EY - Transforming banking: Global Banking Outlook 2015
  • Share

In an era of low growth, the most successful banks will be those that master transformation. Banks must reinvent themselves, not just to respond to today’s pressures, but to be able to adapt to tomorrow’s challenges.

Over the next decade, banks will:

  • Focus more on profitability and on much more targeted revenue growth
  • Be defined by narrower scope and simpler structures
  • Serve fewer customer segments, although some will operate across more markets
  • Deconstruct products back to their component parts so that customers can rebuild them tailor-made
  • Introduce new products more aligned to emerging client needs
  • Outsource back-office functions that no longer provide a competitive advantage
  • Establish industry utilities or operate key banking services for new competitors

Global megatrends, stakeholder pressures and lackluster economic growth will drive both evolution and revolution for banks over the next decade.

Transforming banking updates

In coming months, our Transforming banking series will explore how banks must rethink their strategies and operating models, overcome the pressures of today and respond to the emerging opportunities and challenges of tomorrow.

To stay up-to-date with these and other insights, sign up for email alerts from our Banking & Capital Markets leaders.

Transforming banking—global megatrends

Global megatrends are shaping the world and will also leave their mark on banking. Some trends will merely accelerate banking’s evolution. Others, such as new technology, are already driving a revolution through parts of the industry. These megatrends will also create new markets for banks as customer needs evolve.

Global marketplace
The world will continue to become more interconnected with increased trade flows within regions including Africa, Latin America and Asia, but banks will have to grapple with slowing world economic growth.

Demographic shifts
A changing customer base will create new and different banking needs. Huge investments will be necessary to rejuvenate out-of-date infrastructure in developed markets and support the growth of new cities in emerging markets.

Changing workforce
Working patterns and employee expectations are changing, particularly for a new generation entering the workforce for the first time.

Digital business
Smartphone penetration and other factors are forcing banks to improve their digital offerings rapidly.

Transforming banking—stakeholder pressures

As the world changes, banks are grappling with pressures from multiple stakeholders:

Regulators and governments
The (often divergent) global regulatory reform agenda shows no signs of abating, and compliance costs will remain high.

Banks must find a way to deliver improved performance for investors who have tired of high volatility -- but low returns -- on equity.

Increasingly, top talent is looking for a career beyond financial services, which makes the task of transformation more difficult.

Banks must win back customer trust. New strategies and tactics will be needed to meet rising customer expectations.

Transforming banking—leaner but larger?

Our Global banking outlook 2015 details five transformation imperatives that banks must embrace in the coming decade.

Delivering profitable growth
A 17% revenue increase would enable the average global bank to deliver a 15% return on equity without further cost reduction. How can banks achieve this? Learn more.

Surviving a new era of competition
From retail deposits to M&A advisory services, nearly every aspect of banking faces increased competition. How can banks overcome this challenge? Learn more.

Defining a bank's new core
The next decade may see a simplification of the business, the deconstructing of products and an end to the age of global universal banking. What products and services will banks offer? Learn more.

Adopting advanced technology
As technology spending increases, higher ROI is critical. IT spending must be carefully balanced to address customer expectations, cybersecurity requirements and improving internal processes. Where should banks invest in technology? Learn more.

Defining a bank’s new structure
Banks will have to change their operational footprint through entity rationalization, functionalization and right-shoring. How should banks restructure their operations? Learn more.

Transforming banking—business and operating models for the next generation

Guided by these imperatives, banks must embark on business-wide transformation incorporating multiyear change programs. Transforming banking will require restructuring both business and operating models (see illustration below).

EY - Transforming banking -- Business and operating models for the next generation