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How to balance a digital banking strategy with the banking branch

Distribution, not channel, is key to a digital and branch strategy..

US banks continue to reduce the number of branches as they address expense, but branch count doesn’t tell the whole story. Rather it is the sum of all products and interactions—ATMs, digital adoption, branch visits—that now establish the primary bank relationship.

For basic banking products, most new digital accounts today are savings or spending (credit or loan) as opposed to primary deposit accounts. And digital-only accounts tend to have lower balances or are single-purpose in nature. But as digital account opening and other functionality improves, it will bring a tipping point for digital to become a primary channel.

Success will ultimately involve finding the right balance between building deeper banking relationships with digital customers while persuading branch customers to take advantage of digital capabilities. However, there is no single strategy. Each institution, whether national or regional, will have different strengths to best manage overall customer distribution and servicing.

“In branch evaluation discussions, it will be increasingly critical to a) identify the purpose of the branch—whether it be experience, marketing, deposits, or complex advice, and b) identify proper KPIs for branch measurement. Should bank branches evolve into “marketing outposts” where sales then occur through digital channels? How will the branch be measured and how will marketing dollars be allocated?”

bank branch strategic plan

Download How to balance a digital strategy with the branch

We see three factors that determine how banks can evolve their branch strategy to balance with digital., 1. customer choice and convenience rather than digital versus physical.

In an environment with many different paths and unknowns for digital banking adoption, the best strategy might be to focus on convenience. An easier path to achieve customer satisfaction is by providing immediate assistance or the ability to open any type of account through a mobile device or a branch visit (or both), rather than trying to determine the right channel strategy for each.

2. Workplace barriers need to be addressed at the outset.

Traditional compensation and branch operational targets may prove to be the biggest hurdles banks face when planning an omnichannel strategy. For example, avoiding the conflict that could arise between digital sales targets and the branch employees who are still focused on in-branch product sales.

3. Demographic shifts require multiple tiers of branch design.

Widening demographic shifts such as population, job and income growth have had a far larger impact on deposit growth than technology or branch investment. With roughly half of all US deposits coming from the top 25 markets, the ability to tier branch design to various demographics and geographic regions will prove critical in developing the role and profitability of a branch in a bank’s ecosystem.

Program design structures to support omnichannel relationships

Specific data factors for branch performance, customizing branch strategies to specific markets, the bottom line on digital banking and the branch.

The future of the branch is not just about real estate. In an ever-changing world — where consumer propensity for digital and omnichannel tendencies fluctuate on an individual and demographic level — the best strategy will be relationship-driven. This may involve new top-of-funnel customer acquisition strategies, deposit-tiering (based on strength) and new methods of “trial” conversion. But these steps could ultimately result in deeper relationships, lower attrition and better performance.

Rahul Wadhawan

Principal, Strategy&, PwC US

Dean Nicolacakis

Principal, PwC US

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bank branch strategic plan

Bank of 2030: Transform boldly

Future of banking.

To be successful, the bank of the future will need to embrace emerging technology, remain flexible to adopt evolving business models, and put customers at the center of every strategy. Learn how we can help you transform boldly.

Adapting for the future

The future of banking will look very different from today. Faced with changing consumer expectations, emerging technologies, and new business models, banks will need to start putting strategies in place now to help them prepare for banking in 2030. Explore eight key trends below that are changing the banking landscape.

CyFi (cyber risk and financial crime)

The financial crime ecosystem is evolving as criminals adopt new and innovative ways to commit crime. Additionally, regulators continue to tighten the compliance regime and toughen criminal penalties. Traditional and siloed prevention methods are no longer protecting consumers from complex and sophisticated financial crimes, and this reputational damage can severely compromise financial institutions.

Financial institutions need to embrace advanced technologies such as analytics and artificial intelligence to improve threat visibility and detect fraud effectively.

Data integrity and analytics

It is said that data is power. Although data is plentiful, it’s often not easily accessible, clean enough, or integrated. And opening up customer transaction data to third parties is likely to have profound effects on traditional retail banking, requiring organizations to make strategic choices around business-model impacts and customer retention.

Digital and emerging technologies

New technologies are drastically changing the banking and capital markets industry in the front, middle, and back office. AI and automation are proving to be valuable in ways we never thought possible. Blockchain has led to innovation across the business and will continue to do so. Cloud is changing the industry and has implications we have not experienced.

Companies are trying to understand these technologies, see where and how they can be used, and how they may work with legacy technologies which are in place already.

Related insights:

Cloud banking: More than just a CIO conversation

Embracing and becoming digital

Digital transformation might be the buzzword of the day, but for banks it can be a critical imperative to succeed in a changing business environment. While many banks are experimenting with digital, most have yet to make consistent, sustained, and bold moves toward thorough, technology-enabled transformation. Technology will continue to be the driver of business growth and central to delivering a wide range of services through strong customer experience.

Enterprise agility

The accelerated pace of technology innovation is giving rise to new business models at an even faster speed. Today’s competitive advantage doesn’t come from being big, but from being fast and nimble and that should hold true in 2030. Banks need to embrace change and harness the power of digital forces to innovate in smaller, bolder cycles.

Future of work

What will the future work and workforce look like? Financial institutions are embracing new technologies and investing heavily in digital transformation initiatives. Automation and artificial intelligence are replacing human thinking and urging institutions to revisit their talent landscape and the skills required to stay ahead of the curve. Additionally, trends such as the gig economy and crowdsourcing are changing the way work is done.

How can institutions successfully integrate the digital and human workforce? How will they change their operating models to remain relevant? How can institutions retain and grow talent in this ever-changing environment?

Leveraging platforms and monetizing data

How can banks offer clients what they need, when they need it, in a way they want to receive it? Institutions are looking at ways to improve customer experience, and as we head toward 2030 the issue is becoming more difficult to solve. Data is power. How can firms use data to optimize their products and services, and sell in a way that customers want?

Banks will need to decide how they want to utilize platforms, and the data behind them, in order to grow.

Orchestrating across the ecosystem

The financial services ecosystem is growing. Regulators, fintechs, big techs, banks, and others will need to work together as we move towards 2030. Each offers skills and services which others will need to serve customers. The importance of a deliberate ecosystem strategy and the effective orchestration will be critical.

Firms will need to select how and where to partner. But how can one embed and operationalize optionality and flexibility into their strategy?

The time for transformation is now

How can you drive bold transformation in your organization over the next 10 years? Learn how our holistic, integrated solutions can help you address the challenges and maximize the opportunities of the next-generation bank.

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Deloitte’s Global Financial Services Digital Transformation leader, Michael Tang, shares insights about open banking, and the impact it has on consumers and the financial services business models.

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Rewriting the rules in retail banking

Retail banks have long competed on distribution, realizing economies of scale through network effects and investments in brand and infrastructure. But even those scale economies had limits above a certain size. As a result, in most retail-banking markets, a few large institutions, operating at similar efficiency ratios, dominate market share. Changes to the retail-banking business model have mostly come in response to regulatory shifts, as opposed to a purposeful reimagining of what the winning bank of the future will look like.

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Retail banks have also not kept pace with the improvements in customer experience seen in other consumer industries. Few banks stand out for innovation in customer interaction models or branch formats. Marketing investments have traditionally focused on brand building and increasing loyalty: a reputable brand stood for trust and security and became a moat, providing protection against new entrants to the sector.

Today, the moats that banks have built are more likely to restrict their own progress than protect them from attackers. Four shifts are reshaping the global retail-banking landscape to the point where banks need to fundamentally rethink what it takes to compete and win. This should be an urgent priority for banks. The pace of change will likely accelerate, with a select set of large-scale winners emerging in the next three to five years that will gain share in their core markets and begin to compete across borders, leaving many subscale institutions scrambling for relevance.

Four shifts are reshaping retail banking

Over the next three to five years, we expect a few players to emerge from the competitive scrum to gain dominant share in their core markets and possibly beyond. These firms will have taken bold and decisive actions to capitalize on the following shifts that are reshaping the industry. In some cases, these winners will be incumbents that build on an already significant share; in others, they will be institutions newer to the banking industry, which use their agility, strategic aggressiveness, and sharp execution to attract customers.

1. The traditional distribution-led growth formula no longer applies

Until the financial crisis in 2007, a retail bank’s total share of deposits was tightly linked to the size of its branch network. Over the past decade, this relationship between deposit growth and branch density has weakened. Deposits at the 25 largest US retail banks have doubled over the past decade, while their combined branch footprint shrank by 15 percent over the same period. This reverse correlation is even sharper for the top five US banks—while reducing branches by 15 percent, they increased deposits by 2.6 times (Exhibit 1). While there have been previous periods of branch contraction, they were clearly tied to economic downturns; this most recent wave of retrenchment has persisted through a period of robust economic growth.

Retail-banking branch networks are contracting across Europe, North America, and the United Kingdom (Exhibit 2), although the pace of change varies considerably between regions. Those that are ahead of the curve have reduced branches by as much as 71 percent (Netherlands). Banks in North America and Southern Europe are reducing branches and growing digital sales at a more gradual rate.

The rate of branch reduction is often tied to customer willingness to purchase banking products online or on mobile devices. Eighty to 90 percent of banking customers in the Nordics, for example, are open to digital product purchases for most financial products, compared to 50 to 60 percent in North America and Southern Europe. While customer willingness to purchase products via digital channels varies, however, the common thread is that in all markets this readiness is far ahead of actual digital sales and will require banks to catch up to consumer needs and expectations. Within any specific market, of course, there are banks that have acted swiftly to adopt digital and remote as their main channel for interactions; these banks are pulling away from the pack and have taken decisive actions on several fronts:

  • Set a bold aspiration for sales/service channel mix. Banks must do more than react to shifts in consumer preferences—they need to set aspirational targets for sales and service across channels. Some customers will self-select into digital channels, but banks can do more to encourage less motivated customers to make the shift. Banks in markets like the Nordics and the United Kingdom have reduced the number of customers using branches by up to 60 percent by focusing on how to serve the heaviest branch users effectively through other channels.
  • Use advanced analytics to reshape the physical footprint. Optimizing the branch network requires a deep understanding of consumer preferences in every micromarket, and of the economics of making changes at the branch level. Leading institutions are using combinatorial optimization algorithms to optimize the net present value (NPV) of the network based on granular customer data on characteristics such as digital propensity, willingness to travel, needs based on transaction patterns and branch usage, and the size and space/format of branches.
  • Develop cutting-edge digital sales capabilities. Achieving meaningfully higher levels of digital sales requires sophisticated digital marketing and an understanding of how to optimize each stage of the funnel. Most consumers already seek information on financial products on digital channels, but few institutions are highly effective at converting these inquiries into digital sales. Leading banks use first- and third-party data (for example, geospatial, browsing behavior), a robust marketing technology stack (such as 360-degree view of customer, omnichannel campaigns), and an agile operating model (for example, cross-functional marketing war rooms). With these elements in place, progress can be rapid; a North American institution tripled annual online product sales in 12 months.

Leading a consumer bank through the coronavirus pandemic

Leading a consumer bank through the coronavirus pandemic

2. customer experience is beginning to generate meaningful separation in growth.

Across all retail businesses—including banks—customers now expect interactions to be simple, intuitive, and seamlessly connected across physical and digital touchpoints. Banks are investing in meeting these expectations but have struggled to keep pace. Many are hampered by legacy IT infrastructures and siloed data. As a result, few banks are true leaders in terms of customer experience. Even for institutions ahead of the curve, typically only one-half to two-thirds of customers rate their experience as excellent.

The impact of this less-than-stellar performance is measurable. For example, McKinsey analysis shows that in the United States, top-quartile banks in terms of experience have had meaningfully higher deposit growth over the past three years (Exhibit 3). The few “experience leaders” emerging in retail banking are generating higher growth than their peers by attracting new customers and deepening relationships with their existing customer base. Highly satisfied customers are two and a half times more likely to open new accounts/products with their existing bank than those who are merely satisfied.

These experience leaders are adopting tactics pioneered by digital-native companies in other sectors such as e-commerce, travel, and entertainment: setting a “North Star” based on proven markers of differentiated experience (for example, user-experience design, carrying context across channels), redesigning journeys that matter most for digital-first customers and not just digital-only customers, and establishing integrated real-time measurement that cuts across products, channels, and employees. These banks know that customer experience is not just about the front-end look and feel, but that it requires discipline, focus, and investment in the following actions:

  • Focus on the journeys and subjourneys that matter. The relative contribution of subjourneys (such as app downloading; activating account) in determining overall customer experience varies considerably. In fact, ten to 15 subjourneys have the biggest customer-satisfaction impact for most products and should thus be the first priority. For instance, when opening a new deposit account, the researching options subjourney has eight times the impact on customer satisfaction than other account-opening subjourneys, on average. For banks, the key is to prioritize these high-impact subjourneys and systematically redesign them from scratch—a process that can take about three to four months and result in at least a 15 to 20 percent lift in customer satisfaction.
  • Change the way you engage with customers. Experience leaders understand that digitization is not just about creating a cutting-edge online and mobile experience, and that satisfaction is shaped by customer experience across channels . The experience should be seamless, especially on journeys that are more likely to take place over multiple channels, such as new account opening, financial advice, or issue resolution . One wealth manager equipped its frontline relationship managers (RMs) with robo-advice algorithms that are in sync with what customers see on the self-directed channel—and provided the RMs with daily and weekly next-best-action recommendations to nudge their clients. Banks need to deploy these tools broadly and empower their frontline staff to play a more consultative role that blends human and digital recommendations. They will also need to revisit how these employees are incentivized, shifting to a longer-term view of relationships and profitability rather than just product sales.
  • Translate data into personalized products and real-time offers. The amount of data available on individual customers or prospects has exploded in recent years. The challenge is to convert these data into actionable nudges and highly relevant offers for customers that are delivered at the right moment. Credit-card companies have long offered discounts on specific spending categories or with specific retailers. Today, they can improve loyalty and share of spending by providing location-specific offers right when a customer enters a coffee shop, movie theater, or car dealership. South Africa’s Discovery, as an example, is launching a bank with product features that are informed by behavioral science and incentive-design research.

3. Productivity gains and returns to scale are back

Larger retail banks have historically been more efficient than their smaller competitors, benefiting from distribution network effects and shared overhead for IT, infrastructure, and other shared services. Our analysis of over 3,000 banks around the globe shows that while there is variation across countries, larger institutions tend to be more efficient both in terms of cost-to-asset and cost-to-income ratios. However, beyond a certain point, even larger institutions struggle to eke out efficiencies or realize benefits from scale.

We expect this paradigm to change over the next few years, as structural improvements in efficiency ratios and increasing returns to scale enable some large banks to become even more efficient. The reason is twofold: first, advances in technologies such as robotic-process automation, machine learning, and cognitive artificial intelligence—many of which are now mainstream and commercially viable—are unleashing a new wave of productivity improvements for financial institutions. Deployed effectively, these tools can reduce costs by as much as 30 to 40 percent in customer-facing, middle-, and back-office activities, and fundamentally change how work is done. Dramatic change has already taken place in banking sectors such as capital markets , where algorithmic trading and automation are radically changing the talent profile.

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The second factor leading to a wave of productivity improvement in retail banking is the shift from physical to digital channels for customer acquisition. Banks with scale—and skills in leveraging that advantage—will achieve customer-acquisition costs of up to two to three times lower than their smaller peers. Their outsized volumes of customer data will lead to better targeting and funnel conversion. As investments shift toward digital channels, the productivity gap between large and small banks will widen.

This dynamic has played out in more digitally mature industries, with firms like Amazon and Priceline acquiring customers at a significantly lower cost than competitors. As in these industries, eventually a limited number of dominant firms will emerge, squeezing out undifferentiated midsize and smaller competitors. There are early signs of this trend: undifferentiated smaller community banks in the US have lost a significant share of deposits over the last two to three years, while the three largest banks have gained share. Of course, scale is not everything. Banks that succeed in this new wave of productivity will also have taken the following actions:

  • Use cutting-edge technology to automate. Over the next few years, banks will increase their use of technologies such as natural language processing and artificial intelligence to automate customer-facing interactions and complex internal tasks.
  • Build and reinforce the brand. With rising digital sales consumers have more choice than ever in selecting a financial-services provider. However, our research shows that across most categories, consumers actively consider only two to three products before deciding on a purchase. So it remains as important as ever for a bank to be part of the initial consideration set. Brands with superior awareness and recognition are not only more likely to be part of the initial consideration set but also achieve higher conversion rates than lesser-known brands when they are considered. A leading credit-card provider in the United Kingdom that invested heavily in brand awareness is now twice as likely to be actively considered—by 17 percent of consumers versus 7 to 10 percent for other brands—and experiences 50 percent higher conversion when considered compared to lesser-known brands.

4. The unbundling and ‘rebundling’ of retail banking

The tight one-on-one retail-banking relationships of old are unbundling. Forty percent of US households today hold a deposit account with more than one institution. It is common to have a mortgage with one bank, an unsecured loan with a different lender, and separate deposit and investment accounts. The banking relationship is fragmenting even faster in countries with higher digital adoption.

This decline of customer loyalty provides a perfect context for firms seeking to enter banking in a selective way— focusing on the most profitable segments . Some attackers have demonstrated that while they cannot compete with incumbent banks’ broad access to customer data, they can compete effectively on customer experience coupled with aggressive pricing.

New entrants in financial services typically begin by focusing on a niche—making either a product- or segment-focused play. Their ambition, however, is often to own the full banking relationship of this segment over time—providing cards, mortgage products, and broader banking services.

The Open Banking movement , heralded by Europe’s second Payments Service Directive and the United Kingdom’s Open Banking Standards, has the potential to accelerate the unbundling of banking in the regions where it applies, leading to increasingly intense competition over the next few years. The requirement for banks to share data and provide access to consumer and small-business accounts through a common framework of application programming interfaces is likely to fuel a wave of innovation and level the playing field for fintechs and technology providers seeking entry through payments or consumer financing.

The trend toward unbundling in financial services is well under way, but where it will lead is still an open question. In industries such as music, television, e-commerce, and transportation, digital distribution led to unbundling that destroyed value for incumbents in the short term; over time, consumers tend to converge on a single provider—often an attacker. In this context, firms that effectively orchestrate platform or ecosystem environments tend to eventually emerge as winners.

The balancing act: Omnichannel excellence in retail banking

The balancing act: Omnichannel excellence in retail banking

The history of the music industry over the last 20 years provides a possible model for how things will go in banking. Until the 1990s, music distribution was dominated by stores selling tracks that record companies “bundled” onto albums. In the early 2000s, digital distribution, especially via iTunes, radically reduced distribution costs. Consumers could now “unbundle” albums by purchasing individual tracks online; not surprisingly, many record stores went out of business. Over the past few years, however, we have seen a “rebundling” in the form of the streaming playlist. Streaming services are now the dominant distribution channel, with a few large players such as Spotify and Apple emerging as winners. The success of these platforms is based on their ability to create highly personalized bundles based on consumer needs and preferences, and a superior interface without the friction of purchasing tracks individually. Leaders have created significant value for consumers by using customer data and insights to deliver a superior experience, rather than by manufacturing the underlying product.

If we apply this scenario to banking, winning firms will be those that leverage superior access to customer data to provide truly differentiated and cutting-edge experiences—potentially extending beyond financial products and services. To do this effectively, banks will need to retain privileged access to information about consumers’ sources and use of funds, especially through payments and transaction activity. Banks that rebundle effectively will use this data to deliver compelling and integrated experiences that provide seamless funding, investment, payments, and money-movement capabilities. The bottom line is that in order to reverse the unbundling of financial services, banks need to make it worthwhile for consumers to have a relationship with one institution; they need to deliver not only simplicity and convenience, but also superior value. Only a few banks in each market are likely to be able to succeed with this strategy.

Already, large technology firms such as Amazon are extending into parts of the financial-services value chain, starting with areas where they have a data advantage such as payments, short-term financing for purchases, and working-capital loans for merchants on their platform. To counter the unbundling of their most profitable products, banks need to develop capabilities that few currently possess, and follow the lead of successful technology platforms:

  • Retain superior access to data on transactions and financial behavior. As vast amounts of data are captured by tech firms on consumers’ behavior and preferences, one of the last bastions of valuable information is data on transactions and financial behavior. To retain unparalleled access to this data, banks will need to continue to own the transaction layer, giving them a full view of inbound and outbound activity, to form a complete picture of consumer balance sheets. Historically, this required a bank to be a customer’s primary checking-account provider; over time, we expect that institutions could do this without necessarily owning the checking-account relationship. In some cases, payments or transaction providers could see a significant share of customers’ spend volume. Financial aggregators may also be in a position to capture a broad spectrum of customer activity and use it to build an analytics advantage.
  • Leverage insights to develop innovative products and features. The traditional suite of products that financial institutions offer has remained largely unchanged over the past few decades and is often structurally hard to change given how banks are organized. More nimble firms will be able to leverage insights to create unique offerings—for example, cash in a checking account could automatically be optimized for return based on financial behaviors and spend patterns without needing to ring-fence and transfer it to a separate high-yield deposit or brokerage account.
  • Extend beyond purely financial services and products over time. There are a couple of clear benefits that financial institutions are likely to have relative to ecosystems being created by large tech firms. Superior access to financial information enables them to create faster and more precise offers for big-ticket products that have financing needs associated with them (such as homes or cars). For these types of products, banks could be well positioned to own the full customer journey, including the browsing experience and the transaction. One Northern European bank has developed a mobile app that integrates house searches, booking viewings, budgeting, transactions, and help with setting up a new home (for example, utilities, appliances, and renovation).

Retail banking is at an inflection point, and we expect the pace of change to accelerate significantly over the next three to five years. Success will require clarity in direction, and speed and agility in execution. Retail banks that capitalize on current shifts in the market will emerge with a winning position in their core markets and begin to compete across borders.

This article is an edited extract from the full report,   Rewriting the rules: Succeeding in the new retail banking landscape (PDF–680KB).

Vaibhav Gujral is a partner in McKinsey’s New York office, where Nick Malik is a senior partner; Zubin Taraporevala is a senior partner in the London office.

