By : Ashish Sharma

Despite increasing competition and pressing regulatory challenges, The Retail Banking industry has the potential for real growth. This is a pivotal time for retail banks. The ever changing regulatory Requirements such as BASEL, MiFID and Antimoney Laundering are Swallowing up huge resources, while ageing population in many markets is forcing a rethink strategies. Technology is helping new low cost operators to squeeze margins, and risk management, particularly for credit and operational risk

Despite increasing competition and pressing regulatory challenges, The Retail Banking industry has the potential for real growth.

This is a pivotal time for retail banks.

The ever changing regulatory Requirements such as BASEL, MiFID and Antimoney Laundering are Swallowing up huge resources, while ageing population in many markets is forcing a rethink strategies.

Technology is helping new low cost operators to squeeze margins, and risk management, particularly for credit and operational risk

Which are the key trends in the global retail banking industry? Opportunities and Challenges of Retail Banking in India Who are the top 10 retail banks in the market and who ranks 11 to 20? Who are the top 5 core banking system vendors What are the strategies that are driving the revenue and market share of the leading retail banks? What is the future outlook for the retail banking industry?

Which are the key trends in the global retail banking industry?

Opportunities and Challenges of Retail Banking in India

Who are the top 10 retail banks in the market and who ranks 11 to 20?

Who are the top 5 core banking system vendors

What are the strategies that are driving the revenue and market share of the leading retail banks?

What is the future outlook for the retail banking industry?

1)Deregulation/Re-regulation CAMELS System: Capital Asset Quality Management Quality Earning Quality Liquidity Sensitivity to Market Risk Efforts at deregulation and re-regulation generally address: Pricing issues : Removing price controls on the maximum interest rates paid to depositories and the rate charged to borrowers (usury ceilings). Allowable geographic market penetration New Products and services

1)Deregulation/Re-regulation

CAMELS System:

Capital

Asset Quality

Management Quality

Earning Quality

Liquidity

Sensitivity to Market Risk

Efforts at deregulation and re-regulation generally address:

Pricing issues : Removing price controls on the maximum interest rates paid to depositories and the rate charged to borrowers (usury ceilings).

Allowable geographic market penetration

New Products and services

Shortcomings of Current Banking Regulations: Does not prevent bank failures Cannot eliminate economic risk Does not guarantee that bank management will make good decisions 2) Rising Competition from other Financial Services Companies : Competition for deposits Competition for loans Competition for payment services Competition for other financial services Competition for loans comes in many forms: Commercial paper Captive automobile finance companies Other finance companies Junk bond

Shortcomings of Current Banking Regulations:

Does not prevent bank failures

Cannot eliminate economic risk

Does not guarantee that bank management will make good decisions

2) Rising Competition from other Financial Services Companies :

Competition for deposits

Competition for loans

Competition for payment services

Competition for other financial services

Competition for loans comes in many forms:

Commercial paper

Captive automobile finance companies

Other finance companies

Junk bond

Competition for payment services is coming from emerging electronic payment systems, such as: Smart and stored-value cards Automatic bill payment Bill presentment processing Cash money can be acquired at any teller machine Open a checking account, apply for a loan and receive funds electronically 3) Off-Balance-Sheet Activities Loan Commitments Loan guarantees Standby Letters of Credit Interest Rate Swaps Futures, Forwards & Options Leases

Competition for payment services is coming from emerging electronic payment systems, such as:

Smart and stored-value cards

Automatic bill payment

Bill presentment processing

Cash money can be acquired at any teller machine

Open a checking account, apply for a loan and receive funds electronically

3) Off-Balance-Sheet Activities

Loan Commitments

Loan guarantees

Standby Letters of Credit

Interest Rate Swaps

Futures, Forwards & Options

Leases

4)Information Technology and Banking New technology had made offering new products available: Securitization would not be possible without the servicing software that controls and monitors cash flows. Investors trade pools of credit card loans because they can assess default risk without knowing the creditworthiness of each borrower. Swaps, swaptions, collars and caps are feasible and easier to use because computer pricing models narrow the bounds of mispricing and other errors. Internet banking had reduced costs substantially; New technology had relaxed the geographical market and product constraints, which led to a greater market consolidation.

4)Information Technology and Banking

New technology had made offering new products available:

Securitization would not be possible without the servicing software that controls and monitors cash flows.

Investors trade pools of credit card loans because they can assess default risk without knowing the creditworthiness of each borrower.

Swaps, swaptions, collars and caps are feasible and easier to use because computer pricing models narrow the bounds of mispricing and other errors.

Internet banking had reduced costs substantially;

New technology had relaxed the geographical market and product constraints, which led to a greater market consolidation.

5) Globalization The gradual evolution of markets and institutions so that geographic boundaries do not restrict financial transactions. Firms must recognize that businesses in other countries as well as their own are competitors, and that international events affect domestic .operations

5) Globalization

The gradual evolution of markets and institutions so that geographic boundaries do not restrict financial transactions.

Firms must recognize that businesses in other countries as well as their own are competitors, and that international events affect domestic .operations

Retail banking has immense opportunities in a growing economy like India . How does the world view us? The BRIC Report talking India as an economic superpower. A. T. Kearney, a global management consulting firm, recently identified India as the 'second most attractive retail destination' of 30 emergent markets. The rise of the Indian middle class is an important contributory factor in this regard. The percentage of middle to high income Indian households is expected to continue rising. The younger population not only wields increasing purchasing power, but as far as acquiring personal debt is concerned, they are perhaps more comfortable than previous generations. Improving consumer purchasing power, coupled with more liberal attitudes toward personal debt, is contributing to India's retail banking segment. The combination of the above factors promises substantial growth in the retail sector, which at present is in the nascent stage. Due to bundling of services and delivery channels, the areas of potential conflicts of interest tend to increase in universal banks and financial conglomerates. Some of the key policy issues relevant to the retail banking sector are: financial inclusion, responsible lending, access to finance, long-term savings, financial capability, consumer protection, regulation and financial crime prevention.

