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Subscribe to this list via RSS Blog posts tagged in Financial services

Welcome to our guest blogger Jorge Yui. Jorge is a digital media expert, linguist, entrepreneur, and global banking systems specialist. He has over 25 years of strategy, business consulting, and senior program management experience across Europe, Asia and Latin America at Credit Suisse, Deutsche Bank, Julius Baer, Temenos, and IBM. He studied Computer Linguistics at Zurich University. See Jorge’s blog at jorgeyui.wordpress.com or email him at This email address is being protected from spambots. You need JavaScript enabled to view it.

Here's Jorge's view on the WhatsApp deal and what it means for banking.

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The headlines have been full of numbers recently, particularly as we have just passed a milestone where the 7 billionth person has now joined the world’s population (give or take a few million and a few months either way).  So let’s start there in terms of looking at some important numbers that will impact the world in the next decades.

1.  7 billion: The world’s (estimated) population at the end of 2011

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Last weekend bankers, including Goldman Sachs’s big guns, were actively courting GroupOn to lead its speculated IPO this year. This week Goldman (again) announced that it had raised a US$ 1 billion fund to invest in Facebook from non-US investors. This, along with the US$ 500 million the firm itself and Russia’s Digital Sky Technologies have invested, puts the value of Facebook at around US$ 50 billion.  You can be excused for thinking you are in a time warp.  No, it’s not 2000 again, although those who experienced the internet bubble may be excused for a quick double-take.  I don’t want to be a party-pooper, but is it “bubble or no bubble” as we look at these enormous valuations? Is Facebook really worth more than media giant Time Warner (market cap: US$ 36 billion) or internet veteran Yahoo (market cap US$ 21 billion) – or the equivalent of one sixth of Apple, one quarter of Google or two-thirds of Amazon?

Despite the continued sluggishness of developed world economies, stock markets are rallying and the bulls are out, promising a good year. Institutions are back in equities and emerging markets look good, so everything is rosy… right?  It doesn’t quite fit with the real world as some nations tackle spiraling national debts and others the threat of inflation and over-heating, while some market watchers such as the FT’s John Plender suggest it’s a time to look for the least bad investments.

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When Muhammed Yunus, winner of the 2006 Nobel peace prize jointly with Grameen Bank "for their efforts to create economic and social development from below," pioneered microcredit to help those in poverty improve their lives, it wasn’t meant to end up like this.  In an opinion piece in the New York Times entitled “Sacrificing microcredit for megaprofits,” Yunus sounds deeply saddened that the almost impossible challenges he and Grameen Bank have overcome are being derailed by increasing commercialization of microcredit.  In India there have been large-scale problems of borrowers defaulting on microloans, closely linked to an increasing number of suicides amongst the poorest who have no ability to settle their debts, devastating families and communities. Yunus himself is also under pressure, particularly in his home country of Bangladesh, where there have been sharp attacks on him personally as well as on Grameen. What’s gone wrong? What’s the way forward?  As businesses step up to the challenge of integrating social responsibility into their business models, how do we avoid making a killing in the completely wrong sense of the phrase?

Microcredit’s reason for being is to provide loans to low income clients, both individuals and micro-businesses, to help them move out of poverty (note: microcredit is part of microfinance which includes savings, fund transfers and more). People with little or no cash income or assets are not served by the traditional financial system – in our recent special report on Retail Banking we note that the “great unbanked” includes around 2.5 billion adults, more than half of the world’s adult population, who do not use (or have access to) any formal (or semi-formal) financial services.  Without access to financial services, including credit, many of these people are at the mercy of local loan sharks and do not necessarily have the means to help lift themselves out of poverty.

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Look out for our January 2011 GT Briefing, which gives you a single source to find some of the more interesting and important trend forecasts and predictions for 2011. There’s so much out there – typing Trends for 2011 into Google on January 1st 2011 gave us around 46 million results – that we did this partly for our own sanity but also (hopefully) so others will find it useful.  Do let us know!  It’s an eclectic mix of forecasts, on topics including: Global trends/macro trends (including us of course!), consumer trends, economic trends, financial markets trends, technology trends, social media trends, mobile trends, design & fashion trends, health & wellness trends, retail trends, travel trends and marketing trends.  Sources range from the FT, Trendwatching.com and McKinsey to the IMF, Mashable, TripAdvisor and The Food Channel.  No doubt we have missed some (feel free to let us know) and there are still more coming out daily (of which a couple below), but all have offered us some food for thought as we look ahead. Here are just a few of the themes across the forecasts that we took away.

A two-track world for economic growth

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Between them, the top UK high street banks received a staggering 11,000 customer complaints per day in the first half of 2010, according to figures which the banks were forced to publish (they probably weren’t volunteering). As many as 9 in 10 of these complaints were rejected, often without apology, despite the UK Financial Ombudsmen Service upholding around half of the complaints that were passed on to them, according to consumer finance site www.thisismoney.co.uk.  Last week, a poll of customer satisfaction with 75 of the UK’s top brands by consumer magazine Which? put online bank First Direct top in terms of customer service, but its larger high street rivals well down the list. Retailers John Lewis and Waitrose ranked second and third in the poll.  While these figures cover just one country, the poor customer service offered by leading retail banks is a more global issue, and one that is increasingly likely to impact banks’ future prospects – negatively.  In our recent special report, Who’s Looking After Your Money? The Democratization of Personal Finance, the emerging landscape of personal finance suggests that banks are potentially facing an ever greater challenge than the financial crisis – consumer choice.

No doubt there will be some heads shaking at this view (particularly among bankers) since, for example, the UK public appears to be more loyal to their current accounts than to their partners according to research from Santander.  Why would consumers start switching personal finance/banking providers in future?  And where would they go?

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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...

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