The authors wish to thank Ashwin Adarkar, Jacob Dahl, Filippo Delzi, Miklos Dietz, Dave Elzinga, Darius Imregun, Somesh Khanna, Marc Levesque, Alejandro Martinez, and Robert Schiff for their contributions to this article.

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Five initiatives for streamlining your branch operations

bank branch strategic plan

Retail banks tend not to disclose detailed breakdowns of the costs associated with their branch networks. According to an article from McKinsey & Company , the physical network, workforce and branch support can account for more than half of a retail bank’s operating expenses. With increasing use of digital banking and self-service technologies, why are leading banks still investing in branches and bankers?

Because they are keenly aware of the consequences of blanket cost cutting on customer loyalty, community impact and growth. And, they know they can give customers what they want and improve profits at the same time with a strategy that includes streamlining branch operations. As Richard Davis, retired chairman and CEO of U.S. Bank and one of the greatest bankers in recent times, once said, “He who has the lowest efficiency ratio also often has the biggest revenue.”

Identifying waste and opportunities for improvement

The two prerequisites for streamlining branch operations are measurement and analysis. You can’t improve what you cannot observe, measure and analyze. In order to improve operational efficiency, you need to have an unbiased, detailed view of customer arrivals, wait times, and branch workflows, as well as how associates are spending their time on both serving customers and completing non-customer-facing activities. You also need to benchmark your metrics against top performers.

For a large regional bank, branch observations and analytics provided the following insights:

» Inefficient non-customer-facing activities caused excessive overtime.

» Customer wait times measured below industry average for teller transactions.

» Branch employees spent only 5 percent of their time on growth activities.

For the U.S. branch channel of a global bank, branch observations and analytics provided the following insights:

» Branch employees spent 55 to 60 percent of their time performing customer-facing work.

» Bankers spent only 5 percent of their time prospecting for new customers.

» More than 20 percent of branch staff time was spent on operational or administrative tasks.

Identifying waste and opportunities for improvement is a continuous process. Successful leaders involve associates in the process, gamify it and reward employees.

Planning, prioritization and execution

Once you identify waste and opportunities for improvement, you can plan and prioritize your execution of various streamlining initiatives. How can you reduce or eliminate non-value-add activities? How can you make business-value-add activities more efficient? How can customer-value-add activities be improved? Branch transformation leaders deploy five proven initiatives to streamline branch operations.

1) Eliminate. Eliminating non-value-add tasks is clearly the low hanging fruit. It doesn’t require a big investment and can generate immediate expense reduction.

2) Automate. Automating labor-intensive cash handling processes is the most popular branch automation initiative. According to recent research from BAI and Kiran Analytics , 65 percent of the surveyed bankers said they have automated cash handling with TCRs. Cash automation can increase teller efficiency, reduce errors and eliminate mundane vault transactions that teller supervisors typically perform. Automating manual branch management processes such as shift scheduling is the second most popular branch automation initiative. With automated scheduling, you can improve the branch manager’s productivity and workforce engagement.

3) Enable self-service. According to Harvard Business Review , 81 percent of customers attempt to take care of matters themselves until they need assistance from a live person. With digital channels and self-service, you can enable noncash transactions such as wire transfers, cashier’s checks, and new card issuance. And, you can free up branch staff to focus on customer-value-add activities. Leading banks are increasing investments in assisted self-service in their branches. One approach is in-person assistance from branch staff who monitor self-service kiosks via tablets. The other approach is remote assistance via ITMs (Interactive Teller Machines).

4) Centralize. Banks must perform certain compliance risk management and operational control activities. These activities have traditionally been performed in branches. Centralizing these business-value-add activities can increase operational efficiency and eliminate the need for a dedicated full-time employee in-branch.

5) Optimize staffing. Optimizing the branch workforce has been one of the top challenges of banking leaders. Leading banks are utilizing cloud-based workforce management software to help address this challenge. These advanced labor modeling solutions help determine the optimal staffing mix and level for each branch in the network, accounting for full-time, part-time and peak-time staffing, as well as the deployment of market-level staffing and float pools to cover holes in permanent staffing.

Executing on multiple streamlining initiatives requires successful change leadership. Leaders who can accomplish it lead with culture and leverage data and analytics as their compass for execution.

Streamlining branch operations pays off

Early adopters of branch transformation began streamlining their branch operations four to five years ago. As a result, they have already realized the benefits of their initiatives. One of the world’s leading consumer banks started streamlining branch operations five years ago and reduced staffing levels by 15 percent over two years. Over the five years, the bank doubled revenue per hours worked by a full-time employee (FTE) in their branches. A large regional bank that started four years ago achieved two significant operational efficiency improvements: It decreased staff overtime by 80 percent and reduced branch open hours by 11 percent.

If you are interested in streamlining your branch operations, follow the steps that work for branch transformation leaders:

» Observe, analyze, measure and benchmark to identify waste and opportunities for streamlining your branch operations.

» Plan, prioritize and execute the five proven streamlining initiatives.

» Make operational efficiency and continuous improvement part of your bank’s culture.

» Team up with a proven partner with deep expertise in branch analytics and workforce optimization in the retail banking industry.

Kerim Tumay is vice president of marketing with Kiran Analytics , a Verint Company. He can be reached at [email protected] .

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bank branch strategic plan

In the race for deposits, speed and convenience matter to customers

Feb 14, 2024

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ABA Banking Journal

Branch Transformation Strategies

By Chris Nichols

Which of these branch transformation strategies are you pursuing?

At present, there are two major schools of thought over what the future of the branch looks like. In one camp, we have the “omnichannel” group, while the other is the “mobile-first” faction. How you fall out is of no small consequence, as the difference between the two is huge in terms of customer experience and cost. In this article, we explore both models—and look at a third alternative—and show why this single choice will have far reaching ramifications the success or failure of your bank.

The omnichannel orientation.

The omnichannel crowd stakes out a position that the branch will remain relevant. The idea is that banks should set a strategy that allows customers to conduct their banking business through any channel they want, with the ability to seamlessly switch between channels. Here, the core design means that customers could start a loan application via the mobile phone, sign it on the desktop and seek help with questions in the branch.

Most large and regional banks fall into this group. Proponents point to the fact that survey after survey show that the customer continues to want to use the branch.

The downside of this strategy is that it is the most expensive way to architect a bank.

Executing on this strategy not only requires an investment in all major channels—to include the branch, mobile, desktop, call center, voice and any future channels—but also a data warehouse with thick transaction layer that allows processing across multiple channels.

This is no easy feat to pull off. But banks that can will also gain the advantage of having channel diversification that can handle anything else that might arise in the future. Part of the attraction of this school of thought is that it offers banks the greatest level of operating stability.

The mobile-first movement.

The mobile-first school, on the other hand, laughs at the omnichannel crowd. Proponents of this view argue that surveys consistently show that bank customers want branches because we make them want branches. If experience tells you that you must go into a branch to solve a problem, send a wire more than $10,000 or complete a commercial loan application, then, of course, you are going to want a branch.

Before Amazon, everyone wanted a book store near them.

The mobile-first school of thought foresees the end of branches—the only exception being a few flagship branches in major metro areas. Banking would be almost completely contained in an app—supplemented by some online, desktop support. The assumption here is that the banking customer never wants to go into a branch unless it’s absolutely necessary. Any face-to-face interaction would be done via a Facetime-like banking application.

Being able to engage with customers on a robust mobile platform eliminates the need for developing banking capabilities on social media, text, chat, ATM or other channels. Current banking channels would all be integrated into mobile—thereby simplifying the choices for the customer.

The possible implications are astonishing:

  • The processing power and capabilities of the smartphone, to include location services, camera and app integration—allow the phone to act as a “local cloud,” enabling the device to gather, secure, process and transmit the banking information of the retail customer.
  • Wifi and Bluetooth integration help the smartphone extend the reach to a variety of other integrated channels, such as voice and home IOT devices.
  • On the enterprise level, “edge computing” allows for the large-scale aggregation and processing of data from channels such as sensor-enabled manufacturing equipment, point-of-sale terminals and cash management equipment like scanners and cash recyclers, and then downstream the compiled data to the commercial customer’s smartphone.

The smartphone, in other words, could replace the branch as the traditional central point of bank information processing.

Having a mobile-first model is substantially less expensive and more flexible than a branch-centric or omnichannel model.

Mobile-first proponents argue that the savings on capital and technology can be passed along to the customer. By focusing on mobile, the mobile-first bank can master the one channel while the omnichannel banks will be trying to figure out how to pass your CRM data from ATM to desktop.

Furthermore, they contend that there are few situations that don’t involve the delivery of a physical good in which customers require the ability to switch channels. Currently, the exchange of physical currency is the only reason why a customer may need an ATM or branch. And in the next ten years, the use of currency may be minimized to the point of immateriality. If the mobile experience goes right, customers will be more than happy to complete everything in the digital world.

What’s at stake?

At the risk of seeming overly dramatic, this single decision will control a bank’s future.

The omnichannel crowd believes that the banking customer of the future will always want physical interaction, while the mobile-first school of thought believes that if mobile can serve all needs, then online and the branch will be limited and largely exist to support mobile.

Proponents on both side point to the fact that bank customers are getting more and more comfortable with a variety of channels, especially mobile. The latest Gallup poll , illustrated below, shows that 64% of bank customers use four or more channels already. On the digital spectrum, that shows a majority of banking customers using more digital channels than physical.

The challenge is that both infrastructures take years to build and banks that can successfully execute first will have a huge advantage.

Banks that are able to execute on either vision will be able to acquire customers at a cheaper and faster rate than the competition while being able to manage that customer at a lower cost than a traditional branch-centric bank.

Community bank positioning.

Part of the challenge is for banks to start now with a 10-year transformation plan. While this is outside the planning time horizon of many banks, branch transformation demands a longer-term view. This is something that banks will have to adjust for—creating a strategic plan that goes from the traditional three years to a ten year horizon.

The omnichannel methodology looks the most similar to most current architecture, and since all channels are covered, it’s the safer bet when it comes to customer service. For the $500 million community bank, however, pulling off an omnichannel strategy is almost prohibitively expensive. Sure it will become cheaper in the future, but the sheer capital investment alone—in addition to the human capital support—puts this future out of reach in almost every scenario that can be imagined.

Can community banks refocus on a mobile-first strategy?

Maybe. A mobile-first strategy can be achieved, but community banks will have to decide on what a “slimmed down” version looks like. Banks from different markets will have to band together to develop their own proprietary platform.

Alternatively, banks may decide to white label a third-party vendor’s technology and accept the risk of losing their service-based competitive advantage. Though it may seem daunting to community banks, working with mobile banking vendors is likely the easier and safer strategy to execute on. Banks choosing this path would be served well by focusing their strategic plan here and figuring out how they can augment any third-party applications to create additional customer value.

The third option for community banking.

Banks that are not big enough or sophisticated enough to pull off an omnichannel infrastructure or execute on a mobile-first strategy will likely be acquired quickly. As a bank’s growth-cost differential widens enough, its franchise price will drop to the point where it will become more and more accretive to a bank with a lower operating cost infrastructure.

As we run this model forward, some argue that there will be less than 1,000 banks in America able to survive. However, the consolidation will present an opportunity for some community banks that choose to go a separate way.

Community banks that specialize in a niche can survive.

As omnichannel and mobile-first banks make geography irrelevant, the next strategic option is to stay ahead of technology by focusing on a niche market such as a particular industry or type of banking. While this path will have limited growth potential, it will provide community banks with another 20 years or more of runway and above average profitability.

Developing a hyper-focus on a customer segment or industry will allow a bank to remain relevant. Niches such as healthcare, professional firms, food processors or similar will only be limited to a bank’s creativity.

The cost of doing nothing.

Of course, many banks will be frozen by this decision and passively opt to not choose. This could be the most risky bet of them all. Customers will gravitate towards the omnichannel bank because of the service, the mobile-first bank because of their convenience and efficiency, or the specialty bank because of their knowledge. To compete, banks that don’t choose a strategy will have to misprice risk in order to attract customers—which will hasten that community bank’s demise at the next downturn.

The community bank that does nothing is tacitly betting on the hope that the future banking customer will primarily desire the branch—and that today’s status quo will be maintained. Maybe that is the correct way of thinking about the future. But we are not so sure.

Whatever path your bank’s chooses, being proactive and having intent in your decision will place you light-years ahead of the bank that sits back and lets the future happen.

Chris Nichols is a contributing editor to ABA Bank Marketing.com . Located in San Francisco, he is the chief strategy officer of CenterState Bank , which has its headquarters in Winter Haven, FL.

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New Branch Strategies for Branch Styles that Adapt Flexibly to Customer Needs

The environment in which financial institutions operate is undergoing major changes due to finance industry entrants from other business categories and advances in IT, creating a need to re-evaluate the channels that serve as interfaces with customers. While, among those channels, there is a need for more effective specific reforms based around cost reductions in the branch channels of banks, such core measures as branch consolidation have been fully implemented already, and further moves in this direction, such as additional branch closures, will likely hurt customer service. In response, with regard to the strategic activities of banks, Hitachi is proposing to supply services that cover the work handled by individual branches. The proposed services would support four types of branch strategies with the aim of making banks more distinctive and improving their profitability. They would also rethink banking business processes with the aim of improving costs across the banking industry in the area of non-strategic activities through selective use of bundling and unbundling.

bank branch strategic plan

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About the authors, takeshi shirai.

bank branch strategic plan

Planning Group, Financial Channel Solution Department 1, Financial Channel Solution Business Unit, Financial Channel Solutions & Payment Services Division, Financial Institutions Business Unit, Hitachi, Ltd. He is currently engaged in the planning of financial channel solutions.

Takashi Yamagishi

bank branch strategic plan

Service Group, Financial Channel Solution Department 1, Financial Channel Solution Business Unit, Financial Channel Solutions & Payment Services Division, Financial Institutions Business Unit, Hitachi, Ltd. He is currently engaged in the planning of financial business.

INTRODUCTION

IN the past, bank branches have been required to accurately process large numbers of requests for different types of administrative procedures that were brought to them by visiting customers. Given that situation, banks have reduced the volume of administrative procedures handled by branches and shifted the role of staff from administration to sales by expanding the use of channels such as automated teller machines (ATMs) and Internet banking that allow customers to complete the procedures themselves. Recently, there has been an emergence of services from players other than banks that duplicate some channel functions, such as ATMs at convenience stores and mobile payments, and also changes in the population distribution in Japan as a whole and at the regional level. These environmental changes are now seen as making it difficult for banks to retain sufficient contact with their customers. In order to respond to this situation, instead of the “branch facility” of the past, which delivers identical customer services at all branches, it will become important to provide facilities that can deploy branches rapidly in accordance with the aims (strategies) of each branch and the characteristics of the region.

This article describes what Hitachi is doing with regard to bank branch strategies in response to these challenges to the branch channel.

ENVIRONMENTAL CHANGES SURROUNDING FINANCIAL INSTITUTIONS AND CHALLENGES FACING THE BRANCH CHANNEL

Environmental changes surrounding financial institutions.

Japan's total population is predicted to fall below 100 million in 2048, with the working population also falling below 60 million (roughly 20% lower than in 2015). Also anticipated are a fall in demand for capital, especially from regional companies, and a lowering of the return on capital of regional financial institutions, in particular over the medium and long term, due to the negative interest rate environment. While finance remains a regulated industry in Japan that is still subject to numerous regulations under the supervision of the Financial Services Agency, the entry of new market players is anticipated due to factors such as financial technology (FinTech) and the May 2016 amendments to the Banking Act. With regard to technological advances, meanwhile, smartphones have proliferated rapidly sparked by the appearance of the iPhone * (with ownership of smartphones averaging about 83% among people in their 20's and 30's) and this is anticipated to change user values with respect to services. Given these circumstances, in order to maintain banking service levels, what are needed are operational efficiency improvements made through practices such as business process re-engineering (BPR) and business process outsourcing (BPO), which utilize information technology (IT), and the development of customer-oriented services in order to thrive amid more diverse and intense competition. Unfortunately, improvements to operational efficiency and usability for customers frequently turn out to be conflicting objectives. What is needed to solve this dilemma is a paradigm shift in resource investment. Along with directing resources toward strategic services while also keeping up with changes in user values, such as those associated with FinTech, it has also become necessary for banks to make further cost reductions by pushing ahead with the standardization of non-strategic, low-margin activities, such as administrative procedures, where there is little scope for differentiation from other banks, and on consolidating such work with other banks (see Fig. 1).

Changes in Bank Customers

In considering future customer services, Hitachi considered channel strategies in terms of a 3C analysis of companies (banks), customers, and competitors, dividing bank customers into three segments, namely the asset-rich segment, the asset-builder segment, and the consumer segment (see Fig. 2). This section considers the consumer segment and the asset-builder segment.

The consumer segment contains those customers who are active consumers. The competitors in this context include retail-based banks and communications- and IT-based banks. A feature of these banks is that they deploy their own self-service channels that offer greater customer convenience, such as convenience store ATMs, and operate through business partnerships. The requirements for dealing with the consumer segment are to build up the brand while also installing more cash dispenser to improve customer convenience, and to improve profitability by expanding channels that provide access to consumer finance, a product that is in strong demand by people in this segment. Another requirement is to minimize investment costs as some aspects are difficult to differentiate from other banks.

The asset-builder segment refers to those customers who have a degree of savings that they are starting to increase gradually. Whereas people in this segment have a need for ways to invest their savings (portable assets) and to pass on property, the requirement for companies (banks) is to step up their sales with the aim of generating steady income from fund management fees. The competitors for the asset-builder segment are other banks (regional and mega banks), with a key point being the banks' use of their own product services and channels as a means of differentiation.

bank branch strategic plan

Challenges Facing the Branch Channel and Future Branch Strategies

Next, because the branch channel is so dependent on regional characteristics, this section looks at the distribution of the population across different regions of Japan. Because this distribution is characterized by increasing polarization of the population between urban and suburban locations, it is necessary to consider urban and suburban branch designs separately. For example, regional polarization is becoming increasingly pronounced, and the urban populations of most regions are increasing while the populations in rural and other non-urban areas are steadily falling. Nevertheless, many rural locations have only ever had a single bank branch, meaning that further branch closures naturally pose a difficult problem for staff optimization.

Moreover, when considering the strategic opening of branches in locations such as new housing developments, deploying these branches with a sense of urgency is difficult in terms of cost as well as other factors when they require the same sort of heavy equipment as conventional branches, such as safes. Another difficulty with improving customer service might arise, for example, in the neighborhood of a railway station in an urban area when planning to open a new branch at the eastern exit of the station in response to a development project when there is already another branch at the western exit, in which case it is not possible to justify the cost of a conventional branch.

To deal with these challenges, Hitachi believes that new measures are needed that will improve customer convenience and cut costs by making changes to the bank branch network and branch facilities. Hitachi supports the branch strategies of banks through IT-based systems so that they can strengthen their business fundamentals and improve profitability while still maintaining ties to the community (see Fig. 3).

bank branch strategic plan

FOUR TYPES OF BRANCH STRATEGIES FOR FUTURE BANK BRANCHES

For future bank branches, Hitachi classifies the forms taken by bank branches into four main types with the aim of improving operational efficiency and speeding up branch deployment in accordance with the characteristics of the region and location. The four types are: unstaffed strategic branches, strategic branches designed to handle customer consultations, branches designed for efficiency, and advanced branches (see Fig. 4). The characteristics of each type of branch and the relevant solutions are described below.

bank branch strategic plan

Unstaffed Strategic Branches

bank branch strategic plan

Unstaffed strategic branches are located in areas with high foot traffic, such as railway station buildings or condominiums, and are aimed at obtaining new retail customers by serving as convenient neighborhood banks. Because these branches are equipped with self-service devices such as advanced ATMs (ATMs that can be used to process form-filling procedures) and remote tellers (which can be used to undertake procedures or consult with staff located remotely via a video link), they can operate with minimal staffing (either no staff at all or just one person). In addition to deposits and withdrawals, which can be handled by the ATMs, these branches can also be used for taxes, public funds, private funds transfers, and official procedures or specialist consultations (see Fig. 5).

Strategic Branches Designed to Handle Customer Consultations

bank branch strategic plan

Strategic branches designed to handle customer consultations provide a place where customers can easily communicate with the bank and are aimed at promoting services such as lending and the sale of financial products. Because these branches are designed for consultations, they do not make much use of cashiers or banking devices such as bankbook printers. Accordingly, a small number of such devices can be shared by the entire branch and operated from the tablets used by the staff. This minimizes the quantity of special-purpose equipment that needs to be supplied to a new branch and allows a customer-oriented layout to be adopted without having to worry about where these devices are installed. This enables the low-cost, strategic deployment of branches that are primarily intended for dealing with customers (see Fig. 6).

Branches Designed for Efficiency

bank branch strategic plan

A feature of branches that are designed for efficiency is that they enable a certain number of lobby staff to be retained while aggressively reducing the number of administrative staff through the use of self service. The aim is to reduce staff administrative workloads by having customers undertake such procedures for themselves, while maintaining contact with customers by having lobby staff greet them. Because the tablets used by the lobby staff in these branches have access to information provided by customers when undertaking procedures on self-service devices and their progress, the staff can monitor how each customer is getting along. This function makes it possible for staff to provide assistance or advice when appropriate, improving administrative efficiency, while still maintaining communication with customers (see Fig. 7).

Advanced Branches

bank branch strategic plan

Advanced branches combine all of the elements described above, including those for efficiency and sales improvement. A feature of these branches is that they are located in urban areas and have high foot traffic. They provide improvements in both efficiency and sales by having reception determine the requirements and aims of each customer's visit and then directing them to the appropriate service, making use of the information on the current status of the branch's staff and service channels. Administrative procedures can be performed on self-service devices, freeing staff to use their tablets for sales work in the lobby or the consultation rooms (see Fig. 8).

