Payments News has a review of TowerGroup’s Cross-Industry practice 2007 report.  It identifies three macro trends impacting Financial Services.  These are interesting choices, that are different that the usual ones (except for 1).

1. Reinventing Financial Services: The financial services industry has been slow to reinvent itself in the face of an increasingly networked world. Without reinvention, institutions risk being disintermediated by nontraditional industries as new, previously unlikely competitors find their way into financial services. Rather than continuing to make tactical changes in response to shifts in the marketplace, successful firms will be those that consider how to reinvent the financial services institution from a blank slate — rethinking the full spectrum of products, services, and delivery options.
2. Repurposing Financial Services for Global Diversity: Financial institutions must begin responding more effectively to dramatic changes in a continuously shrinking world. Emerging economies will demand a broader range of product and service options to meet wider variations in customer needs and economic status. It is no longer acceptable to operate under a business model focused purely on shareholder value — meaning institutions must develop dynamic capabilities for serving a larger number of more varied and yet more modest customer relationships in a profitable way. Success will mean establishing a lifetime relationship with large numbers of people who were previously outside the normal scope of an institution’s services.
3. Restoring Confidence in an Uncertain World: News of security breaches, loss of customer data, identity theft, fraud, and terrorism has been disturbing to individual financial institutions and the industry as a whole. Meanwhile, none of the industry’s traditional risks (such as those related to credit, catastrophes, investments, or interest rates) have dissipated. To date, most institutions have pursued the single strategy of playing defense against the universe of global threats. Yet institutions have an obligation to take greater control by making an offensive foray into the global need for assurance, responsibility, and security.

Source: Payments News: Three Major Strategic Shifts For Financial Services – November 27, 2006

I find it interesting to contrast different research, so here is the IBM view from August.

IBM – Paradox of Banking – 2015

1. Focus on core strengths and partner for everything else
2. Optimize the potential of each customer relationship
3. Harness the potential of the workforce through effective performance management
4. Recognize that technology will be a critical element of success.

And … IBM why Banking Innovation matters now in November.

Retail banks can’t assume that the growth and returns of the recent past will continue. Amid a throng of banking competitors – including new market entrants, forward-thinking incumbents and non-banks – banks need to differentiate themselves in ways that are not easily duplicated.

To restore confidence and realize strong future returns, banks must set the stage now. It will require uncommon innovation to stand out from the crowd and adapt successfully to marketplace demands.

Analysis:

The three Tower imperatives are active strategies.

1. Reinventing
2. Diversification – new customer base(s)
3. Restoring confidence …

The IBM views in Paradox, are focussed on how to accomplish the strategies, and 1, 2, & 3 are quite aligned with Tower 1 & 2.  The IBM Innovation piece is focussed on the ‘why’.

Diversification:  this explains the push by all Banks to enter markets that they have traditionally ignored – unbanked, and immigrants.

Restoring Confidence:  This is long overdue for Banks.  Banks have recently reacted to phishing by introduction of security guarantees, and multi factor authentication, but it still feels highly reactive.  There is lots of up space to introduce new ways to manage risk, for example, by being on the consumers side with regard to credit. 

The total reliance on FICO scores and the almost real time updates to credit histories remains highly one-sided.  There is real space there for Banks to work interactively with customers to:

1. see their scores
2. understand how the scores are calculated
3. see the direct results within their score related to their credit history
4. learn how to manage their scores

Other areas that Banks can proactively work with customers are in interest rate management.  Today each rate and the terms associated with the rates are individual to each product.  This seems like old thinking, and Banks don’t manage their own products that way.  They are managed as portfolio’s … good customers should be able to buy hedging services that can be traded against credit or deposit products to protect against interest rates.  Of course it would need to be simple and avoidance of the word hedging would be a good idea.

Just a couple of ideas that could fit in the “Restoring Confidence in an Uncertain World” category.