16 Nov Banks in the Changing World of Financial Intermediation
In this article, McKinsey posed the following question: “Banks sit at the center of a vast, complex system that intermediates more than $250 trillion in global funds. What happens when the system itself is significantly streamlined and reshaped?”
They state: “By our estimates, this financial-intermediation system stores, transfers, lends, invests, and manages risk for roughly $260 trillion in funds. The revenue pool associated with intermediation—the vast majority of which is captured by banks—was roughly $5 trillion in 2017, or approximately 190 basis points. (Note that as recently as 2011, the average was approximately 220 basis points.)”
This is indeed a very interesting article. As despite the Banking Industries abilities to stabilise after the financial crisis approximately a decade ago, the growth of this sector is still rather muted, at only 2% per year over the last 5 years, significantly below the prior years’ annual growth of 5-6%. Banking is therefore under threat in terms of (1) Technology; (2) Innovation & Disrupters; and (3) Shits in Regulatory and Socio-political environments. This is especially prevalent in the likes of Africa.
In Africa, specifically, we are seeing the likes of FinTechs and Telecommunications Multi-nationals, encroaching on the Traditional Banking Sector. Herein lies the opportunity for banks to looks seriously at their long-term strategy and innovation. There is an urgent need to prioritise the need for Innovation and the Digital Transformation Strategy, to help ensure that the Traditional Bank remains relevant in this ever changing financial services eco-system.
Altitude Advisory International have experience in assisting Traditional Banks, in critically analysing their Digital Strategy and assisting with the development of their Digital Transformation Roadmap.
CONTACT US if you are interested in learning more.