Applying Device Solutions to Match Branch Strategy

Up to this point, the strategies for each of the four types of branch have been described. This section describes the solutions to be applied for each branch. Hitachi supplies customer-operated self-service solutions, such as electronic bookkeeping stands that facilitate appropriate pre-assessments of customers when they arrive at the branch by having them electronically input the requirements for their visit, remote tellers that can be used to complete procedures using a video link when needed with assistance from remotely located staff who are provided to handle specialist consultations or to undertake procedures outside of normal working hours, and advanced ATMs that can be used for form-filling procedures as well as normal ATM functions. By supplying these self-service solutions, Hitachi aims to improve customer convenience by making them available for afterhours use, for example. By equipping staff with devices that allow mobility, such as tablets for staff, the flow of customers in the branch can be reformed to achieve a style of customer service where staff go out among the customers. The cost of devices is reduced by sharing banking devices between multiple staff. Cost reduction can be achieved without compromising service levels by applying a combination of these solutions that suits the characteristics of the branch (see Fig. 9).

bank branch strategic plan

MODULARIZATION OF BANKING SERVICES

Service delivery at bank branches demands a rapid response to customers' increasingly diverse needs together with more efficient operation of the associated systems. To shift personnel toward strategic activities while still maintaining and improving branch efficiency, it is necessary to break down business processes into individual functions, to modularize the IT for each function, and to develop practices that can make effective use of this IT. The implementation of these various modules also requires measures that are resilient to change, such as ways of strengthening crisis management, overall service capabilities, and governance, and the efficiency of bank operations can be improved even further by designing the modules to have a higher degree of reusability. Hitachi believes that modularizing banking services in an appropriate manner will facilitate things like the outsourcing of procedures that are handled at the level of individual modules or the consolidation of such work with other banks, and can develop into efficiency improvements that have even greater flexibility.

Use of BPO for Banking Services

Currently, progress is being made on outsourcing at the level of bank branches and elsewhere by spinning off particular operations. However, many of these spun-off operations include requirements that are specific to the bank concerned and it is feared that this will pose an obstacle to future initiatives such as the consolidation of such operations with other banks. In order to make further cost reductions and operational improvements, an important feature of BPO in the future will be that, rather than each bank offering its own individualized services, these services will be modularized as standard business processes so that the resulting modularized processes can be shared among banks. This modularization will require processes to be divided in order to permit the rapid introduction of new services and changes to practices. The applications in Hitachi's branch system packages were designed and developed in component form to facilitate this division and reconstruction, enabling implementation in the form of components and modules at a functional level. However, BPO requires not only the division and reconstruction of applications at the system level, but also the sharing and reallocation of human resources for performing administrative procedures. To solve this problem, Hitachi has started to supply a remote teller solution that provides support for such procedures from an off-site location.

The remote teller solution provides a way for tellers with specialist skills who are based off-site to accurately perform administrative procedures for customers. If this business process, too, can be suitably divided and reconstructed, it will be possible for different banks to consolidate the work in a way that lets them share resources (see Fig. 10).

bank branch strategic plan

BPO Model at Branches Shared by Financial Institutions

A new way of using branches that arises when changing the format of branches to suit the region (location) and aims of the branch, as described above, is for multiple financial institutions to operate branches jointly. An example of this that is already in operation is where multiple financial institutions provide after-sales services using a BPO model based on jointly operated branches, such as handling changes of address or reissuing cash cards for the private customers of regional banks who have moved away from their region to live in a city. It is anticipated that this approach will be adopted more widely in the future as a way of improving customer convenience in locations that have high foot traffic, such as near railway stations or in shopping malls, particularly in cities.

In rural areas, meanwhile, improving the efficiency of aging and unprofitable branches is a pressing concern for regional financial institutions, meaning there is potential for such rural branches to adopt a BPO model based on joint operation that can consolidate non-strategic after-sales services within a region by outsourcing this work to other regional financial institutions or agencies such as post offices that operate nationwide branch networks. Because mobile branches are not economically feasible in those rural areas that are even more sparsely populated, there is scope for having these operated by multiple financial institutions, or for services based on a joint BPO model involving cooperation with companies from other business categories, such as logistics. It is anticipated that BPO models like these that cross multiple industries and work through joint participation by multiple financial institutions or companies from other business categories will be adopted as a way for financial institutions to maintain service continuity. Hitachi believes that its solutions that facilitate the modularization of business processes and their division and reconstruction are suitable for implementing these BPO models in which operations are shared by multiple financial institutions.

CONCLUSIONS

This article has described the forms that Hitachi expects bank branches will take in the future and the measures for achieving these forms based on the challenges facing the branch channels operated by banks. It is anticipated that things like linking with new smartphone-based services and using ATMs as cash dispenser will play a more important role in the future as changes are made to the format of branches to suit their regions and aims. With a product range that encompasses channel services as well as the devices presented in this article, Hitachi is able to serve as a one-stop supplier of channel solutions. Hitachi can also supply services with high added value by combining these solutions with customer relationship management (CRM) information systems that incorporate new technologies such as robots, artificial intelligence (AI), and big data analytics. By sharing a vision for branches (channels) with its customers, Hitachi intends to develop new branch solutions.

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2024 banking and capital markets outlook

Banks' strategic choices will be tested as they contend with multiple fundamental challenges to their business models. they must demonstrate conviction and agility to thrive..

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Vice Chair, US Banking and Capital Markets Practice Leader

United States

Michael is a Deloitte vice chair and leader of Deloitte’s US banking and capital markets practice. He is responsible for leading the firm’s overall banking and capital markets sector strategy and aligning the firm’s practice areas to optimally serve these clients and the market. With more than 30 years of experience, he was most recently a leader in the Capital Markets Technology Services practice where he provided insight on clearing operations, operational turnarounds and revitalizations, operational controls, operations strategy, merger integrations, systems conversions, business process optimization, sourcing strategy, vendor selection, and supplier governance.

Neil Tomlinson

Vice Chairman

United Kingdom

Neil is Vice Chairman and global leader for retail banking. He is a member of Deloitte’s global banking & capital markets executive. In the UK, he leads the CEO programme serving all industries. He is a former senior executive of NatWest and specialises in strategy and business transformation, with expertise across the banking sector including corporate and SME financial services, wealth management, personal and retail banking.

Val Srinivas

Senior research leader, banking & capital markets

Val Srinivas is the banking and capital markets research leader at the Deloitte Center for Financial Services. He leads the development of our thought leadership initiatives in the industry, coordinating our various research efforts and helping to differentiate Deloitte in the marketplace. He has more than 20 years of experience in research and marketing strategy.

Financial services industry outlooks

Read more from the Deloitte Center for Financial Services' 2024 industry outlooks collection

Take me to Financial services industry outlooks.

Key messages

  • A slowing global economy, coupled with a divergent economic landscape, will challenge the banking industry in 2024.  Banks’ ability to generate income and manage costs will be tested in new ways.
  • Multiple disruptive forces are reshaping the foundational architecture of the banking and capital markets industry.  Higher interest rates, reduced money supply, more assertive regulations, climate change, and geopolitical tensions are key drivers behind this transformation.
  • Join the Outlook Dbrief
  • The exponential pace of new technologies, and the confluence of multiple trends, are influencing how banks operate and serve customer needs. The impact of generative AI, industry convergence, embedded finance, open data, digitization of money, decarbonization, digital identity, and fraud will grow in 2024.
  • Banks, in general, are on sound footing, but revenue models will be tested. Organic growth will be modest, forcing institutions to pursue new sources of value in a capital-scarce environment.
  • Investment banking and sales and trading businesses will need to adapt to new competitive dynamics. Forces like the growth of private capital will challenge this sector to offer more value to both corporate and buy-side clients.
  • Early 2023 shocks to global banking have galvanized the industry to reassess their strategies. While bank leaders focus on proposed regulatory changes to capital, liquidity, and risk management for US banks, there is much to be done to evolve business models.

Table of contents

  • Global economic challenges
  • Disruptive forces

Retail banking

Consumer payments

Wealth management

Corporate and transaction banking

Investment banking and capital markets

Market infrastructure

Navigating the changing contours of the global economy

A slowing global economy coupled with a divergent economic landscape will challenge the banking industry in new ways in 2024. Although recent efforts to combat inflation are showing signs of success in many countries, the risks brought to light by supply chain disruptions, rewiring of trade relationships, and ongoing geopolitical tensions will complicate economic growth worldwide. Extreme weather-related events, such as floods, heatwaves, and hurricanes, may also cause severe economic disruption.

With this backdrop, the International Monetary Fund (IMF) expects the world economy to grow at no more than 3.0% in 2024. 1 Advanced economies—i.e., the United States, the Euro area, Japan, the United Kingdom, and Canada—are forecast to experience tepid growth at 1.4% in 2024. 2 But many emerging economies should see higher growth on the back of strong consumer demand, younger demographics, and improving trade balances. In particular, India is expected to have one of the strongest growth rates: 6.3% in 2024. 3

On the other hand, China is facing a potential economic slowdown with weak consumer demand and distressed property markets. The weakness in Chinese exports and imports will not only impact its trading partners, but may well challenge supply chain dynamics and further weaken global recovery. Recent efforts to revive consumer and corporate confidence in China could influence economic growth in other countries, particularly in Asia.

Global inflation is expected to drop to 5.2% in 2024, from a high of 8.7% in 2022, as per the IMF. In countries such as the United States, the labor market and consumer spending are showing signs of deceleration but are still elevated, challenging the targets set by central banks. In fact, the IMF predicts that inflation in almost all countries will remain above target rates. 4

Central banks will be fine-tuning their monetary policies through 2024 (figure 1). The federal funds rate in the United States is expected to remain elevated at or above 550 basis points going into 2024 but may drop to between 450 and 500 basis points in the second half of 2024, according to latest FOMC projections. 5 The European Central Bank (ECB) is expected to begin decreasing interest rates; in August 2023, the ECB policy rate stood at 3.75%, matching the peak in 2001. 6

Meanwhile, the Bank of England is expected to lower the policy rate in the first half of 2024 after reaching a peak of 5.75% at the end of 2023. 7 The story is similar to the Bank of Canada: Rates should decline in the second half of 2024 after surpassing 5%, as per the Canadian Economic Quarterly Forecast by TD Economics. 8 In contrast to other central banks, the Bank of Japan has kept the policy rate near zero, but its July 2023 meeting indicated that it would tweak the bond yield curve control schemes to respond more nimbly to price pressures. 9

But generally, central banks’ quantitative tightening measures will contract global money supply. In fact, in the United States, money supply, as measured by M2, has been falling at its fastest rate since the 1930s. 10

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These challenges will result in divergent and sporadic economic growth. Some economies will face a brighter future, while others will still be fighting stickier inflation and low growth.

How will the macroeconomic environment in 2024 impact the banking industry?

Banks globally will face a unique mix of challenges in 2024. Each of these hurdles will impact banks’ ability to generate income and manage costs (both interest costs and operational expenses).

Deposit costs are here to stay—for now

Higher interest rates have been a boon to the banking industry. In 2022, net interest income increased significantly in many jurisdictions, with American and Canadian banks posting a rise of 18% year over year (YoY), followed by their European peers at 11%. 11

However, elevated rates will continue to push funding costs higher and squeeze margins. The pace and steepness of the current rate cycles have dramatically boosted the cost of interest-bearing deposits for US banks. But these costs have risen more sharply for regional and midsize banks. For instance, deposit costs for the largest banks stood at 2.2% in Q2 2023, compared to 2.5% for the smaller banks. 12 This is a similar pattern in other countries that have experienced rate hikes.

Going forward, the global banking industry may be hard-pressed to bring down high deposit costs (and lower deposit betas) even as interest rates drop. Customer expectations of higher rates, coupled with increased market competition, will force many banks to offer higher deposit rates to retain customers and shore up liquidity. The situation will vary by region, though. European banks may be able to decrease deposit costs more rapidly, for instance. The European banking industry has not faced as much competition from money market funds, unlike in the United States. During the banking turmoil in March 2023, inflows into Europe’s money market funds totaled US$19.3 billion, dwarfing in comparison to US$367 billion into the US money market funds. 13 , 14  Similarly, Asian banks, in India, for instance, may sustain higher rates in the wake of stronger economic growth. In fact, banks in the Asia-Pacific (APAC) region are expected to outpace global peers in generating stronger net interest income.

Loans growth will be modest, at best

In terms of loan growth, we expect demand to be modest given the macroeconomic conditions and high borrowing costs. Banks will also likely continue their restrictive credit lending policies. According to the recent bank lending surveys conducted by the Federal Reserve and the ECB, many banks have already tightened credit standards across all product categories. They anticipate further tightening due to a less favorable economic outlook and likely deterioration in collateral values and credit quality. 15 , 16

However, the impact of the macroeconomic environment will be disparate across loan categories. Consumer spending has remained robust in major economies, but as consumer savings deplete, demand for credit card and auto loans should remain strong. At the same time, across the United States and Europe, bank loan demand from firms has decreased significantly. Bank loans to corporates may weaken in the short term but could pick up later in 2024. (See sidebar, “Real estate jitters” for commentary on commercial real estate loans.)

Real estate jitters

Residential mortgage origination in the United States may see a robust increase in contrast to other advanced economies such as the United Kingdom, Germany, and Australia. However, the commercial real estate (CRE) sector in the United States will continue to be stressed, and this will particularly affect regional and midsize banks that may be overexposed to office space. In light of higher uncertainty, inflated property prices, and concerns about debt repayments, banks will be more selective in their new CRE originations and refinancing. Banks could also be forced to realize losses on certain loan portfolios if there are fire sales or foreclosures at a large scale. CRE loan delinquencies are already rising. The delinquency rate (90+ days past due) in the United States has increased, from 1.84% in Q4 2022 to 3.3% in Q1 2023. 17

The European CRE market appears to be more resilient than the US market. European CRE loans are largely concentrated among the larger banks that are well-capitalized. 18 The APAC region is also expected to follow a smoother trajectory; demand from the hospitality sector should support growth in CRE loans, while multifamily residential mortgages will likely see a continued uptick.

Climate change should also play an important role in loan demand and credit availability. According to a recent EU Bank survey, 19 over the next 12 months, banks expect a stronger credit tightening due to climate risks on credit standards for loans to “brown” firms, while a net easing impact is expected for green firms and firms transitioning to decarbonization. Firm-specific climate-related transition risks and physical risks should have a much larger role in credit disbursements going forward. 20

The combination of higher deposit costs, lower policy rates, and somewhat constrained loan potential can adversely impact banks’ ability to generate strong net interest margin (NIM) in 2024. In fact, banks’ NIMs may already have peaked, as suggested by recent bank earnings. US and European banks should experience a decline in net interest margins in 2024 (figure 2). APAC banks are more likely to enjoy stronger net interest income next year with a higher—and possibly rising—rate environment in many developing countries. These new factors will likely force banks to reassess the true cost of deposits and how they may be deployed.

More noninterest income sources will be sought out

Banks should prioritize noninterest income in 2024 to make up for the shortfall in net interest income. Noninterest income is expected to grow meaningfully in the next few years (figure 3 ). Most banks will seek to raise fee income through a variety of channels, but they may face some constraints in doing so. Consumer-focused fees, such as overdraft fees, nonsufficient funds fees, and credit card late fees, could attract regulatory scrutiny.

However, banks with stronger advisory, underwriting, and corporate banking franchises should have more room to grow their fee income. Clearer valuations and a backlog of deals should lead to higher M&A and issuance activities in the United States, boosting fees. However, reduced volatility across different products will crimp revenue growth in both equities and FICC (fixed income, commodities, and currencies) trading.

Sharpening the cost discipline

With the rising pressure on revenue generation, cost discipline will become even more of a priority, and possibly a competitive differentiator for banks. Efficiency ratio has been improving in the last few years globally (Figure 4), but it is expected to inch higher in 2024, due to sluggish revenue growth and high operating and compensation expenses. Many banks will also continue to invest in technology to remain competitive. Attracting talent in specialized areas such as artificial intelligence, cloud, data science, and cybersecurity should bump up compensation expenses, even as banks rationalize in other areas. In addition, tight labor markets and accelerated wage growth in traditional offshore locations should add to the industry’s cost pressures.

Guarding against loan losses

In the first half of 2023, many banks raised their provisions for future credit losses, anticipating elevated loan defaults from a pandemic-era low. For instance, in Q2 2023, cumulative provisions for the top 10 US banks rose by 26% quarter over quarter (QoQ). 21  Credit quality is expected to deteriorate as customers' ability to pay off loan diminishes, and the full impact of inflation and monetary tightening is felt by businesses and consumers. There is already evidence of rising delinquencies in certain loan categories, such as credit cards and CRE. 22 , 23  Similarly, corporate default rates in the speculative grade may also increase.

While credit quality is decreasing and showing stress in specific segments, credit quality as a whole appears to be normalizing to prepandemic levels. Banks are continuing to build reserves to restore reduced balances over the last few years. Most large banks, globally, seem to have adequate liquidity and strong capital buffers to withstand a severe downturn, as evidenced by recent stress test results by the Federal Reserve, the ECB, and the Bank of England. 24 , 25

US Basel III endgame implications

The US federal banking regulators recently released a notice of proposed rulemaking (NPR) on Basel III final reforms. The proposed changes are aimed at improving the “strength and resiliency” of the US banking system and will impact the regulatory capital frameworks for banks above US$100 billion in assets (about 36 banks). Smaller banks with significant trading activity will also be subject to the new risk framework. These changes are estimated to result in a 16% increase to CET1 (common equity tier 1) capital levels and a 20% increase to RWA (risk-weighted assets) for large bank-holding companies. 26

Higher capital requirements are likely to disadvantage global banks domiciled in the United States and constrain lending, capital markets, and trading activities of all banks, possibly benefitting nonbanks and smaller institutions. These expansive changes, including the application of AOCI, G-SIB surcharge, and dual-RWA requirements, will lead to higher operational burdens, requiring significant investment in risk management, data, controls, compliance, and validation infrastructure.

The impact on banks with large recurring and fee-based businesses, such as credit card fees and investment banking fees, as per the Federal Reserve will be “exacerbated by the use of an internal loss multiplier that may result in an excessive overall capital charge for operational risk.” 27 The new provisions will reduce fee margins for securities underwriting and could materially reduce the depth of banks’ products. This could further increase transfer of services and associated risks to nonbanks/unregulated sectors.

The new rules will also require banks to factor in unrealized gains and losses in capital ratios to comply with the supplementary leverage ratio requirement and the countercyclical capital buffer. In the short term, some banks may look at diminished buybacks. They could also impact investments in technology and market expansion strategies.

The Basel III NPR allows a transition period of three years, starting July 1, 2025. 28 The proposed rules will undoubtedly evolve in the future, but it will be important for banks to assess existing internal infrastructure and potential strategic implications, and engage in continuous conversations with regulators. 29

Bank profitability in many regions will be tested in 2024 due to higher funding costs and sluggish revenue growth (figure 5). However, banks with more diversified revenue streams and a strong cost discipline should be able to boost their profitability, and possibly their market valuation, more than most.

The tilt toward Asia

Going forward, the size and scope of global banking will change even more. The global banking industry has already seen fundamental shifts with Chinese and American banks dominating the global rankings. Figure 6 shows the changes in size (as measured by assets) and the number of banks from each country in the top global 100 banks. Over the next decade, more banks from India and the Middle East are expected to join the ranks of the top 100, tilting the balance toward Asia and the Middle East. Indian banks will grow their balance sheets as the economy grows and huge investments are made in domestic infrastructure, but they may struggle to break outside their domestic markets. Meanwhile, sovereign wealth funds in the Middle East will likely exert strong influence on global money flows.

Forces shaping the future of the B&CM industry

In addition to the macroeconomic factors highlighted in the previous chapter, the banking and capital markets industry must contend with various fundamental and disruptive forces challenging incumbent institutions’ business models in 2024 (figure 7).

Not only are competitive dynamics shifting, but the pace and intensity with which rivals are challenging banks is unprecedented. Banks are now more intensely pitted against traditional and new rivals as more customers become open to having their needs met by nonfinancial institutions.

Deposits, for example, have become a ferocious battleground. Retail banks are competing with digital banks offering higher deposit costs. And in the payments arena, digital wallets and account-to-account payments are fast becoming the de facto payment options in many countries, while buy now, pay later (BNPL) is more widely accepted as a mainstream offering and alternative to credit card financing.

Capital markets and investment banking businesses are not immune to new competitive forces, either. Scale has helped bulge-bracket investment banks in the United States grow market share; however, a resurgence among European banks might be underway as they focus on specialized services, and boutique firms increasingly participate in bigger deals. Meanwhile, private capital could pose a greater threat for credit provisioning and talent. Hedge funds are also increasingly penetrating more of investment banks’ value chain. In market infrastructure, traditional exchanges see increasing competition from niche exchanges and the growth of trading venues in emerging markets.

At the same time, the relationships between banks, fintechs, and bigtechs are evolving rapidly. Fintechs are largely no longer seen as adversaries; collaboration with incumbents is now commonplace. With increasing industry convergence, strategic partnerships of banks with franchised brands in technology and other nonfinancial industries is becoming the norm for customer acquisition and retention.

Concurrently, customers are becoming more vocal about their evolving expectations. They want their banks to balance digital-first experiences without compromising the personal touch. Information is also becoming democratized, with technology and social media empowering customers in ways not seen before. Banks should heed these new demands as retail customers are spoiled for choice and many will be willing to switch accounts and diversify their relationships across multiple platforms with a tap on their smartphones. Younger consumers, in particular, are clamoring for a superior experience that some technology firms and fintech platforms offer. Wealth management clients are increasingly vocalizing their desire for omnichannel experiences at lower costs. And corporate and institutional customers, for their part, seem more intent than ever to broaden the number of banking relationships to diversify risk.

On the regulatory front, we continue to observe a divergence in laws and policies, with some jurisdictions typically charting a more assertive path, as in the EU’s new AI Act. 30 As a result, there is still a lack of a coordinated, global approach to crypto, digital assets, data privacy, artificial intelligence, and even climate risk. But regulatory scrutiny is on the rise, with governments increasingly focusing on consumer protection, industry resilience, and open competition. More regulators and policymakers around the world are now probing banks’ lending practices and calling on them to do more to help consumers.