Retail banking has immense opportunities in a growing economy like India .

How does the world view us? The BRIC Report talking India as an economic superpower.

A. T. Kearney, a global management consulting firm, recently identified India as the 'second most attractive retail destination' of 30 emergent markets.

The rise of the Indian middle class is an important contributory factor in this regard.

The percentage of middle to high income Indian households is expected to continue rising.

The younger population not only wields increasing purchasing power, but as far as acquiring personal debt is concerned, they are perhaps more comfortable than previous generations. Improving consumer purchasing power, coupled with more liberal attitudes toward personal debt, is contributing to India's retail banking segment.

The combination of the above factors promises substantial growth in the retail sector, which at present is in the nascent stage.

Due to bundling of services and delivery channels, the areas of potential conflicts of interest tend to increase in universal banks and financial conglomerates.

Some of the key policy issues relevant to the retail banking sector are: financial inclusion, responsible lending, access to finance, long-term savings, financial capability, consumer protection, regulation and financial crime prevention.

The 20 largest banks in the world Bank Country Total Assets ($M) 1. Mizuho Financial Group Japan $1,285,471 2. Citigroup United States 1,264,032 3. UBS Group Switzerland 1,120,543 4. Credit Agricole Mutual France 1,105,378 5. HSBC Holdings United Kingdom 1,034,216 6. Deutsche Bank Germany 1,014,845 7. BNP paribus France 988,982 8. Mitibush Tokyo Financial Group Japan 974.950 9. Sumitomo Mitsui Financial Group Japan 950,448 10. Royal Bank of Scotland United Kingdom 806,207

The 20 largest banks in the world

The 20 largest banks in the world Bank Country Total Assets ($M) 11. Barclays Bank United Kingdom $791,292 12. Credit Suisse Group Switzerland 777,849 13. J.P. Morgan Chase United States 770,912 14. UFJ Holdings Japan 753,631 15. Bank of America United Statements 736,445 16. ING Bank Netherlands 684,004 17. Societe Generake France 681,218 18. ABN-AMRO Bank Netherlands 667,636 19. HSBC United Kingdom 650,721 20.Industrial and Commercial Bank of China China 637,829

The 20 largest banks in the world

Banking strategies to improve performance and to grow in domestic markets can be divided in three main categories: A. Cost reduction B. Revenue or organic growth C. Domestic mergers, acquisitions and alliances

Banking strategies to improve performance and to grow in domestic markets can be divided in three main categories:

A. Cost reduction

B. Revenue or organic growth

C. Domestic mergers, acquisitions and alliances

Flexibility in branch organization is key to success in retail banking. While regional differences must be taken into account, banks respond quickly to clients needs are garnering the critical edge. Preparing for the post-growth period Converging markets There is a need of constant innovation in retail banking. In bracing for tomorrow, a paradigm shift in bank financing through innovative products and mechanisms involving constant upgradation and revalidation of the banks’ internal systems and processes is called for. Banks now need to use retail as a growth trigger.

Flexibility in branch organization is key to success in retail banking. While regional differences must be taken into account, banks respond quickly to clients needs are garnering the critical edge.

Preparing for the post-growth period

Converging markets

There is a need of constant innovation in retail banking.

In bracing for tomorrow, a paradigm shift in bank financing through innovative products and mechanisms involving constant upgradation and revalidation of the banks’ internal systems and processes is called for.

Banks now need to use retail as a growth trigger.

This requires product development and differentiation, innovation and business process reengineering, micro-planning, marketing, prudent pricing, customisation, technological upgradation, home / electronic / mobile banking, cost reduction and cross-selling While retail banking offers phenomenal opportunities for growth, the challenges are equally daunting. How far the retail banking is able to lead growth of the banking industry in future would depend upon the capacity building of the banks to meet the challenges and make use of the opportunities profitably. However, the kind of technology used and the efficiency of operations would provide the much needed competitive edge for success in retail banking business. Furthermore, in all these customers’ interest is of paramount importance.

This requires product development and differentiation, innovation and business process reengineering, micro-planning, marketing, prudent pricing, customisation, technological upgradation, home / electronic / mobile banking, cost reduction and cross-selling

While retail banking offers phenomenal opportunities for growth, the challenges are equally daunting.

How far the retail banking is able to lead growth of the banking industry in future would depend upon the capacity building of the banks to meet the challenges and make use of the opportunities profitably.

However, the kind of technology used and the efficiency of operations would provide the much needed competitive edge for success in retail banking business.

Furthermore, in all these customers’ interest is of paramount importance.

UK Faster Payments – from May 2008 it will be possible to move sums of money in almost real-time, so there will no longer be a need to withdraw cash from one branch and run to another bank’s branch to deposit the same in an urgent situation. End of Cheques - Major retailers that no longer accept cheques include; Argos, Boots, Next, Sainsbury's, WH Smith, Currys, and those that could soon follow suit, include Asda, Morrisons, PC World and Tesco.

UK Faster Payments – from May 2008 it will be possible to move sums of money in almost real-time, so there will no longer be a need to withdraw cash from one branch and run to another bank’s branch to deposit the same in an urgent situation.

End of Cheques - Major retailers that no longer accept cheques include; Argos, Boots, Next, Sainsbury's, WH Smith, Currys, and those that could soon follow suit, include Asda, Morrisons, PC World and Tesco.

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