Whenever the year starts, it is always full of challenges. Any company assumes the mistakes, achievements, and experience of previous years to consolidate future periods. In this regard, it is important to know the main events that will mark the world economy, and that of course will shape the immediate future of financial institutions in our country. Analysts point out the following circumstances as a key to understanding the challenges that our companies face:
- The falling prices of raw materials and especially the fall of oil prices. In spite that many advanced economies can be a positive factor in primary differentials, for many emerging economies it is proving to be a negative factor which reflects the global GDP. The major economies affected in this regard are Brazil and Russia.
- Greater appreciation of the dollar.
- Volatility of financial markets.
- Additional difficulties in readjusting China. The slowdown in growth in China is the most worrying factor, given the weight of its economy worldwide.
There are three major challenges noted at this point: profitability, regulatory effort, and digital transformation.
Profitability is particularly important because the European Central Bank’s commitment until the end of 2017 is to keep rates near zero interest. This situation, according to Gonzalo Gortázar, CEO of CaixaBank, obliges banks to pursue profitability through two main strategies (offensive and defensive). However, Gortázar ruled out the idea of “charging” for liabilities in the short-term, an idea that is hovering around the industry.
1.1 Offensive strategy: Making the current customer more profitable via linking, through a wider and not as focused relationship on the transaction. On the other hand, continuing to improve the customer relationship through new channels.
For this, it is essential to develop capabilities in sales executives for the value and solutions sales.
Diversification will remain important so the bank can continue “making a living” with the services and products out of balance via commissions.
Finally, internationalization will continue being a strategy by the main players in the Spanish banking industry, except for Caixabank.
1.2 Defensive strategy: Overseeing the income statement via cost containment is another fundamental leverage point to guarantee the necessary profitability. In this regard, new measures are expected to set the oversizing of the industry (office settings and industry concentration).
2. Regulatory effort:
The industry is preparing for the arrival of a new twist in terms of regulation. The new regulatory framework will require investment from institutions in time and resources (Mifid, Basilea).
At the same time, in terms of regulation, the banking industry feels at a disadvantage to “shadowing banking” and at the possible emergence of new native digital players (Google, Apple) that are not subject to the same regulatory framework.
3. Digital Transformation:
In the digital transformation of financial institutions, two different speeds were observed. On one hand, there are a group of entities that consider digital transformation as a key strategy for development in the short term and on the other hand, there are a number of entities that understand digitization as a “complement” to branch activity. The two main focuses of development are:
3.1 Drive towards multi-channels: Developing non-traditional channels to be more complete and accurate, while at the same time being consistent with the company’s set customer experience strategy. In this sense, it will be crucial to develop the bank’s employees in the digital competencies necessary for their performance activity.
3.2 Push for business in offices: Some entities are using Big Data in the push of its sales structure with the objective to be more precise in the customer relationship. In the coming years, the development of the “analytics” capability in bank employees will be a requirement in order to compete with others.
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