In addition, banks, particularly in the United States, could face stricter capital requirements under a proposed overhaul to capital rules as part of Basel III “endgame” starting July 2025. 31 These rules could impact banks’ ability to support some capital markets activities, such as prop trading. They could also impede retail banks’ ability to lend in the residential mortgage space.

Regulatory pressures will be particularly acute for regional and small banks, especially those that are concentrated in their investment and lending portfolio and deposit mix. Many banks will spend the bulk of 2024 trying to tighten lending standards and diversify their balance sheets away from risky assets such as CRE loans and even safe assets such as long-term treasuries.

Meanwhile, open banking regulations in the United Kingdom, Europe, Australia, Saudi Arabia, Brazil, and Mexico are reducing the barriers for data sharing and offering customers more choice for financial products and services. The US Consumer Financial Protection Bureau (CFPB) is mulling similar rules. 32 US consumer watchdogs are also sounding the alarm on the proliferation of artificial intelligence (AI)-driven chatbots in banking.

Scale and diversification, greater regulatory oversight, and the desire to shed low-yielding assets should drive further consolidation and M&A in the banking industry.

In the technology arena, it is hard not to get caught up in the excitement surrounding the incredible potential of generative AI. By all accounts, it can be a hugely transformative force. But more broadly, AI and automation are not new to banking. In fact, machine learning/deep learning algorithms and natural language processing (NLP) techniques have been widely used for years to help automate trading, modernize risk management, and conduct investment research. However, despite the billions of dollars spent on automating the various functions across the transaction life cycle, there are still a fair number of tasks that are conducted using precious human capital. But large language models (LLMs) could help automate many tasks, from generating marketing products to coding. Generative AI can not only save money, but also improve worker productivity. It could also free up resources to spark innovation and enable employees to focus more on productively interacting with clients.

Scaling generative AI will take time. In the short term, one of the biggest challenges in 2024 will be to determine the focus. In assessing the many potential use cases, leaders should choose the ones that will be the most impactful. The benefits of LLMs may not be uniform. They should also consider the potential ease of execution and any associated risks.

But for any of these technologies to have maximal impact, having the right data—and making sure it can be accessed and shared across the enterprise—will be key. While banks have been building out data capabilities for years, the pressure to derive insights to gain a more holistic view of customers has never been greater. There is a growing appetite among customers for real-time data about their payments, cash positions, trading, and valuations. In addition, advances in open banking globally are gradually eroding what was once traditional banks’ competitive edge. It is becoming increasingly important for banks to meaningfully harness both traditional and alternative datasets, as well as forge new partnerships with third parties, to create new value in the form of personalized insights, tailored product offerings, and enhanced customer experiences.

The proliferation of new technologies is opening banks to risks they may have never had to grapple with before. Open banking and the increase in partnerships with technology partners, for example, can expose banks’ infrastructure to new vulnerabilities and cyberattacks. Fourth-party risks are also becoming more of a threat as banks engage in more partnerships with service providers that have their own vendors. The speed with which these threats take shape is also accelerating. Generative AI has gained the sophistication needed to create “deepfakes,” which makes it more challenging for financial institutions to differentiate human customers from digital media imitating their likenesses. Collectively, this fast-moving risk environment is proving to be a huge obstacle to maintaining customer trust.

And, of course, one cannot ignore what climate change is already doing to our planet—the multiple heat waves, floods, and wildfires in the first half of 2023 are a precursor to what is likely to be the norm in the future. Banks, as key financial intermediaries, play an important role in bending the arc of climate change. But looking beyond, banks have a unique opportunity to support climate innovation through green finance and carbon markets. Not only can they provide early-stage financing to startups piloting carbon capture and storage and carbon dioxide removal technologies, but they can also help direct more capital to carbon project developers in emerging economies.

Finally, how well banks manage their talent will one of the most critical success factors in 2024 and beyond. The war for talent in technology remains a pressure point for many banks. Banks may have to pay dearly to hire specialized tech talent from outside businesses or train their own employees to become more tech savvy, especially as innovations from and within AI expand. Bankers should be empowered with the knowledge and resources they’ll need to adequately advise clients amid market uncertainties. As with other industries, banks may also have to instill a culture that reconnects employees with their corporate identity and creates a sense of belonging that can be a conveyed in a hybrid work environment.

To effectively deal with the forces outlined above, banks will likely have to make agility a fundamental attribute. Executives should be bold, decisive, and creative, yet remain true to their identity as financial intermediaries.

In the following chapters, we highlight how these themes will impact specific segments within banking and capital markets, including retail banking, consumer payments, wealth management, corporate and transaction banking, investment banking, and market infrastructure .

Retail banking: Fortifying customer relationships and owning a greater share of wallet

Priorities for retail banks in 2024 and beyond.

Retail banking businesses will not only grapple with higher funding costs and slower loan growth, but they must also contend with declining loyalty and increasing customer defections. While deposit flows should stabilize, it will likely remain challenging to contain deposit costs even as policy rates decline. Banks should also expect new rules and regulations in the form of higher capital and liquidity requirements, as well as heightened scrutiny of risk modeling. In addition, weakening household finances will continue to pressure banks’ loan books, prompting further credit tightening.

Retail banks should find new ways to forge deeper customer relationships and instill a greater sense of financial empowerment. Personalization will be key to demonstrating lifetime value. But banks will likely struggle to customize products and services due to legacy systems and their inability to curate tailored experiences using customer data. They should strive to adopt advanced modeling tools that generate predictive insights and enable the delivery of real-time financial advice. Banks should also look at how emerging technologies can improve risk, compliance, and operations tasks in addition to enhancing the customer experience. For example, they can consider how generative AI may accelerate credit risk assessments, instantly alert mortgage applicants to missing or incomplete documents, and boost the productivity of customer-facing teams.

Retail banks are grappling with a confluence of pressures, including higher funding costs, growing competition from digital banks, and surging demand for increasingly personalized services, even as they explore how best to deploy generative AI and strengthen their data analytic capabilities. Many of these challenges will be exacerbated by the fact that retail customers are spoiled for choice, and it has become easier for them to switch accounts and diversify deposits across multiple platforms. In addition, the growth of embedded finance and open banking are changing the face of retail banking as customers know it.

While deposit outflows largely stabilized after a turbulent first half of 2023, many challenges persist. On the lending side, higher rates continue to lower borrowers’ appetite, leading to slower pace of growth for new loans and refinancing. Retail customers are running behind on payments, causing more auto, credit card, and consumer loans to head into delinquency. Banks around the world are increasing their buffers to prepare for a higher rate of defaults. Canada’s five biggest lenders, for example, boosted their YoY loan loss provisions 13-fold in the first three months of 2023. 33 Banks will likely tighten credit further heading into 2024 and may even look to sell subprime auto loans and riskier home equity loans to strengthen their balance sheets.

These mounting challenges will have disparate impacts on retail banks in 2024. Which banks will be strained the most, and how can they reposition their business models to deliver more value to their customers? What other opportunities may be available for banks to recapture customer loyalty and serve customers beyond the point of transaction?

The fight for deposits will continue

Although deposit flows stabilized in Q2 2023, banks will incur increasingly higher costs to retain deposits. For instance, the cost of interest-bearing deposits (including certificates of deposit, money market deposit accounts, and savings deposits) in the United States rose by 192 basis points to 2.1% by the end of 1H 2023, up from 0.2% a year ago. 34 This trend accelerated in the wake of bank failures, when the goal of retaining deposits became even more paramount. Going forward, the industry should be hard-pressed to bring down their deposit costs even as the policy rate declines (figure 8).

Retail customers are demanding higher rates on their deposits, and many have already switched their cash into higher-yielding time deposits. 35 Some US brokerages are beginning to chase “held-away cash” at retail banks with new services through higher yields. 36 Digital banking is also contributing to this phenomenon. Digital-only banks, for instance, will likely continue to offer higher CD rates; they are also offering variations on typical features such as a CD with no early withdrawal penalty. Several online banks, such as Ally Financial and Goldman Sachs’ Marcus, bucked the deposit exodus trend experienced by some regional and midsize banks and grew their deposit base during the first half of 2023. 37 These digital-only banks and fintechs backed by traditional banks joined large traditional banks as the winners of March 2023’s flight to safety. 38 Choice Financial Group, which sponsors the fintech Mercury, saw 17% deposit growth that quarter. SoFi and Varo Bank each had 37% and 43% quarterly deposit growth, respectively. 39

Similarly, European car manufacturers are increasingly looking for alternative sources of funding for auto loans, given the soaring costs of corporate bonds and asset-backed securities. As a result, they are also emerging as rivals to traditional banks. 40 These automobile companies are luring depositors with higher interest rates for deposits and money in savings accounts. 41

European customers are also increasingly withdrawing money from banks in search of better terms due to some lenders’ reluctancy to pay more to retain deposits they believe they can do without. Most of Europe's largest banks reported net deposit outflows year over year for the first quarter of 2023. 42 Money market funds are also popular with European savers seeking a higher return on their cash in the face of persistently high levels of inflation.

New rules and regulations will also pressure retail banks. In particular, higher capital and liquidity requirements, a reevaluation of assumptions about deposit stickiness by supervisors, and closer scrutiny of how capital and deposit dynamics should factor into banks’ risk modeling will be priorities on the regulatory agenda. Recent events have also reiterated the importance of scale and stability. Some banks may not have the appetite to remain below certain asset thresholds. As a result, more M&A activity within the banking industry is likely. Entities with sticky deposits that lack strong lending platforms may be particularly attractive targets during any upcoming wave of consolidation. 43  Some midsize and regional banks could also seek mergers that will bring in enough outside capital to enable the sale of low-yielding assets. 44

Banks should take steps to remind customers of the value they provide beyond deposits by broadening the conversation to include additional avenues of support, such as wealth management and insurance services. They should also use data analytics to identify at-risk account holders and create custom product and pricing solutions that may be preferable for their unique circumstances. 45

Lending pressures will continue to weigh on banks

Higher rates, persistent inflation, and weakening household finances will continue to pressure banks’ loan books. While many banks have been buoyed by net interest income, potential rising delinquencies and loan loss reserves should start to impact profitability more. The return of student debt payments in the United States will also add more financial stress and impede spending at a time when many consumers are struggling with the higher cost of living. As a result, it will be increasingly important for banks to actively engage with customers and pivot to an advice-based model to help these customers manage their debt.

US banks should also anticipate slower growth and prepare for a rise in consumer loan defaults. Some banks have started to reduce their exposure to home lending as mortgage originations fell to their lowest point in 20 years, dropping 56% between the first quarters of 2022 and 2023. 46 In addition, large lenders could soon face stricter capital requirements under a proposed overhaul to bank capital rules by US banking regulators. 47 These changes may impact banks’ ability to lend to first-time and underrepresented homebuyers. 48

Demand for mortgages and consumer loans in Europe are also expected to falter, while tightening credit standards could constrain spending and growth. 49 Meanwhile, APAC is also struggling with anemic loan demand, prompting many banks to consider new sources of revenue. Banks in Mainland China, for example, are trying to spur demand for mortgages by offering relay loans for elderly borrowers that are inherited by children if they cannot pay, as well as joint loans for unmarried couples. 50 Australia’s major lenders are also beginning to divert resources away from residential mortgages and are weighing moves into other businesses, such as commercial loans. 51

Regulators and policymakers around the world are also increasingly scrutinizing banks’ lending practices and calling on the sector to do more to help consumers. The Consumer Financial Protection Bureau is focusing on banking “junk fees” and working to make mortgage servicing and auto lending less risky for borrowers. 52 Meanwhile, a new UK regulation will bring more transparency to mortgage lending, 53 and South Korea has made it easier for new entrants to compete with large lenders. 54

Banks should also take steps to help improve their credit risk models by making them more inclusive with the addition of more alternative data. Rent payment history, gig economy income, and utility bill payments may help credit invisibles: consumers with limited information to demonstrate creditworthiness. In addition, they can develop more embedded finance tools in lending processes, such as adding technologies that enable instant loan approvals at an auto dealership.

Empowering customers and reimagining loyalty

Global banks can’t solely rely on brand recognition to grow their customer base. They should take greater steps to redefine what customer loyalty looks like and forge deeper relationships by supporting and empowering customers.

Banks should strive to be the go-to hub for most of consumers’ financial needs, especially as economic uncertainties weigh on customers more heavily over the coming year. Only 21% of customers surveyed say they’ve received guidance or advice from their primary bank between January 2022 and January 2023, even though the financial health of many Americans dropped markedly in that period. 55 Customers who received advice and felt it met their needs were more likely to reward the bank accordingly: About half opened a new account with that institution. 56

Banks should look for where they can use customer data to personalize experiences and deepen customer lifetime value. This has been a priority for global banking leaders for some time, but personalization efforts have been hampered by legacy systems, data privacy concerns, lack of data, and the inability to harness data fully to curate tailored experiences. As a result, two out of three banks report they are unable to assess the context of a customer’s situation outside of a single moment in time. 57 This inability is not only detrimental to the customer experience; it can also hinder financial performance and fraud detection (figure 9).

Banks should increasingly invest in advanced modeling tools that can parse through transaction data and deliver predictive insights at multiple customer touchpoints. They can also use emerging AI capabilities to provide richer and more targeted advisory services. Over time, banks should seek to advance hyperpersonalization to the point that customers feel they are a segment of one. 58 For example, if a bank sees that an aspiring borrower abandoned a mortgage application to check out other lending platforms, it may dispatch an advisor to contact the applicant with a more competitive rate and offer of personalized support. 59

Banks should also shift away from a product-focused business model to become a consumer-centric organization. As industry lines blur, and customer expectations are influenced by experiences in other domains, customers are increasingly expecting banks to replicate the services they get elsewhere. Some are also becoming more comfortable having their needs met by nonfinancial institutions. Bank leaders can learn from customer interactions with entities outside of banking and consider new opportunities to serve them in a more unique or holistic way. Northwestern Mutual, for example, took a page out of a dating app playbook to design a matchmaking algorithm that pairs customers with financial advisors that are best suited for their needs. 60

Strategic partnerships with franchised brands can also be a powerful tool for customer acquisition and retention, especially if the bank works with third-party institutions to deliver custom rewards. For example, hundreds of music fans shared plans on social media to apply for a Capital One card to gain access to presale tickets for a popular 2023 concert tour. 61 These nontraditional, nonbanking perks are beginning to play a greater role in customers’ choice of a primary financial services provider. However, such brand sponsorships could also come with some risks.

Forging ahead with tech advances and innovation

Banks should also seize opportunities to use emerging technologies to reduce risk, streamline operations, and build trust with customers by offering new safeguards from fraud. For example, open banking initiatives that give customers more control of their finances are gaining steam in many parts of the world. Regulators and central banks continue lowering the barriers for data sharing in the United Kingdom, Europe, Australia, Saudi Arabia, Brazil, and Mexico. The US market may also usher in a wave of open banking soon, as the CFPB mulls a new rule to give customers more rights over their personal data. The rule could open the door for third-party firms to seek consent for access to customer data through application programming interfaces (APIs), and provide more tailored services such as budgeting, financial management, and lending. This could also help large banks obtain data from other institutions, such as community banks and credit unions, which may be useful for growing their own business lines. 62

Banks can also develop new methods for issuing and authenticating digital identity, especially as more deepfakes emerge that take on the likeness of real or fabricated humans. Greater adoption of digital wallets is also heightening the need for safeguards. In the Nordics and Canada, many financial institutions garnered a great deal of goodwill and trust by advancing BankID and Interac Verified systems, 63 demonstrating their role as credibility agents in the digital economy. Biometrics, including behavioral biometrics that analyze a consumer’s touchscreen behavior, mobile app navigation, and typing habits, will also become more and more pivotal in the fight against fraud.

In addition, in the near term, generative AI will have many benefits for risk, compliance, and operations functions. For instance, banks are evaluating how the technology can improve mortgage applications by performing faster and more accurate underwriting processes and enabling conversational AI tools to instantly alert borrowers to missing or incomplete documents.

Some banks are launching pilots to learn how they can better assist customers with the nascent technology. ABN Amro in the Netherlands, for example, is using generative AI with 200 employees to summarize their conversations with customers. It is also testing how it can gather customer data to resolve issues in real time. 64 Sweden’s Klarna Bank has equipped every employee with access to generative AI language models and asked them to experiment with the technology. 65 JPMorgan Chase estimates that these tools will generate an additional US$1.5 billion in value by the end of 2023. 66 Its retail bank has found success in using AI to extend customized offerings, such as credit card upgrades. 67

Financial institutions are still reluctant to embed AI into customer applications since it can bring about new exposures to ethical and security risks. In the United States, the CFPB warned that banks using generative AI may not be providing “timely, straightforward" answers to user questions, and expressed concern about the tools’ ability to comply with consumer protection laws. 68 But as banks learn to use generative AI safely, they can make chatbots more sophisticated and easier to understand, deliver personalized marketing campaigns customized to each target’s content consumption habits, and reduce wait times for processes such as mortgage lending.

Consumer payments: Grabbing a bigger slice of the revenue pie in a fast-evolving ecosystem

Priorities for payments institutions in 2024 and beyond.

2024 will see an acceleration of several trends shaping the future of the consumer payments industry. Consumer spending will increasingly shift from cash to digital payments. However, growth in digital and real-time payments, along with the proliferation of artificial intelligence, will also make fraud and cyber threats more challenging to prevent and detect.

Governments, especially in developing economies, will play a more prominent role in consumer payments by expanding financial inclusion, reducing inefficiencies, and fostering competition. The trio of regulatory, market, and competitive forces will further challenge the economics of the volume-focused business models. Many incumbent institutions recognize they need to deliver new value beyond transaction execution to remain relevant, as the traditional boundaries in the payment ecosystem blur.

Use of proprietary and alternative data and more robust analytical models should enable institutions to better understand consumers’ needs and offer more personalized insights. They should engage collaboratively with the ecosystem but choose the right third-party providers (TPPs) that consumers trust to lessen concerns around security and privacy. Investing in technology talent and using sophisticated AI and biometrics technologies could help incumbents strengthen fraud detection models and protect consumer payments and data from malicious actors.

The world of global consumer payments is evolving rapidly, driven by a multitude of factors. Digital wallets and faster payment rails are pushing traditional payment methods further into the background. However, use of credit cards has stayed resilient and BNPL has further democratized access to credit at the point of sale, both in-store and digitally. Governments are actively pushing the bar on financial inclusion with digital faster payments, such as Instant Payment Platform in the United Arab Emirates and Unified Payments Interface (UPI) in India. 69

However, the shift from cash to digital payment methods shows a divergence in maturity levels across countries and regions. Countries, such as Norway and the Netherlands, have been trailblazers in the use of digital payments in the developed world for some years now. Joining them are China, India, and Brazil, leading the digital payments revolution from developing economies. Meanwhile, many countries in Europe and Asia-Pacific, despite their sizable economies, are a bit behind in the use of cashless payments. 70

Despite these differences, the resilience in consumer spending, especially in travel, has translated well for card issuers and payment networks. JPMorgan Chase reported a 7% increase in credit and debit card transactions and an 18% rise in card loans in Q2 2023, largely attributed to its US volumes. 71 Similarly, Mastercard reported a 12% YoY growth in global gross dollar value of transactions to US$2.3 trillion in Q2 2023, attributed largely to international travel and cross-border spending. 72

However, consumers are acquiring more debt, thus increasing the credit risk for issuers. Credit cards remain the dominant payment method for American consumers, encompassing 31% of payments in 2022. 73 US consumer credit card debt surpassed US$1 trillion in Q2 2023, reaching a new peak since 2003. 74 In the same quarter, the 30+ day credit card delinquency rate climbed to 7.2%, a level last seen more than a decade ago in 2012. 75 The moratorium on US student loans ending in September 2023 could further deplete consumers’ savings and constrain their ability to pay their credit card dues on time.

Concurrently, institutions in the card value chain must also grapple with the changing economics of their business models. For instance, regulators in the United States plan to reduce card swipe fees. Meanwhile, national governments are building sovereign card rails and forging bilateral deals to bring more efficiencies to domestic and cross-border payment flows. Debit volumes are under pressure with a rise of account-to-account–based real-time payments networks. Meanwhile, software players are bringing payments in-house, eating into the revenue of merchant acquirers.

Given these mixed dynamics, what should payments institutions do to increase their share of the revenue pie in 2024 and beyond? How can they reimagine value creation and delivery to remain relevant to consumers and bolster their competitiveness?

Economics of card swipe fees face a new threat

Card networks have faced pressure from retailers to lower card swipe fees for some years now, but this issue is finding a new voice in lawmakers’ reform agendas across different jurisdictions.

In the United States, the Credit Card Competition Act (CCCA), reintroduced in Congress in June 2023, proposes more network choices for merchants to further reduce swipe fees. 76 Some retailers are passing on part of this cost to consumers by imposing a surcharge on credit card transactions. Lawmakers are hoping that additional competition will result in lower cost to retailers, and ultimately, to consumers in the form of lower prices.

But if this law is passed, it could hamper the ability of incumbent payments networks and card issuers to offer attractive rewards to consumers, which are largely financed by swipe fees. The restriction on swipe fees could also reduce issuers’ incentives to issue cards to consumers with inadequate access to credit.

It is also not clear how much retailers’ savings would ultimately be passed on to consumers, if at all. But increased price competition would put an additional strain on issuers and networks’ transaction revenues and the card products they offer to consumers.

Swipe fees are not a burning issue in Europe, but in other countries, such as India, there is a renewed focus on expanding competition. For instance, the Indian central bank has mandated that card issuers must issue their cards on more than one network beginning in October 2023. 77 The move will end exclusive issuance arrangements between card networks and leading issuers.

