Five Emerging Trends Will Reshape Global Banking in Next Decade: IBM Study

Customers Take Charge and New Competitors Take Profitable Niches as Global Industry Begins a Transformation That Will Be Marked by Innovation

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ARMONK, NY - 15 Nov 2005: IBM today released a landmark study revealing the key trends and innovations that will define the global banking industry in 2015.

The study "Banking 2015: Defining the Future of Banking" (available at forecasts trends in banking to produce a unique insight into the competitive forces that will face bankers in the next 10 years. The study also spotlights the emerging business and technology innovations and societal trends that will propel and shape the industry's transformation.

The survey by IBM's strategic research unit, The Institute for Business Value, comes at a time of rapid change fueled by new information technology, global regulations and emerging markets in Asia, Eastern Europe and South America. Worldwide, total financial services revenue is forecast to experience compound annual growth of 7.1 percent between 2000 and 2015, from US $2 trillion to US $5.6 trillion. In the Asia-Pacific region, IBM predicts a growth rate of about 7.6 percent.

IBM found five key trends will determine market success in 2015:

Rusty Wiley, lead partner for IBM's Global Banking Practice, says the study shows what banks must do now in order to stay competitive over the next ten years. "By 2015, we will live in an intensely customer-centric market that is dominated by global mega banks and densely populated by specialist financial services providers. Fierce competition, global regulation and technology will reshape bank and non-bank structures.

"Technology will also drive fundamental changes in workforce disposition, which will have substantial follow-on effects for productivity, efficiency and profitability," Wiley says. "These trends are already evident but, as they become entrenched, there will be profound changes to the competitive drivers of global banking."

Four strategic imperatives
According to IBM, these market changes pose big challenges for conventional banks. Four key strategic issues arise from these profound changes.

Mortgages among the next big products
But how can banks choose which products and market innovations will be best for their business? The IBM study identifies a number of value-added options:

According to Sunny Banerjea, global banking leader for the Institute for Business Value, each bank must decide on a strategy that fits its customers' needs. "Banks will need special strategies to cater to a far more discerning -- and controlling -- customer. Innovative approaches to business design, customer service, workforce management and IT will be critical to banks' future success.

"Banking customers will demand more advocacy, personal security and control in their banking relationships," Banerjea says. "Banks will source products and services from many specialized and best-in-class service providers, including independents and other banks providing white-label products and services. They will partner actively with providers to improve their own capabilities without locking up their own capital and improving dramatically their ability to address changing demand cycles."

"Innovation in products, processes, relationships and business models will be the primary path to sustainable growth."

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