solution is so high that some countries on the continent cannot afford it and resort to the use of analog links that are extremely difficult to integrate to newer technologies. The cost of building and maintaining the infrastructure needed to execute these payment solutions is so high that some telecoms or service providers shy aware from it and making it very difficult to make this dream a reality.

For these payments solutions to survive or work effectively in Africa, telecom companies must begin to work together in achieving singular goal instead of battling to dominate market share. Equally, banks telecom companies and merchants or retailers like, Game Shoprite, Palace, and Melcom should work closely together. Currently some of these retailers are of the view that these banks and telecom companies are out to exploit them and take their moneys. If the cost of operating the payment devices are reduced or shared equally amongst this group of people, I believe it will improve the patronage of the digital payments.

 Also if the target market for the digital payments is both the banked and the unbanked, then a lot of compromise must be made. There should not be frequent charges on the use of say money wallets or mobile money and the likes, and whatever will be charged must be explained thoroughly to the user. Lastly, governments put out clear and simple measures so that other service providers can also come in and support with trends and new technologies.

Social Entrepreneurship: an Alternative to the Welfare State

Since 2008 the world has been struggling with the financial crisis, which is claimed to be the most severe recession since the Great Depression of the 1930s. As a result, the unemployment rate has reached approximately 12% in the EU, and even over 25% in countries like Greece and Spain. It is highest among people under 25 years of age – 23.2% in the EU, 58.7% in Greece and 56.1% in Spain. [1] Continue reading