Government-backed payments systems cause further fragmentation

After building their sovereign card rails to reduce dominance on the international payment plans, national governments are exploring modernizing consumer payments to make them more convenient and cost-effective for their citizens. More than 70 countries have adopted real-time payments (RTP) rails, with many solutions having government endorsement and support. Public-sector involvement is equally important in addressing inefficiencies in the ~US$650 billion global remittance market. 78  According to the World Bank, the global average cost of sending US$200 in remittance across borders was as steep as 6.25% of value in Q1 2023, falling disproportionately on the poor. 79 The average cost of remittance remains more than twice the United Nations Sustainable Development Goals target of 3%, which is to be reached by 2030. 80

While hopes for a ubiquitous and efficient cross-border remittance solution are still alive, national governments are initiating bilateral arrangements to make their domestic RTP systems interoperable across borders one country at a time. India and Singapore have linked UPI and PayNow, their respective faster payment rails, to enable quick and low-cost fund transfers. 81 More recently, India signed a deal with the UAE’s Mashreq Bank to use UPI to facilitate foreign remittances from the India diaspora in the region. 82

Europe also plans to create a unified instant payments solution with its European Payments Initiative, a new payment standard for European consumers and merchants for all types of transactions, including in-store, online, cash withdrawal, and peer-to-peer (P2P). 83 Set to launch in Belgium, France, and Germany in 2024, this initiative aims to offer a pan-European bank card, digital wallet, and P2P payments solution to consumers for lower friction in cross-border payments.

An increase in such bilateral deals and regional initiatives would make the global payments landscape more fragmented and create different regional payment blocs. Yet, encouragingly, we are inching closer to a more efficient cross-border payments system, one payment bloc at a time.

The blurring of product lines and competition for customers’ wallets

Traditionally, payments institutions stuck to their respective product lanes, but now they are encroaching into each other’s businesses to grow revenues. For instance, card issuers are trying to grab a greater share of account-to-account (A2A) consumer payments, as domestic RTP offerings expand. In the United States, both large and small banks have signed up as early adopters of FedNow, 84 the Federal Reserve’s real-time A2A payments rail. Even global card networks are excited about A2A payments and building multi-rail (e.g., cards, P2P, A2A, and crypto) value propositions (figure 10).

Blockchain-based and fiat currency-backed stablecoins are also entering the world of consumer payments. In some instances, they are further disintermediating the role of traditional payments institutions by facilitating the exchange of money in cross-border remittances, P2P payments, and even customer-to-business retail payments.

Concurrently, digital wallet and BNPL providers have launched card offerings; card issuers, in return, are launching their own digital wallets 85 and integrating BNPL offerings into their portfolios. Issuers are also working with merchants to offer embedded payments, allowing nonfinancial companies to offer integrated payment solutions to their consumers.

These efforts to expand beyond their core offerings suggest card issuers and networks recognize that this interconnected web of payments, products, and rails will only get more complex as we enter 2024. The innovations and competitive actions threaten their transaction revenues, and risk diminishing visibility and ownership of consumer data.

Additionally, open banking around the world is gradually eroding what once was payments incumbents’ competitive edge. With open banking, third-party providers, including fintechs, bigtechs, and other software providers, can access customer data in payment providers’ systems via APIs, embed payments, and help consumers pay seamlessly within their shopping journeys. This may be the beginning of open data encompassing nonfinancial interactions as well, such as with telecom and utility players. At the same time, ensuring privacy and security of data will be critical. With this in mind, the EU is considering new regulations for the use and access of open data. 86

Going forward, card issuers should continue to deliver value beyond payment transactions to remain competitive. Much of this may boil down to how well they know their customers and their ability to analyze customers’ proprietary transactional and alternative datasets to offer more personalized advice, such as spending controls, budgeting advice, and tailored rewards.

Meanwhile, data can be leveraged to help enable value creation, new business models, and new partnerships. Choosing the right TPPs that consumers trust would allow payments incumbents to alleviate consumers’ concerns around security and privacy while also elevating their experience with innovative offerings. This growing role of trust in a world where physical and virtual realities are increasingly converging would solidify the push toward digital identity, making it easier for institutions to authenticate senders and recipients of money across all interactions.

Responsible BNPL credit to elevate consumers’ financial well-being

The proliferation of BNPL in consumer payments has encouraged traditional credit card issuers to include BNPL in their portfolios. An inflationary environment further heightened the financial and operational benefits of BNPL over traditional credit products, driving lending volumes.

While BNPL products have helped many consumers access credit, multiple studies suggest that these consumers may be overspending beyond their means. In a recent Pymnts survey of BNPL users, 70% of respondents admitted they spent more than they would have, had they paid upfront. 87 Also, according to the CFPB, “[BNPL] firms have created their own gateways and digital, app-driven marketplaces, powered by personalized behavioral data, to lure their users into buying more products.” 88

Another concern is how BNPL balances seem to be disproportionately accumulated by those heavily dependent on credit for their living. For instance, BNPL users were more likely to be highly indebted and rely on many other high-interest credit products compared to BNPL nonusers, according to a CFPB analysis (figure 11). While these credit products are intended to help consumers in distress, are they eventually putting them in more distress?

The US regulator’s findings also indicate other issues with the BNPL space: inadequate dispute protections compared to credit cards, bigtech-style data surveillance, and slow progress among reporting agencies to develop mature reporting protocols when it comes to BNPL credit.

As a result, regulators globally plan to supervise this industry to bolster consumer protection. In May 2023, Australia announced reforms that recognize BNPL as a credit product under the Credit Act, and mandate that firms comply with responsible lending obligations and hardship requirements. 89

These regulations, along with institutions’ enhanced risk management, reporting to traditional credit bureaus, and emphasis on the short term, small-ticket size credit, could usher in the next wave of BNPL maturity. Card issuers and pure-play BNPL providers can play a significant role to elevate consumers’ financial well-being by providing advice and responsible credit. For instance, Klarna launched a credit opt-out feature that offers consumers a choice to opt out of using credit to stay within their budget. 90

Moreover, by providing cash flow tools to consolidate multiple payment schedules, delivering insights on budgeting, and supporting customers in achieving financial goals, issuers and BNPL providers in the space can encourage customers to save and spend more effectively. 91 In fact, responsible BNPL credit can help the unserved and underserved consumers build or rebuild credit. 92

Traditional acquirers face growing competition from software players and modern acquirers

Merchant acquiring and payments processing providers, which are increasingly operating in a commoditized business, recognize the opportunity with small and midsize businesses (SMBs). A 2022 Credit Suisse study indicated that the US SMB segment comprised under 20% of payment flows but accounted for about 55% of potential revenues for acquirers. 93

Competition is closely following the money. Software providers, especially working with SMBs, continue to bring payment elements in-house (becoming a “payfac”) to own a larger share of the merchant acquiring value chain. 94 Additionally, modern acquirers are scaling both domestically and internationally, and expanding beyond payments to offer embedded finance products to deepen wallet share. For instance, Adyen began offering business checking accounts and business lending options for platforms and marketplaces in Europe and the United States in late 2022. 95

Caught between competition from software providers and modern acquirers, the incumbent merchant acquirers should step up their defense. Some acquirers may choose to partner with or even acquire software firms that cater to merchants to retain a greater share of the value chain. Meanwhile, competing with modern acquirers would demand superior digital and service capabilities. Incumbent acquirers should not only offer international presence and omnichannel payments acceptance, but also provide a single (or few) integration(s) to businesses to access local processing platforms and payment methods and to acquire support, among other local services.

Fighting synthetic fraud when fake is as good as real

Payment firms are in a global arms race with malicious threat actors, as scams become more sophisticated. Synthetic fraud is one such example that is notoriously difficult to detect. 96 Many fraudsters concoct entire personas using a mix of real and fabricated information, which are often pinned to social security numbers.

The proliferation of generative AI is only expected to accelerate the pace at which fraudsters fabricate such synthetic identities to trick consumers and businesses to send payments to their impersonated accounts, commonly referred to as authorized push payments (APP) fraud. In the United Kingdom, Faster Payments service has experienced a 6% YoY increase in APP fraud cases 97 on personal accounts, with losses amounting to US$600.1 million in 2022. 98

To combat these risks, regulators are stepping in with measures to bolster consumer protection. The UK Payments System Regulator issued new reimbursement requirements in which both the payer and payee’s institutions need to fully compensate consumers who are victims of APP fraud within Faster Payments. 99

The stakes are high for payment institutions; they should strengthen their risk-based approaches to minimize or eliminate fraudulent payment requests. They should supercharge their anti-fraud skillsets with generative AI technologies and third-party data to train their authentication and fraud detection models to predict criminals’ next moves and circumvent their advances (figure 12).

Banks should also work more closely with startups and established technology firms to develop multimodal biometric security that evaluates several indicators at once, such as fingerprints, natural speech patterns, and word choice, to increase fraud-detection outcomes and reduce false positives. Collaborating with nonfinancial institutions, such as telecoms, mobile network providers, and regulators, would also add allies that could analyze consumers’ nonfinancial data to prevent unauthorized use of identity.

Wealth management: Revamping the advice engine for the future of wealth

Priorities for wealth management institutions in 2024 and beyond.

Wealth management business is at the cusp of change. While global wealth continues to build and diversify across regions, recent market volatility has challenged assets under management (AUM) growth. This is prompting wealth managers to redouble their efforts to provide a richer advice experience, which they can then combine with innovative new products. Technology continues to play an important role for wealth firms, especially as institutions come to grips with the need to develop expertise in, and promote the use of, artificial intelligence to drive greater personalization. Many wealth managers will also look to automate routine tasks through generative AI and advanced data analytics. The push to bring about greater efficiencies and broaden product offerings by acquiring or partnering with third parties will continue to be of interest, although deals may be struck at a slower pace than in previous years.

Intergenerational wealth transfer continues to gather momentum as well. This shift will require advisors to develop even more holistic advice capabilities.Many members of Gen X and other generations are worried about whether their parents will be able to attain a comfortable retirement, while those holding the assets are clamoring for broader coaching and advice. Some of these new concerns are driven by greater longevity. Succession planning is also becoming more urgent as the advisor population ages in many parts of the world. The next investor generation will want to sit across the table—physical or virtual—from someone who looks like them and has the same lived experiences they have. Acquiring and developing younger and more diverse talent could challenge growth, however.

Macroeconomic, geopolitical, and regulatory uncertainties have exacerbated costs and margin pressures for global wealth managers, but they remain resilient. Global wealth is likely to surpass US$500 trillion in 2024, nearly five times the global GDP. 100 From a regional perspective, the biggest portion of this wealth is now in Asia-Pacific (~40%), with China accounting for nearly 20%. North America has about 33% of that total, with Europe at 23%. 101 Assets under management should grow at an annual pace of around 8% over the next five years, 102 more than double the expected growth in global GDP. 103 And net financial wealth held by the mass retail market could almost double to US$22 trillion by 2030. 104

Even with these positive expectations, wealth managers should continue to evaluate their competitive strengths and operating models to support the agility needed in the future. What changes should they consider in their operating models to capitalize on the growth prospects in 2024 and beyond? How can they differentiate themselves to create a winning franchise?

Honing the advice experience

With client needs and markets shifting, wealth managers cannot rely on bull markets for increased assets under management. In the previous decade, more than 70% of the growth in AUM was the result of market performance, with only the remaining 30% coming from organic growth. 105 Investor satisfaction is a function of returns. For instance, US investor satisfaction with full-service investment advisors tumbled 17 points in 2022, coinciding with a 20% drop in the S&P 500 in the same period. 106 But wealth managers have little control over market performance, so they should focus on improving customer satisfaction through other means. These include offering advice beyond investments and supporting clients through their life journey. Unfortunately, only 11% of advisors currently take these additional steps. 107

Further, the shift from accumulation to decumulation among those holding the greatest share of assets continues. With more baby boomers retiring every day, the boundaries of advice continue to not only expand across retirement income, but also include health insurance, longevity, and even dementia care planning. For good reason: A recent survey showed that 80% of Americans aged 50 and older were concerned about funding their own health care costs in retirement. 108 The most impactful advice propositions will likely emerge around moments that matter, by integrating both financial and nonfinancial assets and liabilities.

Moreover, a recent Deloitte survey of 300 affluent Swiss banking clients revealed that they want it all: superior, omnichannel wealth management experiences at lower costs. 109 Self-service platforms remain a popular approach to serve not just the affluent, but also young, first-time investors with lower investable assets. Even so, the ability for wealth managers to support moments that impact their clients’ life and wealth journeys can be a differentiator. A good place to start is by using data and analytics to create hyperpersonalization based on an efficient segmentation strategy.

To best serve these younger generations, firms should hire more young talent. Unfortunately, about 37% of advisors plan to retire during the next decade, but 72% of newcomers (those with three or fewer years of advisory experience) fail to stay in the industry. 110 Wealth managers should adjust their recruitment policies to focus on diversity and provide sufficient growth opportunities to budding advisors to maximize success. UBS, for example, is diversifying its advisor pool in terms of age and race to better mirror younger generations. 111

Retooling platforms with a focus on cost takeout and deepening client relationships

Wealth managers continue to invest in technology, but with a greater focus on cost rationalization than before. Indeed, 68% of wealth managers surveyed consider optimizing cost-to-income ratio and aiding regulatory compliance as their top, near-term business challenges. 112 Consequently, there’s a greater inclination to look to third parties: In a recent survey of global wealth management and private banking clients, 72% of respondents said they plan to collaborate with fintechs, broker-dealers, and custodians to modernize their technology infrastructure and free up internal resources and time to focus on strategically important products and services that enhance client experience. 113

Firms will invest in forming clear data management strategies to better use new forms of data and artificial intelligence. This will help them generate richer insights while creating agile and scalable operations to keep pace with future advice models. The spend on cloud services for wealth management platforms, including more wealth management-specific industry cloud solutions, could grow by more than US$10 billion over the next 10 years. 114 Firms can start today by undertaking small-scale transformation to help create quick wins that can build confidence and trust on the way to enabling faster time to market and operational efficiency. Perpetual know your customer (KYC), for instance, can help provide a more complete, real-time risk picture, but its success depends on the unification and quality of firmwide data. 115 But security concerns (e.g., cybersecurity, data privacy, deepfakes, and hallucinations) loom, making it vital to instill an AI trust framework. 116 Regulators are also becoming increasingly focused on conflicts of interest. In July, the Securities and Exchange Commission (SEC) proposed new rules requiring firms to keep investors’ best interests in mind when using AI. 117

Next, firms are providing advisors with integrated omnichannel solutions that support new on-demand conversations. Engagement and collaboration tools like live chat, secure messenger, and cobrowsing can free them up to focus on higher-value activities and even increase the number of clients served.

Generative AI is starting to be used in fraud detection, anti-money laundering (AML), client communication and marketing, product fit assessment, memo writing, and report generation based on research. 118 Deutsche Bank is deploying deep learning to analyze client portfolios for concentration risk and match individual clients with suitable funds, bonds, or shares. 119 Meanwhile, JPMorgan has recently applied to trademark IndexGPT, which can analyze and select securities based on client preferences. 120

Bridging the offerings gap                                                      

While exchange-traded funds remain the preferred investment vehicle for clients of all sizes, with more than US$600 billion in net flows in 2022, direct indexing and alternative investments continue to gain momentum. In fact, alternative investments could increase from 11% of consumer household investable assets to 20% by 2026 and generate an additional US$11 trillion in incremental net flows for wealth management firms. 121 Ultra-high-net-worth investors expect to be overweighted on private equity, the largest percentage of any of the alternative asset classes, followed by hedge funds, venture capital, and private debt. 122 Meanwhile, extreme price volatility and the recent turmoil in crypto markets seem to have cooled demand for digital assets.

With private assets becoming more mainstream as regulations ease, wealth managers could offer products to clients who are lower on the asset spectrum. For example, Luxembourg’s parliament recently passed a bill that lowers the minimum investment threshold for alternative funds by about US$27,000 to US$108,500. 123 The United States is also relaxing rules that govern “accredited investor” definitions to allow for broader retail participation in alternative products. 124 Wealth managers are looking to acquire these capabilities. Recently, MUFG announced its intention to buy alternative asset firms to meet client demand. 125 Training advisors is crucial since advisors typically do not recommend products with which they are not familiar. 126

Meanwhile, just 17% of advisors surveyed in the United States are citing ESG factors as a consideration in their clients’ investment processes, the lowest in five years. 127 This could be a function of profit-taking, portfolio rebalancing, underperformance, or, perhaps, a lack of trust. In a Deloitte survey of about 1,000 retail investors in the United Kingdom, 69% said they have or would refrain from investing in a financial asset if they did not trust the ESG investment framework used by their provider. 128

Industry estimates suggest ESG assets could reach US$50 trillion by 2025. 129 Firms should, therefore, continue to support advisors with tools that aid client conversations around values-based investing. New regulations, such as the European Commission’s proposed Green Claims Directive, which would require companies to back environmental claims with a comprehensive assessment, 130 along with the SEC’s new rules for company disclosures on ESG policies, 131 would require firms to put guardrails in place to avert the perception of greenwashing. These may include third-party certifications and compliance checks.

Wealth management M&A to slow down

Owing to the attractiveness of the segment, insurance companies, hedge funds, and others continue to consider acquisitions in this space. 132 Globally, wealth managers closed 254 deals last year (figure 13), the highest in a decade, with North America accounting for 70% of the deals, followed by Europe (21%) and Asia-Pacific (6%). Driven by a buy-and-build strategy, private equity-backed firms Mercer Global Advisors and Wealth Enhancement Group, acquired 18 and 11 companies, respectively, last year. 133 , 134  The primary drivers for M&A activity are economies of scale, cost reduction, new services, and talent acquisition. However, the number of deals are down by 26% YoY to 84 in the first half of 2023. This slower pace may continue even in 2024 as macroeconomic conditions weigh on buyer sentiment.

Corporate and transaction banking: Enabling efficient money flows through digitization

Priorities for corporate and transaction banks in 2024 and beyond.

Corporate and transaction banking businesses are looking at a confluence of priorities. 135 While commercial loan growth held steady for most of last year and the start of 2023, banks are looking at a more muted outlook for the next several quarters along with tightening lending standards and the increasing risk of CRE loan portfolios. De-risking is also on the minds of many corporate clients, who seek more optionality with respect to their banking relationships.

There is enormous pressure for banks to pick up the pace of digitization to elevate customer experience and strengthen relationships, while also managing costs. Digital solutions in loan origination and underwriting, cash management, B2B payments, trade finance, and asset servicing should help institutions unlock new efficiencies and address customers’ pain points.

Growth opportunities are emerging, however. From digital asset custody to green transition strategy advice, corporate bankers should remain agile to support their clients’ more complex needs. They should work constructively with borrowers and champion an advice-based model to strengthen the personal touch, while also empowering clients with a self-service model to address their direct, simple needs.

The current state of lending to corporates and SMBs has shown strength globally despite the economic challenges in the past year. US banks’ outstanding exposure of C&I loans rose 6% YoY to US$2.8 trillion in May 2023. 136 At the same time, their outstanding exposure to total CRE loans rose 11% YoY to US$2.9 trillion, 137 much of it held by banks with less than US$100 billion in assets.

Bank lending to corporates in the Eurozone grew 3% YoY to US$6.4 trillion in June 2023. 138 , 139  European banks’ NIMs have also benefited from lower deposit costs, and institutions continue to demonstrate cost discipline. 140

However, a less favorable economic outlook, lower risk tolerance, and the desire to shore up liquidity positions have prompted many banks to tighten their credit to corporate borrowers. In Q2 2023, 68% and 51% of surveyed US banks reported tighter standards for CRE and C&I loans, respectively. 141 Meanwhile, only 30% of European banks reported tighter credit standards for commercial real estate in H1 2023, compared to 25% in H2 2022. 142

The office CRE debt market continues to show signs of weakness due to declining values and rising vacancy rates, particularly in the United States. 143 Of the total US office property loans maturing in 2024 that are held by banks and with investors as commercial mortgage-backed securities (CMBS), 17.4% are classified as “troubled” or “potentially troubled/watchlist” as of August 2023. This figure stands at 10.5% for retail property loans and 8.5% for multifamily property loans. 144

As a result, regulatory scrutiny is expected to increase for banks with high exposure to the CRE market, especially small banks with assets under US$10 billion. A Federal Reserve analysis indicated that small banks’ CRE loans as a percentage of risk-based capital stood at 357% in Q1 2023, compared to 131% for the overall banking industry and 300% regulatory threshold. 145 SMBs with heavy CRE exposure could become M&A targets in 2024 as they seek to shore up their balance sheets. Meanwhile, regulators have already encouraged banks to work “constructively” with CRE borrowers by offering loan accommodations and extending repayment arrangements. 146

On the deposits side, corporate clients are reducing their bank concentration and diversifying their deposits across multiple banks. Banks’ funding costs have increased since they are paying higher rates to corporate depositors.

With this backdrop, what should corporate banks do to maintain profitable lending margins in 2024 and beyond? Given the constraints on NIM growth, how can they strengthen customer relationships to drive fee-based business with corporate and institutional clients?

Balancing risk, efficiency, and relationships in a cautious lending environment

Corporate banks will face a unique set of challenges going into 2024. With the global economy recovering at a divergent pace and the ongoing uncertainties around interest rate trajectories, revenue growth is likely to be challenged, especially in the United States. In Europe, the mounting political pressure to offer higher deposit rates to customers is beginning to disincentivize investors. 147

In such a macroeconomic environment, banks should strengthen their risk management with alternative data (such as trading data, bank transaction data and repayment history, customer ratings and reviews on different digital platforms, accounts receivable, and cash-balance data) in real time. Refining customer segmentation models around structural archetypes (e.g., capital-intensive businesses, transaction-heavy businesses, and cash flow businesses, among others) should allow for more tailored credit approval processes and risk monitoring.

Concurrently, there is enormous pressure for banks to pick up the pace of digitization while managing costs. In particular, many banks are working to determine how best to use AI/machine learning (ML) and APIs to improve risk selection and achieve operating efficiencies in the loan value chain, especially in the SMB loan portfolio. For instance, many UK banks have emerged as trailblazers in SMB lending by fully automating loans up to US$100,000. 148

Banks are also looking at how to use embedded finance as a distribution channel to increase access, especially to more SMB customers. Embedding real-time payments, deposit accounts, and capital loans into corporate customers’ existing ERP and accounting systems makes it more efficient for businesses to access financial services in a unified ecosystem without needing to directly interact with banks.

