Banks feel pressure to globalise, offer new services for consumers

Competition driving industry to specialise and collaborate to capture new markets – IBM global study

ARMONK, NY.- IBM recently announced the results of a global research report that reveals the banking industry is counting on new market expansion, particularly in emerging markets, to fuel growth and efficiency opportunities over the next five years, yet banks say they are not prepared to seize these opportunities.

The report, “No Bank is an Island: Get Global Before Globalisation Gets You” indicates 69 percent of banking executives acknowledge their organisation is not operating in a globally integrated fashion. As a result, few banks are positioned to effectively operate outside their domestic markets or compete in key emerging markets such as China, South Korea, India, Ireland, and Turkey where demand for new banking products and services is set for rapid growth.

“The worldwide financial system is expected to quadruple to (US) $1,300 trillion by 2025” said Shanker Ramamurthy, global industry leader, banking and financial markets, IBM Global Business Services. “Banks of all sizes are feeling the effects of globalisation as rising cross-border banking M&A and the proliferation of non-bank, online and mobile banking providers increases competition for customers. The question is: what role will traditional banks play in a globally integrated industry? And will they be able to adapt their business models to take advantage of globalisation? We believe banks that specialise and collaborate with other players both within and outside the industry to meet specific consumer needs in various markets will be best positioned for growth”

The global survey, conducted by the IBM Institute for Business Value in cooperation with the Economist Intelligence Unit, includes responses from more than 640 industry executives across 89 countries to determine the impact of globalization on the banking industry.

Taking Action
Study analysis reveals banks can take specific actions to better capitalise on the opportunities of globalisation:
-- Break away from the herd - Executives recognise the need to measure the risk and reward trade-offs, and fear world-wide windows of opportunity may be closing. Contd.on page 4

Understanding their own strengths against the changing nature of financial sector sophistication in different parts of the world allows bankers to choose the right strategy for their bank. For example, banks that can effectively identify and analyze the potential impact of industry interdependence across the financial services sector (as evidenced by the global credit crisis that began in 2007) will be better positioned to mitigate risk and uncover new growth opportunities as compared to the competition.

-- Specialize to gain advantage - Specialist banks, with their targeted strategies and specific expertise, seem to own the advantage in understanding customer needs. New entrants with an ability to empower key customer segments are targeting the base of the innovation S-curve to win the hearts and minds of their customers. Banks must focus and strengthen their key capabilities to be able to compete with these innovators or risk being left behind.

-- Globally integrate your capabilities - Banks are struggling to operate in a more agile and global fashion. Fifty-one percent of universal banks rank their global integration capabilities as moderate to poor. The shift toward more fluid, globally integrated enterprises will enable banks to capture opportunities whenever and wherever they exist on the revenue and cost sides.

-- Win minds - Executives realize that organizational culture is both the top enabler of global integration and a formidable barrier. Banks must actively win minds and address the cultural cues -- both with customers and internally -- to better manage for success.

To view a copy of this study and for more information on IBM banking solutions, visit http://www.ibm.com/gbs/globalbanking.

IBM surveyed 644 business leaders from 89 countries and 320 firms. We conducted qualitative interviews of 184 executives and surveyed 460 executives in partnership with the Economist Intelligence Unit. Our respondents were based around the world: 30 percent in the Americas, 32 percent in Asia-Pacific and 38 percent across Europe, the Middle East and Africa. Analysis of the research focused on gaining insights from selected banking industry participants including universal banks, national/regional banks, community banks/savings & loans/cooperative banks and building societies, specialist and boutique banks, industry vendors and service providers, non-governmental organizations, academics and regulators.