Fast growing digital banking services and strong efforts for regulatory realignment will create a paradigm shift in the financial service industry, says Dr. R. Seetharaman, Group CEO of Doha Bank, the leading private commercial bank in Qatar. He was giving insights on the changing trends that impact the sector.
“With the regulatory realignment happening in the sector, the costs of regulation and competitive pressures will lead to industry consolidation, while non-traditional competitors is expected to occupy a significant space in the sector,” he said while speaking on “Future of Banking in 2020” at a regional conference held in Bahrain recently.
The Bahrain Chapter of the Institute of Chartered Accountants of India (BCICAI), under the patronage of the Ministry of Finance and the Kingdom of Bahrain, hosted the conference themed “Financial Professionals- Partners in Nation Building”. Regional bankers and senior finance professionals from various industries participated in the conference.
In his speech, Dr. Seetharaman highlighted the emerging trends in the banking industry. “The old attitude which centered on traditional banking services, proprietary products and less differentiation are shifting towards a new attitude, in which we analyse the needs and differentiate, collaborate and diversify them. There is a shift from product-focused or location-centric approach to consumer-focused and information-centric approach.”
“The mobile device will be the world’s primary connection tool to the internet in 2020. The local banks in the GCC are well positioned to build on solid online banking trends. In the next five years, online banking services are expected to triple in the region, with the online sales to new customers increasing five-fold. This will enable banks to focus on small outlets rather than full-fledged branches,” he said quoting Mc-kinsey study which says the number of digital banking consumers in Asia would reach at 1.7 billion by 2020, with China, India, and ASEAN seeing the biggest gains.
“The expanding business domains will result in value creation to customers such as one stop shop, tailor-made products, better services, seamless integration with banking products and cost reduction. The convergence of banking and technology is well underway. Long term winners in the banking industry will become harder to distinguish from pure technology companies. Today, IT and electronic banking strategy are integral parts of the financial services business,” Dr. Seetharaman elaborated.
Highlighting the trends in retail and wealth management towards 2020, he said, “Fiscal problems will reduce social support services from federal, state and local governments. Individuals will become responsible and accountable for the most risk-related decisions in the areas of financial planning, retirement, insurance and health care. Females in 2020 will be financial decision-makers as businesswomen and consumers.”
“According to PWC, the rise in the volume of investable assets is set to increase to $102 trillion by 2020. Assets under management in the SAAAME (South America, Asia, Africa and the Middle East) economies are set to grow faster than in the developed world. The growth in assets will be driven by three key trends: the government-incentivised shift to individual retirement plans; the increase of high-net-worth-individuals (HNWIs) from emerging populations; the growth of sovereign wealth funds (SWFs).”
Dr. Seetharaman says that there is a need to improve scale advantages, spread increasing regulatory costs over a larger base of business, and lower costs by improving efficiencies. “This will result in more mergers, acquisitions and industry consolidation. Through partnerships and collaboration, smaller and mid-sized players will provide the breadth and depth of services provided to the customers at affordable costs. Some of the non- traditional players in the financial services industry include Walmart, Virgin Money, Deutsche Postbank AG and UK Post Office.”
Highlighting the changing trends in the global economy, Dr. R. Seetharman said, “The US economy is recovering and Euro Area and the UK indicate signs of recovery. There is slower growth in the emerging economies; however they still contribute to the global growth. There is an increasing global attention in the developing Asian region. There are growing voices of the emerging economies and their demand for more equitable positions.”
“Removing bottlenecks of global trade liberalisation and enabling all countries to participate in the global economy are among the biggest challenges. The use of Yuan has been increasing with China having a programme to internationalise its currency by allowing the Yuan to be used to settle cross-border trade. There are evolving partnerships amongst the countries to cope up with the global competitiveness and threats,” he concluded.
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