While product and loan origination has seen a lot of digital action, these technologies have not yet unlocked efficiencies in loan servicing (figure 14). Standard, day-to-day loan servicing could be automated, providing a seamless customer experience and an omnichannel support. Digital systems can also autogenerate workflow notices on actions required by corporate clients. This would free up relationship bankers to focus on sales, customer service, managing risks, and handling true exceptions.

Doing so will also elevate relationship bankers’ role; they can focus more time addressing the needs of the clients and reinforcing the personal touch. Adopting a solution mindset and honing industry specialization should empower relationship bankers to champion an advice-based model. Bankers who complement their industry specialization with tech proficiency and cross-industry fluency are likely to forge stronger client relationships.

Corporate banking units should aim to build agile staffing models to support customers’ pain points, for instance, by becoming trusted advisors in their climate transition strategy. In addition to upskilling existing talent pools on honing solution mindset and industry specialization, banks will need to rejigger their workforce and elevate commercial bankers’ profiles to make it more attractive for young talent to participate in and champion this cultural change.

Empowering corporate treasurers with new tools to better manage finances

Events leading up to the US bank failures in early 2023 put many corporate treasurers, especially clients of US regional banks, under extreme stress. Fearing contagion, treasurers worried if their deposits were safe, and how their payroll processing and payments would be negatively impacted. Corporate treasurers in Europe were also on high alert as the collapse of Credit Suisse unfolded.

This experience only reinforced the importance of capital preservation. Boards of directors also recognize the importance. According to Deloitte’s 2022 Global Treasury survey of corporate executives, 96% of respondents say their boards or chief financial officers view enhancing liquidity risk management as a critical or important mandate. 149

There is also anecdotal evidence of “de-risking” by corporate clients, who seem quite intent on broadening the number of banking relationships. It is not uncommon, especially for large corporates, to have 10 or more banking relationships. 150 This may be true for SMBs as well.

The net result of such bank diversification by corporate clients has implications on both sides. For banks, share of wallet could shrink as competition for deposits grows. This is why superior transaction banking services would be one of the strongest levers to attract corporate deposits and increase fee income. Looking from the lens of corporate customers, the flip side of diversification is higher fragmentation. It may be harder for corporate treasurers to attract special attention and get a global view of cash pools across different subsidiaries and businesses to manage liquidity. In the past, treasurers benefited from concentrated deposit portfolios, but it is not as straightforward now to gain efficiencies from cash sweeping and rate arbitrage.

Nearly two-thirds of executives responding to Deloitte’s treasury survey admit that visibility into global cash pools and risk exposures is a challenge (figure 15). Similarly, 83% of respondents said they lack visibility into FX exposures and unreliable forecasts are the biggest challenges they face in managing FX risks. It appears that even cash flow forecasting misses the accuracy mark.

Corporate treasurers are always looking for digital and automated solutions to help make better and quicker decisions. Advanced analytics and AI should allow banks to build agile cash flow forecasting capabilities and allow customers to see consolidated views from multiple accounts in real time through APIs. 151 As an example, Citi Treasury and Trade Solutions expanded its partnership with Treasury Intelligence Solutions to offer its clients automated workflows to predict their cash positions and working capital needs. 152

Modernizing B2B payments for efficiency and transparency

For decades, trillions in B2B payments, primarily in checks, have been fraught with inefficiencies. In the United States alone, check payments accounted for US$8.9 trillion in 2022. 153 Meanwhile, ACH payments amounted to US$52.5 trillion in 2022 (increasing 107% over the last 10 years), most of which were settled the same day or the next business day. 154

But, slowly, digitization in the B2B space is accelerating. Payment networks dominant in the consumer payments space are expanding beyond the “card” rails to grow their B2B payments volumes. For instance, Visa B2B Connect, the card network’s distributed ledger-based, account-to-account, cross-border payments network, has enrolled more than 30 banks and is facilitating payment flows across 90 countries. 155

Meanwhile, initiatives to modernize B2B payments with RTP are expanding across different countries. After some delay, FedNow is a reality in the United States, although adoption is not yet widespread. In a conservative growth scenario, Deloitte predicts that real-time payments could replace US$2.7 trillion in ACH and check-based B2B payments in the United States in 2024 (figure 16). In an aggressive growth scenario, that number could jump to US$4.1 trillion (refer to, “ Fasten your seat belts: Real-time, business-to-business payments are preparing for takeoff ,” for more details).

Despite the overall general enthusiasm, however, some banking institutions may be conflicted about promoting RTP, given the risks. While faster payments benefit clients, it would also risk banks’ float income in today’s high-rate environment.

One incentive for embracing the RTP phenomenon is the early-mover advantage—the chance to win a bigger slice of corporate clients’ payments transactions. Additionally, real-time payments would add more transparency to the fragmented and unpredictable B2B payments landscape. Many RTP systems, including FedNow, use ISO 20022 messaging standards that enable two-way communication, such as “request for payment,” “request for information,” and “confirmation of payment.” These standards should allow banks to overlay richer insights and value-added services and help modernize B2B transactions end to end, such as automated matching of purchase orders to invoices, virtual account services, e-invoices for payment initiation, and account reconciliation.

Banks should prepare to support direct integration of transaction data into clients' enterprise resource planning and other back-office systems to offer real-time or near real-time insights on payments transactions and liquidity positions.

Challenges to accelerating the digitization of trade finance

Trade finance is another area that is long overdue for modernization, particularly given how important trade is for the global economy. Domestic and cross-border trade credit comprised more than 40% of the world GDP, or US$35 trillion in 2022. 156

But global trade has a US$2 trillion financing gap, especially in the emerging economies, among SMBs, and women-led businesses, according to Asian Development Bank. 157

While this may seem like a rich opportunity for banks, particularly in developing markets, banks often have inadequate data to inform trade financing arrangements. In several instances, the complexity and costs of complying with AML and KYC regulations make many banks selective about the loans they approve. 158 In particular, SMBs tend to face high rejection rates and are often asked to put in valuable collateral and third-party guarantees in response to banks’ de-risking efforts.

Banks could address this challenge by building credit models based on alternative data, as in the case of SMB loans discussed earlier. Stronger legal enforceability, especially around collateral, should provide more security to banks and allow them to ease access to trade finance, at least to some degree.

Digitization of trade finance should make some of these underwriting processes more efficient. For instance, digital data validation with AI could help with KYC/AML checks. Some banks have also been exploring blockchain to replace paper invoices and to identify if these trades are financed by other financial institutions. However, standardization of trade and finance terms remain critical challenges, along with the lack of sophisticated systems at SMBs to provide visibility of their trades for effective blockchain integration.

Successful digitization in trade finance also depends on digitization of trade. To date, companies across many countries still need to present a paper bill of lading 159 at shipping ports to unload their containers on the dock.

Much of international trade has remained manual, not for the lack of digital technologies, but due to the lack of uniformity in legal frameworks. Fortunately, new regulations could propel the much-awaited transformation in trade. The International Chamber of Commerce (ICC) laid out a road map for digital trade in financial services in 2020, and the UN Commission on International Trade is leading a new Model Law on Electronic Records (MLETR) to recognize the legal validity of electronic trade records. 160 Taking inspiration, the United Kingdom became the first G7 country to sign the Electronic Trade Documents Act into law in July 2023, which recognizes electronic documents as the same legal outcome as paper documents. 161 The new regulation is expected to be a big win for digital trade, not just in the country but globally. 162

Bolstering revenue growth in asset servicing

Asset servicing revenues have remained pressured in the first half of 2023, mimicking the constrained revenue growth in asset management in 2023. 163 With many asset management clients expecting their assets under management (AUM) to decline or remain flat year over year, servicing revenues are not expected to deviate from this trend.

To grow revenues, some back-office and middle-office-focused firms should continue to move up the value chain and strengthen their front-office capabilities. CACEIS, a subsidiary of Crédit Agricole group and Santander, acquired Royal Bank of Canada’s European asset servicing business to expand its front-to-back capabilities. 164

Digital assets custody is another emerging topline growth opportunity in the asset servicing industry, one that is marked by high price competition. The recent collapse of crypto exchanges has underscored the importance of having regulated crypto custodians. European banks are ahead of their US competitors in the digital assets custody game, in part due to a proactive regulatory stance to bolster investor protection. 165 In July 2023, Société Générale became the first bank to get a digital asset service provider license to operate as a crypto custodian and trading desk in France. 166

Transition to T+1 settlement in the United States, Canada, and Mexico by May 2024 will likely consume most of custodians’ operational bandwidth, as only about one-third of American and Canadian custodians in a Citibank survey were ready for T+1 transition. 167 Custodians should participate in industrywide testing, which began in August 2023, to iron out system and process deficiencies.

Staffing models would likely change to align with a follow-the-sun approach, especially for custodians outside North America. Firms should prioritize automation to gain straight-through processing efficiencies, which could also reduce the quantum of trade exceptions requiring a resolution and ultimately lower the rate of settlement fails. But at the same time, they should build plans to deal with settlement failures and prepare their teams to deal with any regulatory requirements occurring due to settlement failures.

Custodians would also need to prepare their clients for this transition. While larger institutions may be ready, SMB clients may require help to modernize their systems to send instructions on a timely basis or self-affirm by the required time.

Investment banking and capital markets: Rejiggering business models and leading with cutting-edge technology

Priorities for investment banking and capital markets firms in 2024 and beyond.

Investment banking businesses will experience modest growth in 2024. As the global economic recovery continues to build steam, restructuring services will be highly sought after, particularly in the CRE and technology sectors. As a result, refinancing, sustainability-led initiatives, and event-driven acquisitions should boost issuances and advisory revenue. But the lack of megadeals and a languishing M&A market could shift competitive dynamics from large US institutions to smaller European banks and boutiques. Meanwhile, the trading arm could see limited growth opportunities as lower volatility continues to impair FICC and equities trading income. Overall, scale will remain important and will benefit larger players who will continue to dominate certain markets. Others will be forced to specialize more than ever and make clear strategic choices.

The investment banking business should selectively experiment with generative AI to boost productivity in the front and back offices. Since the buy side is also investing in AI technologies, large investment banks must fine-tune their input data to differentiate their machine learning models. They may also need to vie for data scientists and AI specialists in an undersupplied talent pool and consider how large language models (LLMs) can cut down on labor costs. Finally, investment banks have a unique opportunity to support climate innovation by offering products and infrastructure that build more credibility into nascent carbon markets.

After a year of disappointing performance, investment banking and capital markets businesses should experience modest growth in 2024. But this will come with some new challenges, including the need to modernize digital infrastructure, allocate capital more judiciously, and ensure the full promise of generative AI is realized.

Trading has been a major revenue producer for banks in the last several years, thanks to higher market volatility. Global investment banks pulled in an average of US$150B in FICC and equities revenues in the last three years, as clients hedged foreign exchange, interest rate, and energy price exposures. 168 But as volatility declined to prepandemic levels, FICC and equities trading income in the first half of 2023 were down meaningfully. 169 Underwriting and advisory businesses, on the other hand, are beginning to show signs of improvement.

Given the current state of investment banking and capital markets, what can we expect going forward in 2024? And how should executives adapt to the new competitive dynamics, the proliferation of AI, and evolving talent models, even as cost and capital pressures increase?

Revival in demand for advisory services

The momentum within the underwriting and advisory business should continue into the next year, driven by stronger market sentiment, lower volatility, and more attractive valuations—albeit at a slow and varying pace. The rising cost of debt is also expected to drive demand for IPOs and other equity issuances. The M&A deal pipeline also continues to build up. Excess corporate cash and private equity dry powder should also result in a stronger recovery in M&A fees. Additionally, as companies adapt to shifts in the global economy, restructuring services are expected to remain in high demand, especially in CRE and technology sectors where clients will look to navigate through unchartered territory. Much of the 2024 recovery will be triggered by a combination of refinancing, sustainability-led initiatives, and event-driven acquisitions. For these reasons, revenue from issuances and advisory is expected to outpace the trading division in the next year (figure 17). 170 More stable monetary policies and lower market volatility in many regions should crimp trading revenue growth. Nevertheless, investment banking revenues may not reach the highs of 2021 in the near term.

In the United States, one could expect higher deal and issuance activity due to greater valuation certainty as rates become more stable, the need for new funding, and a backlog of deals, particularly in the technology, consumer, and health care industries. 171 However, one can expect a subdued environment in Europe in the short term, given the geopolitical uncertainties as well as the lagging recovery in the region. In contrast, APAC region should experience stronger growth in underwriting and advisory, fueled by rising competition in the technology and fintech sectors. The Middle East is another bright spot for listings where several businesses have launched their flotations.

Shifting competitive dynamics

The share of big investment banks in the global advisory fee pool has gone up since the financial crisis, with US banks leading the charge. However, the top 10 global banks experienced a drop in market share recently—from 41% in 2020 to 35% in 2022. 172   Lack of megadeals and a less vibrant global M&A market may have contributed to this decline. But whether they can recapture their lost market share or whether European players stage a comeback and boutique firms continue to nip away at large-value deals is yet to be seen.

The bulge bracket US investment banks should continue to lead the market. Scale has helped these banks grow market share and earn their share of revenues in a challenging environment. Their higher capital levels should help them weather the ongoing margin squeeze, as they invest in emerging technologies and retain high-performing bankers.

However, there could be a resurgence among European banks as they focus on specialized services globally. In anticipation of deal flow revivals, some European players are looking to acquire small boutique firms, particularly those that operate in the technology and energy sectors. For instance, Italy’s Mediobanca has agreed to buy London-based Arma Partners to capture growing corporate demand for advisory services on tech deals. 173   The prospects for European banks in the US market look more challenging. Capital constraints, lack of scale, and perhaps not enough service differentiation can limit the potential of European banks. Strategic partnerships and hiring and retaining star talent in selective areas will be key to expanding their presence, but this will come at a significant cost. APAC banks are also looking at a larger share of the global fee pool, especially with rising M&A and capital market opportunities in countries China and India.

Some boutique firms, on the other hand, can be expected to fight hard and expand their offerings. They have performed well in the current environment—especially in the tightly contested middle-market M&A. US boutique firms, for instance, featured in most of the high-valued deals in the first half of 2023. Centerview Partners was one of the top M&A advisors by value. 174 What they lack in capital, they make up in repeat business, specialized services, and strong talent. Even as deals dried up, they continue to rejigger talent and, in some cases, even expand into new services. Lazard, for instance, is looking to expand into underwriting as it looks for new growth. 175 The relatively smaller size also helps them manage expenses more efficiently and remain competitive to nip off revenue spillover from bulge bracket banks.  

Private capital is another growing competitive threat to banks, from lending to trading activities. US private markets raised more than US$250 billion in new capital in 2022, substantially higher than IPOs. 176 These days, private capital is not limited to small specialty deals. Even as public market issuances pick up in 2024, the attraction of higher valuations, higher rates, and the rising demand for sustainable finance will likely push the demand for private capital. There may also be increased buyout activity in 2024.

One should also expect greater penetration by large hedge funds to attract talent from traditional investment banks as well as boost presence in commodities trading. This will be particularly challenging for smaller, less diversified players. Investment banks should look at strong partnerships with other private-market participants and hedge funds to drive growth and innovation and search for potential new revenue streams to their clients.

Generative AI as a productivity tool in the front office

Artificial intelligence is not new to investment banking. Machine learning/deep learning algorithms and natural language processing techniques have been widely used for years to help automate trading, modernize risk management, and conduct investment research. Multiple investment banks have begun implementing use cases for generative AI, which could well be one of the most transformative technologies for the industry. Our analysis suggests that the use of generative AI can boost productivity for front-office employees by as much as 27%–35% by 2026, after adjusting for inflation. 177 (Please refer to this paper for more details.) This translates to an additional revenue of US$3 million to US$4 million per front-office employee (figure 18).

Generative AI also may alter the dynamics with buy-side clients. As clients embrace this technology, the outputs they are able to generate with greater efficiencies may reduce dependency on the sell side. Some clients may want to independently develop their own value streams and turn to investment banks only for the most high-value-adding services. AI may further democratize finance, reduce barriers to entry, and reduce market inefficiencies, leading to shrunken spreads. The input data in such models could be the differentiating factor. But because investments needed to develop such data models and LLMs are substantial, this technology may also widen the gap among market participants and may put smaller, boutique firms at a disadvantage. Scale and optimal capital allocation will become even more critical. Banks should focus on areas that have the most potential for transformation through generative AI.  

Such an infusion of AI will most likely come with potential legal, reputational, and other operational risks. Banks should look for able partners in fintechs and vendors. continuously apprise themselves of the tool’s evolving efficacy and introduce it to their value chain in a piecemeal fashion.

Investing in technology talent and augmenting investment bankers’ tech skills

Investment banks have had to pivot their talent strategies from a hiring spree in 2021 to workforce reduction plans in 2023. From bulge bracket players to boutique firms, several investment banks have reduced their workforce recently. Some banks are also hardening their stance on return-to-office policies; others are rejiggering their compensation pools. 178

However, these strategies are not uniform across the spectrum. Layoffs and new compensation policies at large banks are affording boutiques and smaller players to attract this talent. Banks in the APAC region are also planning to increase headcounts as they foresee a stronger deal pipeline. Daiwa Securities, 179 for instance, plans to hire more staff, and buy boutique firms as it accelerates its global push.

Despite the efforts to contain talent costs, the war for talent in technology remains a pressure point. Given the market demands and the need to keep pace with technology for competitive differentiation, investment banks have little choice but to vie for the brightest—and the most expensive—data scientists and AI specialists. The demand for these skills has outpaced supply. Recent layoffs in the tech sector may have provided some relief on this front, but looking ahead, most employers, including banks, will need to pay dearly for such unique talent.

However, one potential avenue to cut back on talent costs in the technology area is coding. The stunning capabilities LLMs have in producing and correcting code should be an opportunity to save labor costs in this area. Also, the trend toward low-code/no-code environments may help obviate the need for programming talent, especially at the junior levels.

Also, given the rapid pace of technological changes, investment bankers should continue becoming more tech-savvy, especially as innovations from and within artificial intelligence expand. Corporate and buy side will want to know how such shifts could impact their companies and industry. The rising trend of industry convergence will likely also impact M&A synergies. Dealmakers should possess strong tech and cross-industry fluency.

Pursuing innovation amid new capital constraints

New regulatory requirements regarding capital and liquidity will be another constraint for investment banks—especially their capital-intensive trading arms. The additional capital required in the recent Basel III “endgame” rules for banks above US$100B in assets 180 should impact capital allocation to prop trading, technology investment, and plans for market expansion. Furthermore, these rules could materially constrain large banks’ ability to support capital markets activities as counterparties in financial derivatives, which could further elevate the cost of capital for the end users as well. 181

Also, the move to T+1 settlement in several countries, including the United States, will require banks to prepare for potential increases in settlement risks and enhance other risk management features. Investment banks must also continue to monitor and prepare for regulatory changes for crypto assets. Financial Stability Board (FSB) recently launched a global framework for the oversight and regulation for crypto activities, building on the notion that the same activities with similar risks should have similar regulations. 182

Focus on cost discipline will be another differentiating factor. Recently, investment banks’ expenses have grown, largely due to growth in technology support staff, higher fixed compensation, as well as rising costs of key office locations. There are some signs of improvement, though. For instance, the proposed move to abolish the banker bonus cap for Material Risk Taker (MRT) employees in the United Kingdom may help banks operating there bring down their current compensation structures. 183 Technology investments made in the last few years are also paying off through additional efficiencies in the front office and back office.

At the same time, investment banks will need to continue financing and supporting climate innovation. Green finance and carbon markets are ripe for investment banks to step up their role. In fact, some banks are investing in platforms that will ease clients’ participation in carbon credits. 184 In addition to providing liquidity, investment banks should develop a more robust trade infrastructure buttressed by reference and market data, and efficient settlement platforms. They also must work to securitize carbon credits and develop tradeable instruments that provide price signals to other entities.

Market infrastructure: Reinventing business models and becoming more indispensable to clients

Priorities for market infrastructure firms in 2024 and beyond.

Traditional exchanges are grappling with intensifying competition, from niche players to competitors from other regions. Some new rivals will be specialist exchanges that are focused on sustainability, corporate governance, and price transparency. Others could come from regions with fast-growing economies and increasing trading volumes. In fact, it is expected that the market cap of exchanges in emerging markets will exceed that of US exchanges by 2030. Canadian and Australian exchanges are also expected to take market share away from peers in Japan and the European Union.

Going forward, the exchanges that have long served as go-to trading hubs will need to attract global investors with dual listings and support from other members of the trading ecosystem. They should also improve how data is packaged and delivered, such as with flexible feeds and mobile solutions that customers can plug into their analytical models. Migrating markets to the cloud will also be imperative to reducing latency, executing orders faster, and monitoring transactions across market participants. Ancillary businesses will become more important to creating enduring relationships with customers. As a result, large exchanges should continue expanding services that cater to corporate clients, such as risk monitoring, carbon trading, and infrastructure for digital securities.

Traditional exchanges globally are at a critical juncture. Strategic choices they make now could determine whether they continue to grow—or even retain—market share and garner higher profits. Over the next several years, profitability will be pressured by intensifying competition from niche exchanges, the growth of trading venues in emerging markets, and increasing demand for diversified services from clients. At the same time, exchanges have a unique opportunity to deepen their value proposition to customers by improving listing services and migrating markets to the cloud.

Entering 2024, exchange leaders should ask themselves: How are customer expectations changing as new entrants become more prominent? What business and service lines can we enhance to become indispensable to corporate clients? How can we use emerging technologies—particularly data feed infrastructure, cloud-powered computing, and generative AI—to give traders a competitive edge?

Exchanges continue to seek new ways to evolve

Incumbent exchanges should soon find themselves pitted against new rivals. Some competitors will be specialist exchanges that cater to niche areas, such as those focused on sustainability; others will be up-and-coming exchanges in emerging economies. For example, a new exchange called the Green Impact Exchange (GIX) plans to go live in 2023. The GIX will require companies to adopt principles that promote environmental goals and will delist those that don’t adhere to these principles. 185 Singapore’s Climate Impact X (CIX), an exchange for the voluntary carbon market, also launched in 2023. 186 There is also the Abaxx Exchange, a commodity futures exchange that focuses on energy markets and natural gas. 187

Other exchanges that have come to market in recent years include the fee transparency-focused Members Exchange (MEMX) and the corporate governance-minded Long-Term Stock Exchange (LTSE). Of course, it is hard to tell how much market share these new exchanges may take.

