From management shakeups at some of the top financial institutions to fallout from the mortgage crisis, big changes are in store for the banking industry in 2008. And things might become a bit slippery, especially for smaller banks. With the Single Euro Payments Area (SEPA) taking effect in January, small banks in Europe might find themselves on the outside looking in. And community banks in the United States face a new era in which they may struggle to be heard over the concerns of the largest financial institutions as America's Community Bankers is absorbed by the ABA. However, new opportunities abound for all. Smaller banks have shown they have the wherewithal to take on mobile banking as early adopters, and new rules from SWIFT may help many low-volume/low-value users utilize the messaging organization for far greater efficiency. These developments and more promise to shape the banking industry in 2008 and beyond.
Mobile Banking and Payments Offer Both Opportunity and Threat
The pace of mobile banking announcements has steadily increased as bank after bank jumps on the trend. All the major players have thrown their hats in the ring in one way or another. Even some smaller banks are getting in on the action, recognizing that m-banking can be a great differentiator. But the m-banking wars haven't even begun to heat up yet in the U.S. Although the number of consumers taking advantage of the mobile channel has plenty of room to grow, the potential is great since mobile devices are so ubiquitous these days.
The technology is ready. But is the industry? Banks have yet to agree upon an operating model and many are taking a Lone Ranger approach to deployments. Insiders agree, however, that a more universal, standards-based operating model would be the best route for both banks and their customers, specifically as it relates to m-payments. Who will actually own the customer remains to be seen, as m-banking involves not just the banks, but the wireless carriers, handset manufacturers and other players just champing at the bit for a piece of the m-payments pie. Disintermediation looms large for banks if they don't put forth a more unified front.
Congress and the Mortgage Crisis: Regulation for Regulation's Sake?
The lending industry can see it coming from a mile away -- Washington already has begun to take a hand in trying to rectify the credit crunch that arose from the subprime mortgage crisis. Measures are being taken to alleviate the situation for homeowners who are at risk of foreclosure. Even three of the big banks -- JPMorgan Chase, Bank of America and Citi -- have teamed up to create a fund to help ease credit woes for the industry.
But what happens when the "R" word finally rears its ugly head? Bankers, lenders and analysts say the industry is regulated enough and that further rules are unneeded. However, enforcement of what's already on the books does make sense. But will Congress buy that argument, or will an ambitious politician with an ulterior agenda (reelection?) create yet another bill with his name on it?
The Citi That Never Sleeps: Who Will Rule Following Prince's Departure?
As this issue goes to print, Charles Prince is making the transition into retirement from his role as chairman and CEO of Citigroup. The move came as no surprise. Speculation about the polarizing Prince's future had come to a head in recent weeks as he increasingly took a lot of heat for Citi's performance during the current credit crisis. He even cited Citi's losses in the mortgage-backed securities market as his reason for retirement. In fact, upon Prince's retirement, Citi annouced the formation of a new business unit, "the sole focus of which will be on managing the assets related to subprime mortgage securities and their resultant exposures," acording to a release.
Robert E. Rubin, chairman of Citi's executive committee and a member of the board, will serve as chairman of the board, and Sir Win Bischoff, chairman of Citi Europe and a member of Citi's business heads, operating and management committees, will serve as acting CEO as the search begins for a new CEO. Throughout his tenure, Prince stated that one of his goals was "shrinking to greatness," which included shrinking technology budgets. It will be interesting to see if the next CEO shares Prince's views on technology.