Just looking through the recent special reports on www.FT.com, there is an interesting set of articles about the future of financial services. With new rules on the amount of capital banks need to hold (from Basel III), which is 3 times the previous requirement albeit delayed for several years, and new liquidity requirements, banks are certainly going to find the future more challenging. Add in then the issue that:
“We believe that impetus towards co-ordination of financial sector reform has largely stalled and that the consensus among governments is that there is no consensus,” say analysts at Nomura recently…
…and we have unilateral actions by many governments to drive banking reform. For example, the potential for the break-up of the big UK banks is under consideration by government bodies and commissions, which has already provoked talk among some such as HSBC and Barclays about moving headquarters away from the London financial hub towards friendlier regulatory regimes. As the FT points out, the banking industry, not just in the UK but globally, is in limbo. And that state will last for some time.
The FT sets out the regulatory and transnational challenges in detail for financial services, so I am not going to repeat those here. All I would like to do at this point is raise a question — where’s the customer, or consumer, in this environment? Who is thinking about and taking account of what the consumers, whether individuals or businesses, want from banks? At this point, it seems not to be the commercial banks, who are more concerned with the future regulatory environment. That is fair in many ways as the changes under discussion will have enormous impact on how, where and with what return they do business in future.
However, there are those non-bankers, individuals and networks that are thinking about the customer and consumer. Take for example the retailers, including Tesco and Wal-Mart, who are moving into financial services with brands that have far higher levels of trust than those of high-street banks. As a consumer who want to make smart use of their money in a tough economic environment, wouldn’t you think about companies where “Every little helps” or that suggests “Save money. Live better.” How about peer-to-peer lending and microfinance, which are now far beyond the realm of rapidly developing economies and taking off in the developed world? What about price comparison sites that allow you to use your money more wisely by making complex financial investments more transparent?
The FT suggests that the future of financial services is uncertain and challenging. We agree, but it is not just about regulations and capital requirements. The biggest challenge is going to come from outside the financial services arena, because that’s where you will find companies who are focusing what the customer and consumer wants. What’s your view?