In addition, exchanges in the Asia-Pacific region are becoming more of a threat to established venues in London and New York. In 2022, the Americas accounted for 27.4% of equity trading volumes, less than half of the share of APAC’s volumes. 188 And the market cap of exchanges in emerging markets should exceed the value of U.S. exchanges as soon as 2030, according to economists at Goldman Sachs (figure 19). 189 The fast pace of economic growth in Mainland China and India will help emerging markets command a larger slice of the global equity market. In total, the share of emerging markets is expected to rise from 27% in 2022 to 35% by decade’s end. US exchanges, by comparison, could see their market share shrink from 42% to 35% in that time frame. Within developed economies, influence could also shift: Canadian and Australian exchanges are poised to grow at the expense of peers in Japan and the European Union. 190

Going forward, exchanges will have to maintain more of a global focus, particularly on developing economies as they continue to grow. International issuers already make up about 20% of listings on the New York Stock Exchange (NYSE), 191 and NYSE plans to expand its global customer base even further, especially in countries that have a stronger IPO market. It recently joined forces with both the Tel Aviv Stock Exchange (TASE) 192 and the Johannesburg Stock Exchange (JSE) 193 to encourage dual listings on their respective platforms and collaborate on the creation of new products. This follows similar agreements that NYSE made in Indonesia and Singapore to establish a bigger presence in the burgeoning Asia-Pacific region in 2022. 194 The Dubai Financial Market has also been working to entice foreign companies that may be interested in dual listings on two exchanges. 195 Similarly, Cboe, which has traditionally been less focused on non-US listings, is intent on attracting companies to its European trading venues. 196

The increasing competition is also placing more urgency on efforts to assess how exchanges can make their listing services more appealing to corporate issuers, domestic and foreign alike. For its part, the Toronto Stock Exchange (TSX) is working with banks and investors to generate more support for domestic companies to list on its platform. 197 Some governments are even stepping in to bring business back to its capital markets. For example, the British Treasury plans to implement “common sense” reforms, such as simplifying prospectuses; easing rules for buying, holding, and selling shares; and developing a new kind of market that will allow private companies to access capital markets without a listing. 198

Doubling down on data and technology

Exchanges have been investing in data capabilities for years, and now they should take bolder steps to unlock new sources of value using innovative tools and technologies. In fact, if exchanges lag in making the technology upgrades that alternative trading systems and off-exchange market venues are undertaking, they could soon encounter interoperability issues with brokers and traders. The sweet spot—where data licensing, cloud computing, and artificial intelligence techniques intersect—should be a particularly strong driver of growth in the coming years.

Exchanges already derive a sizable share of revenues from data services, but there is ample opportunity to grow this pie even more. There is not only a large appetite for real-time trading data, but more firms are looking to purchase pricing, reference, and valuation data as well. In 2022, global spending on market data exceeded US$37.3 billion. 199 Exchanges also need to continue to improve how data is packaged and delivered. Both sell-side and buy-side clients increasingly expect more convenient and flexible feeds and mobile solutions they can plug into their analytical models for competitive advantage.

Migrating data to the cloud as urgently as possible will also be key to delivering data-driven, user-centric services. In fact, large exchanges point to cloud-based platforms as “the next generation of how markets will operate.” The CME Group expects its cloud adoption to reduce latency. Its investments should also bring massive datasets under one taxonomy that can be tapped for real-time risk mitigation and AI-driven decision-making. These efforts will make it easier for client firms to interact with the Chicago-based exchange. 200

Similarly, Nasdaq’s cloud systems are designed to analyze multiple markets simultaneously and execute many orders within seconds. 201 It expects to migrate two markets by the end of 2023 and plans to move the rest in coming years. The exchange’s leaders have also noted that its cloud-based risk management business can monitor transactions across banks and mitigate financial crimes.

Looking over a longer-term horizon, exchanges should consider how quantum computing can improve the performance, speed, and cost of market operations. The immense processing power of quantum algorithms should make it possible for exchanges and market participants to perform tasks that were previously deemed too complicated, such as tasks in derivatives pricing, 202 order matching, 203 fraud detection and risk management, 204 and portfolio optimization through natural language processing. 205 A Deutsche Börse pilot, for example, found that quantum computing could reduce the time required for a business risk model simulation with 1,000 inputs from multiple years to less than 24 hours. 206 While it may be a few years before this nascent technology can be applied to practical trading applications, some large financial institutions have started to work backward to identify problems that quantum technology may be best suited to solve. 207

US banks and financial institutions are also exploring ways to maximize the value of data repositories they built for the SEC’s Consolidated Audit Trail (CAT), which became fully operational in 2023. The consolidated tape now provides organizations with a coherent view of current and historic order and trade life cycle events, which they can mine on cloud-based data platforms that support advanced algorithms. 208 These tools can unlock new insights, for example, by allowing sell-side analysts to review systematic trading patterns and providing a window for them to advise clients on new trade opportunities. Over time, merging equities data with other securities may bring an even more expansive range of trades across asset classes.

Finally, generative AI will transform securities exchanges globally. Some institutions are already engaged in pilots of various kinds. Nasdaq, for example, is exploring how the technology can more effectively spot financial crime, a capability the company wants to advance as “deepfakes” become more sophisticated and pervasive. 209 It is also assessing how generative AI can assist in building code, writing blog posts, and summarizing legal documents. 210

Meanwhile, this technology also has enormous potential to transform trading operations, both on the sell side and buy side. In the near term, traders can use LLMs to process large amounts of text to inform trading strategies. Some big banks, for example, have started using generative AI to pick up on trade signals by deciphering speeches and messaging from the Federal Reserve and other central banks. 211 These innovations could impact the speed and volume of trading on exchanges. It could also usher in a new demand for new types of market data from exchanges.

Exchanges want to be more than just exchanges

While listings and market data continue to be prized assets, many exchanges are expanding into other areas of the financial system to create more sticky relationships with corporates, buy-side, and sell-side firms. These ancillary businesses will become more critical as exchanges contend with heightened competition, increasing fee pressure, and the possibility of stagnated transaction volumes.

Several exchange operators are exploring strategic acquisitions that can bolster their value proposition. Nasdaq, for example, is accelerating its decade-long push to supplement traditional revenue streams with software-based businesses that primarily offer pretrade and at-trade risk management and anti-financial-crime technology. In June 2023, the exchange made its largest ever purchase in a US$10.5 billion deal for a fintech that will be integrated into its business line dedicated to supporting corporate clients. 212 About one-third of the Nasdaq’s recurring revenues now stem from software subscriptions, and it is aiming for the share of total revenue attributable to its solutions business to grow from 71% to 77% by the end of 2023. 213

UK exchange operators are also branching into new areas to help set the foundation for future growth. The London Stock Exchange (LSEG), for example, entered into a 10-year partnership with Microsoft to catalyze the migration of its infrastructure to the cloud. The partnership also plans to develop products that can be delivered through Microsoft’s offerings, such as data and analytics shared on the Teams messaging platform. 214 In addition, LSEG is also expanding into green financing; its recently launched voluntary carbon market sets listing rules for investment funds and businesses to raise capital for carbon credit-yielding projects. 215 Other alternative revenue streams that exchanges can pursue include platforms to host fintechs and other ecosystem players, direct market access that targets specific customers, and smart contract-based KYC processes. 216

Digital assets continue to attract new market infrastructure firms, which can play a unique role in offering proper governance and cross-market risk management. European institutions will likely have a leg up piloting digital securities, given the flexibility that some regulators are extending to that market. Luxembourg, for example, adopted a law that expands the definition of financial instruments to include products issued on the blockchain. This will open the door to the greater issuance of tokenized securities. 217 The Luxembourg Stock Exchange (LuxSE) is only issuing tokens rooted in fiat currency that qualify as debt financial instruments, but exchanges may soon facilitate the launch of other novel listings. Exchanges and market infrastructure firms can instill credibility into blockchain-issued instruments by building out complementary services, such as repo solutions and digital custody.

However, expanding revenue streams into nascent markets is fraught with some uncertainties. Digital assets and securities tokenization do not have a globally consistent regulatory framework. Similarly, voluntary carbon markets could benefit from greater regulatory guidance and clarity, not to mention ambiguous legal and accounting standards. Finally, carving out too deep of a niche may subject exchanges to antitrust concerns and/or claims of data monopolization.

Time’s up for the T+1 transition

The move to an accelerated trade settlement period in Canada and the United States continues to be a major undertaking. Many firms are scrambling to prepare before the May 2024 implementation date. The transition to T+1 is expected to reduce credit, counterparty, and operational risks arising from unsettled trades. But crossing the finish line—and adapting to new workflows once the changes take effect—will be a major hurdle.

While the shifts to T+3 and T+2 were largely technology-driven, accelerated settlement will trigger many changes in processes and behaviors. Chief among them is reduced time available for post-trade operations. In fact, the Association for Financial Markets in Europe predicts that the transition from T+2 to T+1 shortens the settlement operations window by 83%. 218 This truncated timeline will impact how institutions interact with global clients. Large North American firms may adopt the “follow-the-sun” model of assisting clients from multiple global locations, but other institutions may need to rely on second/staggered shifts. In addition, non-US investors could begin prefunding FX trades to accommodate the T+1 settlement cycle. Investment managers outside the United States may need to sell a day earlier to make US funds available for trades, which could impact their other holdings. 219

Costs are widely expected to rise if there is an increase in trade fails, which will require higher margins, more collateral, and increased funding. Firms can bring about operational efficiencies by working to automate post-trade processes that currently require manual intervention and moving to straight-through processing. One area ripe for automation is the allocation of institutional trades; only about 20% of allocations in the United States occur when markets are open. 220 Increasing trading-day allocations can provide more time to process confirmations and execute timely affirmations. 221 In addition, the industry should update service-level agreements to improve the consistency and reliability of information shared between market participants. 222 Roughly four out of 10 trade fails are the result of incomplete or inaccurate settlement instructions and unavailable securities. 223

There could also be more friction in securities lending. Not only will lenders have a shorter time frame to identify and recall securities, but custodians and agents may not receive sufficient notice to return them if batch processing limits their access to real-time information. This can lead to an uptick in breaks and fails, as well as an increase in penalties. As a result, global firms may be hesitant to extend loans if they believe time zone differences will prevent them from making a recall on the US and Canadian trade date, which have the latest market closing times among developed economies. 224

Let’s make this work.

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Byron Kaye, “ Analysis: Australian banks' bid to shake mortgage reliance brings new risks ,” Reuters , May 16, 2023.

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Ryan Browne and MacKenzie Sigalos, “ Big banks are talking up generative A.I. — but the risks mean they’re not diving in headfirst ,” CNBC , June 13, 2023.

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Will McCurdy, “ Adyen moves into embedded finance with dual product launch ,” AltFi, October 25, 2022; Jordan McKee, “ Money 20/20 U.S. highlights: The rise of embedded finance and ‘everything’ as a service ,” Forbes , November 7, 2022.

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Pymnts, “ UK APP fraud rules will keep faster payments safer long term, experts say ,” May 2, 2023. 

UK Finance, Annual Fraud report: The definitive overview of payment industry fraud in 2022 , May 2023; British pound to US dollar conversation rate of 1.2369 in 2022. See: Exchange Rates, “ British Pound to US Dollar Spot Exchange Rates for 2023 ,” accessed on September 1, 2023.

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Deloitte, “ Deloitte launches generative AI practice to help clients harness the power of disruptive new AI technology ,” press release, April 13, 2023.

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Blake Schmidt and Amanda Albright, “ AI Is coming for wealth management. Here’s what that means ,” Bloomberg , April 21, 2023.

William Shaw and Aisha S. Gani, “ Wall Street banks are using AI to rewire the world of finance ,” Bloomberg , June 1, 2023.

Hugh Son, “ JPMorgan is developing a ChatGPT-like A.I. service that gives investment advice ,” CNBC , May 25, 2023.

Tiburon Strategic Advisors, “ Tiburon CEO Summits .” 

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Ted Godbout, “ $1 billion-plus deals driving 2023 RIA M&A activity ,” NAPA, July 10, 2023.

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Interviews with Deloitte experts.

Niklas Bergentoft and François-Dominique Doll, “Deloitte global treasury survey,” November 2022.

Tim Partridge and Richa Wadhwani, Commercial Banking 2025: Finding a new compass to navigate the future , Deloitte, January 27, 2023.

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Laura Murray, “ Electronic Trade Documents Bill to bring global trade into the 21 st Century ,” The Banker , February 2, 2023.

  • Deloitte Center for Financial Services analysis. View in Article

Credit Agricole, “ CACEIS and Royal Bank of Canada complete acquisition of RBC Investor Services’ operations in Europe and Malaysia ,” press release, July 3, 2023.

Giancarlo, “ European Banks overtake US competitors in crypto custody race ,” Blockzeit , July 17, 2023.

Emily Nicolle, “ Societe Generale Unit gets France’s first crypto license ,” Bloomberg , July 19, 2023.

Citigroup, “ T+1 – A race against time .”

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Banks Q2 2023 earnings transcript.

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Valentina Za, “ Mediobanca buys Arma Partners to boost tech advisory offer ,” Reuters , May 19, 2023. 

DCFS analysis of S&P Market intelligence database.

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JPMorgan, “ Is the private markets boom here to stay? ,” February 16, 2023. 

Simon Foy, “ Bankers refusing to return to the office will be punished, warns JP Morgan ,” The Telegraph , April 12, 2023. 

Makiko Yamazaki, “ Japan's Daiwa targets 50% jump in M&A advisory with US focus ,” Reuters , June 1, 2023.

Colby Smith, “ Regulators announce ‘Basel III endgame’ rules for large US banks ,” Financial Times , July 28, 2023.

Dr. Guowei Zhang, Katie Kolchin, Dr. Peter Ryan, and Carter McDowell, “ The Basel III Endgame’s Potential Impacts on Commercial End-Users ,” SIFMA, July 11, 2023. 

FSB, “ FSB finalises global regulatory framework for crypto-asset activities ,” press release, July 17, 2023. 

Craig Coben, “ Bonus cap blues ,” Financial Times , February 15, 2023. 

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Intercontinental Exchange, “ The New York Stock Exchange and The Johannesburg Stock Exchange announce collaboration on dual listings ,” press release, October 10, 2022.

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Nikou Asgari, “ Cboe prepares for European stock market listings grab ,” Financial Times , May 24, 2023.

Geoffrey Morgan, “ Toronto Exchange Fights to Keep Stock Listings in Canada Over US ,” Bloomberg , April 17, 2023. 

HM Treasury, “ Chancellor Jeremy Hunt’s Mansion House speech ,” Gov.UK, July 10, 2023.

TP ICAP, “ Global spend on financial market data totals a record $37.3 billion in 2022, rising 4.7% on demand for research, pricing, reference and portfolio management data - new Burton Taylor report ,” press release, April 18, 2023.

Shanny Basar, “ CME, Google Cloud Partnership is ‘Transformational’ ,” Traders Magazine , January 10, 2022.

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Acknowledgments

This report was researched and coauthored by  Richa Wadhwani ,  Jill Gregorie ,  Abhinav Chauhan ,  Samia Hazuria , and contributing analyst  Shivalik Srivastav.

The Center would like to thank the following Deloitte client services professionals for their insights and contributions to the development of this outlook:

US Industry and Practice leaders:

  • Monica O'Reilly , vice chair, US Financial Services Industry leader, Deloitte & Touche LLP
  • Mike Wade , vice chair, US Banking & Capital Markets leader, Deloitte & Touche LLP
  • Larry Rosenberg , partner, US Audit & Assurance Capital Markets leader, Deloitte & Touche LLP
  • Louis Romeo , partner, US Banking Audit Leader, Deloitte & Touche LLP
  • Garrett O'Brien , principal, US Banking & Capital Markets Risk & Financial Advisory leader, Deloitte & Touche LLP
  • Jason Marmo , principal, US and Global Banking & Capital Markets Tax leader, Deloitte Tax LLP
  • Michelle Gauchat , principal, US Banking & Capital Markets Consulting leader, Deloitte Consulting LLP

Global and regional leaders:

  • Neil Tomlinson , vice chair, Global Banking and Capital Markets Leader, Deloitte MCS Limited

Regional leaders:

·        Tony Wood , partner, Deloitte Advisory (Hong Kong) Limited

·        David Myers , partner, Deloitte Touche Tohmatsu

·        Yukihiro Otani , partner, Deloitte Touche Tohmatsu LLC

·       Richard Kibble , partner, Deloitte MCS Limited

·       Alessandra Ceriani , partner, Deloitte Consulting SRL

·       Juan Perez de Ayala , partner, Deloitte Consulting SLU

·       Marijn Struben , partner, Deloitte Netherlands

·       Raman Rai , partner, Deloitte Canada

Subject matter specialists:

Macroeconomics

·       Danny Bachman , senior manager, Deloitte Services LP

·       Ira Kalish , managing director, Deloitte Touche Tohmatsu

·       Michael Wolf , senior manager, Deloitte Touche Tohmatsu

·       Shiro Katsufuji , managing director, Deloitte Touche Tohmatsu LLC

·       Kristin Korzekwa , managing director, Deloitte Consulting LLP

·       Thomas Nicolosi , principal, Deloitte & Touche LLP

·       Bill Dworsky , senior manager, Deloitte Consulting LLP

·       Jeff Todd , partner, Deloitte Canada

·       Zachary Aron , principal, Deloitte Consulting LLP

·       Jade Shopp , partner, Deloitte & Touche LLP

·       Mike Reichert , partner, Deloitte Tax LLP

·       Tushar Puranik , managing director, Deloitte Consulting LLP

·       Jean-François Lagassé , partner, Deloitte AG

·       Kendra Thompson , partner, Consulting, Deloitte Canada

·       Karl Ehrsam , principal, Deloitte & Touche LLP

·       Gauthier Vincent , principal, Deloitte Consulting LLP

·       Jeff Levi , principal, Deloitte Consulting LLP

·       Thomas Kirk , managing director, Deloitte Consulting LLP

·       Pascal Martino , partner, Deloitte Tax and Consulting LLP

·       James Alexander, director, Deloitte MCS Limited

·       Peyman Pardis , senior manager, Consulting, Deloitte Canada

·       Tim Partridge , principal, Deloitte Consulting LLP

·       Kris Ferguson, partner, Deloitte MCS Limited

·       Steven Fricano , managing director, Deloitte Consulting LLP

·       Stefan Frank , partner, Deloitte Consulting GmbH

·       Ketan Bhole , partner, Deloitte Canada

·       Fadl El Laoune , managing director, Deloitte Consulting LLP

·       Michelle Gauchat , principal, Deloitte Consulting LLP

·       Nitish Idnani , principal, Deloitte & Touche LLP

·       Vipul Pal , principal, Deloitte Consulting LLP

·       Sachin Sondhi , principal, Deloitte Consulting LLP

·       Vishal Vedi , partner, UK, Deloitte LLP

·       Nina Gopal , partner, UK, Deloitte MCS Limited

·       Suresh Kanwar , partner, Deloitte MCS Limited, UK

·       Sriram Gopalakrishnan , principal, Deloitte Consulting LLP

·       Alex Lakhanpal , partner, Deloitte & Touche LLP

·       Tushar Daru , principal, Deloitte Consulting LLP

·       Bob Walley , principal, Deloitte & Touche LLP

·       Sunil Kapur , managing director, Deloitte & Touche LLP

·       George Black , principal, Deloitte & Touche LLP

The Deloitte Center for Financial Services, Deloitte Insights, and B&CM practice professionals

·        Jim Eckenrode , managing director, Deloitte Services LP

·        Sylvia Gentzsch , senior manager, Deloitte GmbH

·        Alec Roberts , senior manager, Deloitte & Touche LLP

·        Patricia Danielecki , senior manager, Deloitte Services LP

·       Karen Edelman , senior manager, Deloitte Services LP

·        Paul Kaiser , manager, Deloitte Services LP

·        Pankaj Bansal , assistant manager, Deloitte Support Services India Pvt Ltd.

·      Jayesh Prabhu , assistant manager, Deloitte Support Services India Pvt Ltd.

·        Margaret Doyle , partner, Head of UK Financial Services Insights Center, Deloitte LLP

Cover image by: Jim Slatton

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bank branch strategic plan

sbi investor presentation 2022

Dear Shareholders, It gives me immense pleasure to place before you the highlights of your Bank's performance during FY2023. Details of the achievements and initiatives taken by your Bank are provided in the Annual Report for FY2023.

The past year has been another turbulent year with the global economy marred by profound shocks and unprecedented uncertainty. The global economic growth has moderated amidst the prolonged Russia-Ukraine war, even though the effect of the pandemic has receded. Food and energy price shocks affected the general prices, with wage- price spiral leading to elevated inflation across countries. The recent failures of banks in the United States are a reminder of the challenges posed by the interaction between tighter monetary and financial conditions and the build- up in vulnerabilities. Though inflation has receded with central banks raising interest rates, underlying price pressures are proving sticky, with labor markets being tight in several economies. In parallel, debt levels remain high, limiting the ability of fiscal policymakers to respond to new challenges. Commodity prices have moderated, but the elevated geopolitical tensions are the key risks. However, earlier than expected opening of China is easing supply chain disruptions and renewing hopes for moderate economic recovery. As per IMF projections, world growth will bottom out at 2.8% this year before rising modestly to 3.0% in 2024.

Against this backdrop of global uncertainties, Indian economy has remained resilient with robust agriculture and services sector. Meanwhile, on the external front, exports of goods and services reached new heights supported by strong demand of Indian services. India’s GDP in FY2023 grew at 7.2%, driven by buoyant investment and private consumption. Looking ahead, real GDP growth is projected at 6.5% in FY2024 (RBI), with economic activity backed by improving rural demand, the Government’s thrust on infrastructure spending, revival in corporate investment, healthy bank credit, and moderating commodity prices.

sbi investor presentation 2022

During the year FY2023, your Bank’s business grew at a faster pace than the banking industry, both in deposits and credit.

In FY2023, the whole Bank deposits grew by 9.19% YoY to ` 44.23 Lakh Crore, of which domestic deposits increased by 8.50% to ` 42.53 Lakh Crore and foreign offices deposits by 29.60% to ` 1.70 Lakh Crore. CASA deposits grew by 4.95% to ` 18.62 Lakh Crore and CASA ratio of your Bank is at 43.80% as of March FY2023. Current account deposits grew by 7.47%, while saving bank deposits grew by 4.51%. Your Bank has opened 1.24 Crore Regular Savings Bank Accounts, of which 64% accounts were acquired digitally through YONO during FY2023.

Your Bank’s gross advances grew by 15.99% to ` 32.69 Lakh Crore, compared to a growth of 11.0% in FY2022. While domestic advances grew by 15.38% to ` 27.76 Lakh Crore, foreign offices advances grew by 19.55% to ` 4.92 Lakh Crore. You will be happy to know that your Bank’s domestic advances growth (15.38%) is higher than the banking industry’s growth of 15.0% in FY2023, led by robust growth in all the sectors. Among all the business segments, retail personal loans registered the highest YoY growth of 17.64% touching ` 11.79 Lakh Crore followed by SME advances which grew by 17.59% to ` 3.59 Lakh Crore. Agri & Corporate loans registered a YoY growth of 13.31% to ` 2.58 Lakh Crore and 12.52% to ` 9.79 Lakh Crore, respectively.

The 3-year CAGR of retail personal loans indicate a 16.0% growth and now accounts 42.5% of domestic advances in FY2023. Among the retail personal loans, Xpress credit loans crossed the ` 3 Lakh Crore mark, with YoY growth of 22.72% to ` 3.04 Lakh Crore in FY2023. Home loans and Auto loans, grew by 14.07% to ` 6.41 Lakh Crore and 23.22% to ` 97,523 Crore respectively during FY2023. As on March 2023, your Bank’s market share in Home loans and Auto loans is at 33.1% and 19.4% respectively.

With the interest rate hikes across the globe to tame inflation, your Bank’s prudent investment decisions helped contain the impact of rising interest rates on the investment portfolio. Your Bank’s investment portfolio increased by 6.3% to ` 15.87 Lakh Crore in FY2023, of which 96% are domestic investments. Within the domestic investment portfolio, 62.94% is in HTM category while the rest is under AFS & HFT category. The yield on investment at 6.51% is in line with the interest rate scenario of FY2023. Your Bank’s liquidity position remains comfortable, and it is well-placed to handle any moderation in liquidity.

Profitability

During FY2023, your Bank optimally leveraged the opportunities inherent in the resurgent and resilient Indian economy. Buoyed by relentless pursuit of best practices and strategies across niche segments, the standalone net profit during FY2023 rose by over 58% to ` 50,232 Crore from previous year’s net profit of ` 31,676 Crore (FY2022). Your Bank has registered significant improvements on the asset quality front, provision coverage ratio, RoE/RoA, NII and NIM, while also giving highest standalone profit in FY2023 by any listed corporate, domestically.

The Net Interest Income (NII) of your Bank registered a robust growth of 19.99% over the previous year at ` 1,44,841 Crore in FY2023 ( ` 1,20,708 Crore in FY2022). Lending book grew across all segments and remained adequately diversified with traditional bastions like Xpress credit and Housing loans growing handsomely, all contributing to higher interest income. Control in slippages and moderation in credit costs showed marked improvements. Credit costs further improved by 23 basis points to 0.32%, continuing its momentum. Total provisions made during FY2023 stood at ` 33,481 Crore, falling 7.51% ( ` 2717 Crore) over FY2022 level. The operating profit of your Bank during FY2023 stood at ` 83,713 Crore, a marked improvement of 11.18% over FY2022 ( ` 75,292 Crore that had grown by 5.22%). The cost to income ratio increased by 56 basis points in FY2023 (over FY2022), though standing a little elevated at 53.87 for the FY2023 against 53.31 (FY2022) due to higher provisions on account of wage hike negotiations.

Return on Assets (RoA) for Q4 FY2023 stood at 1.23% (0.96% for the full FY2023 against 0.67% for FY2022), signalling that the journey towards guidance of ROA of 1%+ was on track with continuous improvement in ROA from FY2020 onwards. Return on Equity (RoE) showed marked improvement of 551 basis points, rising to 19.43% for the FY2023 against 13.92% during FY2022 (as against improvement of 398 basis points displayed in FY2022).

The capital ratios of the Bank continued to improve during the financial year on the back of better planning, plough back of profit, and efficient risk management of the banking book. The CET-1 ratio improved by 33bps to reach 10.27% as of March 2023.

The overall Capital Adequacy Ratio (CAR) as at the end of March 2023 stands at 14.68%, improving by 85 bps YoY. With healthy profits in FY2023, the capital position of the Bank remains comfortable to tap future growth opportunities.

I am happy to announce that the Board of your Bank has declared a dividend of ` 11.30 per equity share (i.e. 1130%) for the financial year ended March 31, 2023.

Asset Quality

The focus on asset quality and containing risk has been an area of continued attention for the Bank. There was a broad-based improvement in the asset quality of your Bank in FY2023. The gross non-performing assets (NPA) of the Bank dropped by 119 bps YoY and stood at 2.78% as of March 2023. The net NPA ratio accordingly stands at 0.67% as of March 2023 down 35 bps YoY.

Slippage, which indicates the incremental fall in credit quality during the year, was down by 26.38% compared to FY2022 and as a result, the slippage ratio for FY2023 improved by 34 bps YoY reaching 0.65% as of March 2023.

The proactive management of risk during the year resulted in improvement in Provision Coverage Ratio (PCR) by 135 bps YoY, standing at 76.39% by the close of financial year.

Customer Centricity

At SBI, customer-centricity is of paramount importance, and we undertake a proactive and flexible approach to cater to the changing financial needs of our customers.

We employ cutting-edge technology and new solutions to offer seamless and efficient banking experiences, keeping our finger on the pulse of market developments. Our objective is to significantly increase our presence across the country and penetrate deeper into new regions to ensure that all our customers have access to our services.

Our multichannel delivery model – digital, mobile, ATM, internet, social media and branches, offer customers a wide choice to carry out their transactions, as per their convenience at any time and place. Your Bank has one of the largest ATM networks in the country, with 65,627 ATMs, including Automated Deposit and Withdrawal Machines (ADWMs), as on March 31, 2023. On an average, ~1.3 Crore transactions are recorded every day at your Bank’s ATMs/ADWMs and 5.66 Lakh cash deposit transactions at ADWMs.

Your Bank has established a centralised dedicated cell, CLIC (Customer Liability Identification Centre), across all 17 circles. This cell expedites the resolution of complaints related to unauthorised electronic debit transactions (UAED), ensuring a swift and efficient customer experience.

To ensure optimal service quality, incognito visits were carried out at various branches. These visits assessed various aspects such as infrastructure availability, staff readiness, and overall branch activity.

To improve customer convenience and ease of banking, your Bank is extending doorstep banking services through agents to all customers at the top 100 banking centres. Senior Citizens more than 70 years of age and differently abled persons are being extended doorstep banking services at all banking centres.

With a presence across all time zones through its 235 points of presence in 29 countries, your Bank has gradually spread its wings globally and has become a pioneer of International Banking among the Indian banks. During FY2023, your Bank has opened one India visa application centre at Khulna (Bangladesh) and 5 branches and 3 extension counters through its overseas subsidiary in Nepal.

Technology & Innovation

Your Bank uses technology in every aspect of the value proposition - from business, designing products, streamlining processes, and improving delivery, to monitoring. Your Bank has taken several initiatives to build a quality SME portfolio in a risk-mitigated manner and has implemented significant changes to ensure ease of banking.

YONO Business combines all corporate banking needs by being a one-stop solution for the customer. Your Bank deploys the most advanced technologies like artificial intelligence, machine learning and business analytics, among others, to augment its product offerings to enhance customer delight each time, without exception. Under YONO, Pre- Approved Business Loan (PABL) has recorded a YoY growth of 1076% to ` 3,605 Crore in FY2023.

Following initiatives have been implemented during the year:

1. New digital products under development in collaboration with Fintech/ AA/ GST

MSME SAHAJ Seller’s Invoice Financing on Yono Business providing digital loan and financing of GST invoice Seller’s Invoice Financing Scheme under GST Sahay, a GoI initiative, provides digital loan through GST Sahay app, which is a marketplace.

2. Contactless Lending Platform (CLP):

Your Bank is one of the stakeholders in SIDBI-led PSB Consortium, which offers SMEs quick and simple access to loans through CLP platform psbloanin59minutes.com. Eligible proposals receive instant in-principle approval based on GST returns, IT returns and account statements.

For FY2023, your Bank has already sanctioned 6,342 leads worth ` 2,940.24 Crore, with ticket size ranging from ` 1 Lakh to ` 5 Crore.

To facilitate digitalisation and streamline the issuance of credit, a new mechanism for the auto-renewal of leads obtained from CLP has been launched. This approach will guarantee the prompt renewal of accounts considered good and financially satisfactory, with minimal need for manual work. It allows Relationship Managers (SME) to concentrate on sales and marketing activities.

3. Assisted Journey for ETCB/ NTCB/ NTB Customers

The Assisted Journey allows operating functionaries such as RM (SME) team, field officers and Branch Managers to initiate the CLP journey on behalf of the customer without needing them to input any details. These can be uploaded directly on the portal.

4. Supply Chain Finance

By leveraging technology and branch network, your Bank has been a major player in supply chain finance while strengthening corporate relationships across sectors. During FY2023, supply chain finance was extended to 34,592 dealers with total sanctioned limits of over ` 44,565 Crore e-DFS (Electronic Dealer Financing Scheme) and ` 16,437 Crore e-VFS (Electronic Vendor Financing Scheme) respectively.

Your Bank entered into 16 new e-DFS and 37 new e-VFS tie-ups during the year. Your Bank has already implemented CLP for e-DFS and e-VFS. Your Bank has also simplified the e-VFS processes and built a new digital interface “psbloansin59minutes.com” on CLP for improved customer experience. It has also introduced Supply Chain Finance Centralised Processing Centres to reduce TAT for proposal processing. To ring-fence the supply chain portfolio, it has implemented suitable risk mitigation measures and risk-based pricing. Your Bank is also launching various campaigns for onboarding dealers/ vendors and broadening the channel finance base.

Your Bank is the first Public Sector Bank to register as a financier on the TReDS platform and is present on all the three TReDS platforms in the country -RXIL, M1 Exchange and Invoicemart, to provide finance to MSMEs. In FY2023, your Bank has discounted 26,973 bills amounting to ` 9,800 Crore, registering a YoY growth of 144%.

To further penetrate the agriculture and rural market, your Bank has floated State Bank Operations Support Services (SBOSS), which is expected to help your Bank reach out to a larger populace, coupled with improved efficiency in sourcing and renewal of KCC loans.

Your Bank is actively looking to partner with agri-techs and start-ups to cater to the financial needs across the agriculture value chain. Your Bank has opened specialised Start-up branches at Bengaluru, Mumbai, Delhi and Chennai to offer one-stop solutions to Start-ups.

In order to make banking more convenient for customers, your Bank has introduced the V-CIP digital process, which allows account opening from home, eliminating the need to visit branches. During FY2023, 4.70 Lakh customers joined us through V-CIP.

As a result of the various initiatives taken by your Bank, 64% of total Regular Savings Bank Accounts have been opened digitally during FY2023.

Your Bank has ensured customer convenience and portfolio growth by offering a comprehensive range of products on multiple platforms, with higher profit margins. YONO offers digital loans in real-time, eliminating the need for physical documentation or visiting a branch. Additionally, real-time pre-approved personal loan eligibility by sending SMS has been introduced.

Key initiatives during the FY on ATMs/ ADWMs front chiefly include:

  • Implementing Enhanced cash dispensation logic for small denomination notes at all Bank’s ATMs.
  • OTP based Cash withdrawal – addition of new feature – 30 sec Timer display on ATM screen to make customer aware about the time available for entering the OTP and avoid time out.
  • Pro-active reversal of failed transactions to customers.
  • Installation of 15000 new GCC machines.
  • Cassette Swap has been implemented in 12907 Branches managed by CAPEX ATMs/ ADWMs
  • 49,719 sites have been covered under electronic surveillance solutions (eSS)
  • SMS is being sent to customers for availing free Balance Enquiry & Mini Statement from SBI ATMs and the above services are also available on WhatsApp banking.
  • Replacement of 3,250 old SWAYAM machines has been completed.
  • Display of “Cash not available” on ATM Screen whenever the ATMs are out of Cash (Before the transactions are undertaken by the customers).

Your Bank has deployed 20,137 Barcode Based Passbook Printing Kiosks (SWAYAMs) at 17,643 branches and 13 lakh transactions are processed on daily basis, migrating ~3.65 Crore passbook printing transactions every month from branch counters. Your Bank has also deployed 33,077 GCC terminals at 21,446 retail branches for transactions through debit cards to promote Green Banking. To combat the Cybercrimes, Ministry of Home Affairs has rolled out cybercrime reporting Portal with dedicated email (www.cybercrime.gov. in) and a helpline number 1930 to report the cybercrime incidents by the victims. Cybercrime cells at 17 circles of your Bank work in multiple shifts to attend to customer complaints concerning cyber frauds.

As on 31.03.2023, a total of 3,04,450 complaints have been attended, and an amount of ` 51.50 Crore has been put on hold.

Financial Inclusion

Your Bank has taken significant steps to promote financial inclusion through a vast network of Business Correspondents (BCs)/Customer Service Points (CSPs). As on 31st March 2023, your Bank has 76,089 CSPs, providing access to 32 banking products and services in unbanked areas while reducing footfalls in the branches. The BC/CSP channel has recorded around 53.32 Crore transactions amounting to ` 3,30,389 Crore during FY2023. On an average, around 25-30 Lakh transactions per day are routed through the BC/CSP channel.

The BC/CSP channel has opened 14.69 Crore BSBD accounts with ` 50,091 Crore deposits and has brought the unbanked / underprivileged sections of society within the ambit of the formal Banking system by promoting various social security schemes, low-cost microinsurance products (PMJJBY, PMSBY) and pension schemes (APY).

Your Bank is the undisputed market leader in customer enrolment for government-sponsored social security schemes viz, PMJJBY, PMSBY and APY. The share of banks in PMJJBY, PMSBY and APY are 43.83%, 40.85% and 31.78% respectively, among all Public Sector banks. During FY2023, your Bank has achieved 27.88 Lakh APY enrolments as against the target of 17.90 Lakh allotted by PFRDA (~156% of the target), simultaneously winning major awards from the PFRDA under various APY campaigns.

Environmental, Social & Governance (ESG) Practices

We believe that our success is intertwined with the prosperity of the society we serve, and therefore, we actively engage in initiatives focused on education, healthcare, environmental sustainability, and community development. By embracing corporate social responsibility, we strengthen our bond with stakeholders, foster inclusive growth, and contribute to building a better and more equitable future for all.

For FY2023, an amount of ` 316.76 Crore has been allocated for undertaking CSR activities by your Bank. Out of which, an amount of ` 194.78 Crore is allocated to SBI Foundation for undertaking CSR activities in project mode.

Your Bank has developed an ESG financing framework aligned with sustainable finance guidelines and principles. This framework serves as a guide for our future bond and loan issuance programs, ensuring that proceeds are used to finance or refinance eligible assets and projects with environmental or social benefits. It has received a Second Party Opinion to validate its robustness and adherence to policy prescriptions.

To promote ESG and to underscore the Bank’s longstanding commitment to supporting green and social projects, your Bank concluded its largest inaugural Syndicated Social loan of $1 billion ($500 million + green shoe of $500 million) making it the largest ESG loan raised by a commercial Bank in the Asia-Pacific market.

Taking cognizance of the importance of managing the efficiency of our owned facilities, your Bank is making continuous efforts to develop a green ecosystem. Under this initiative, your Bank’s prominent establishments viz Corporate Office, Global IT Centre and 6 of the Local Head Offices (LHOs) have shifted to green power through green tariff policy or through open access channels via solar/wind.

In line with the country’s vision for scaling up Renewable Energy (RE) power generation, your Bank is also facilitating RE financing in a big way. Your Bank has availed lines of credit from multilateral agencies viz. the World Bank, KfW German Development Bank etc., for onward lending to RE power developers.

Strategic New Initiatives

During FY2023, your Bank has continued undertaking strategic initiatives to achieve the long-term objectives set by the Bank. Some of the important initiatives are:

  • In line with government policies on electric mobility, your Bank has partnered with Tata Power to set up EV charging facilities at various identified premises, including our corporate office, local head offices, and residential premises across the country. This initiative promotes sustainable mobility and encourages the use of electric vehicles among our employees.
  • As a part of its commitment to sustainable development, your Bank has incorporated rooftop solar photo voltaic systems financing as a component of the home loan project cost. This, coupled with an extensive micro market study and the opening of 133 processing centres across India have enabled greater penetration of home loans in Tier-II and Tier-III cities.
  • Furthermore, IT has developed ‘SBI- Easy ride’, an end-to-end digital product which enables two-wheeler financing without the need to visit any branch for sanction or disbursement.
  • In case of personal loan products, your Bank has integrated Digital Document Execution into Xpress Credit loans, utilising e-stamping and e-signature for real-time document execution to make it customer-centric.
  • For the benefit of its NRI clientele, your Bank has launched a number of services in FY2023 including tie- up with ‘Remitly’ to facilitate swift remittance to India, remittance facility using UPI Application, launch of NRE non-callable deposit scheme, increase of daily limit for forex outward remittances through FX-Out (INB Channel) from NRE Account to US$ 25000, among others.
  • Your Bank has introduced SBI e-Forex facility in the YONO Business - Android app to enable customers to book foreign exchange rates on the go. The same is expected to be rolled out shortly for the iOS platform as well.
  • External benchmark (T-Bill Rate) linked interest rates have been rolled out to WCL and LC Bill Discounting facilities to incentivise top-rated borrowers and encourage the utilisation of their limits. To stay competitive, this option is even offered for Rupee Export Packing Credit facilities.
  • Project Kuber was launched in your Bank, which is driving a special focus on marketing of current account deposits and various transaction banking products in CCG vertical.
  • Your Bank recognises the contribution of its ex-employees, whose dedicated lifelong services brought your Bank to its present height. It initiated ‘Project SBI Cares’ for automation and streamlining of various pre-retirement and post-retirement benefits and processes through its HRMS portal.
  • Further, your Bank has adopted a branch-based model for manpower planning linked to productivity parameters at the branches.
  • Your Bank has been at the forefront of launching various innovative solutions. Some of the initiatives taken during the year include development of Internal Financial Controls over Financial Reporting (IFCoFR) Portal, a dashboard for monitoring of gold retention limit, and new features in SBI Digi Vault Application.
  • Your Bank has launched a Fund Management Solution to meet the requirements of Government of India pertaining to Centrally Sponsored Schemes (CSS) under Single Nodal Account (SNA) covering 433 schemes of 23 States/UTs and Central Sector Scheme through Central Nodal Account (CNA) mechanism covering 124 schemes.

Subsidiaries

Through its subsidiaries, your Bank provides a complete bouquet of financial products and services to its customers.

On a consolidated basis, SBI Capital Markets Limited has posted a profit after tax (PAT) of ` 725.39 Crore for FY2023 as against ` 635.42 Crore in the previous year. SBICAP Securities Limited (SSL), a wholly owned subsidiary of SBI Capital Markets Limited and broking arm of the SBI Group posted a net profit of ` 308 Crore during the year ended FY2023 as against ` 233 Crore in FY2022.

With a total Gross Written Premium (GWP) of ` 10,888 Crore and a YoY growth of 18%, the SBI General Insurance Company Limited achieved the milestone of ` 10,000 Crore GWP in FY2023. SBI General increased its market share from 4.15% in FY2022 to 4.21% in FY2023. The company’s presence has grown from 17 locations in 2011 to over 141 branches across India. The company has served over 34 Crore clients to date, with claims of ` 22,000 Crore handled.

SBI Life Insurance Company Limited has proven its market leadership in the year ended March 31, 2023, with numero- uno position in Individual New Business Premium, Individual Rated Premium, Total Rated Premium and Total New Business Premium among the private insurers. The company witnessed growth in Individual New business premium of 26.7% vis-à-vis the industry growth of 15.4% with a private market share of 24.3% & Industry market share of 14.5%. The company generated a PAT of ` 1,721 Crore in FY2023 against ` 1,506 Crore in FY2022.

SBI Cards and Payment Services Limited registered PAT of ` 2,258 Crore in FY2023 as compared to ` 1,616 Crore in FY2022, an increase of 40% YoY.

SBI Funds Management Limited is the fastest growing AMCs with a growth of over 10.83% against the industry average of 5.55% in FY2023. It has one of largest investor bases with over 121.80 Lakh live investor folios with about 27 Lakh new investor folios added in FY2023. The company posted a PAT of ` 1,331.20 Crore for FY2023 as against ` 1070.65 Crore earned during FY2022.

SBI Global Factors Limited, a leading NBFC factor providing both Domestic and Export Factoring services under one roof, registered a turnover of ` 5,544 Crore for FY2023 as compared to turnover of ` 4,773 Crore in FY2022.

SBI Pension Funds Private Limited has earned net profit of ` 53.51 Crore for FY2023. The total Assets Under Management (AUM) of the company as on 31st March 2023 is ` 3,39,006 Crore (YoY growth of 20.01%). The company maintains lead position among 10 PFMs in terms of AUM with market share of 37.71%.

Awards and Recognition

Your Bank’s efforts in various areas of banking were acknowledged and many awards and recognitions were received during the year. Your Bank was awarded ET BFSI Best Brands award for 2022 and 2023. The Global Finance Magazine also awarded "The Best Bank Award 2022".

Your Bank has been awarded by ET HR World Future Skill Awards, ‘Gold’ under the category ‘Best Learning Management System’ for Gyanodaya “e-learning” and askSBI, and ‘Silver’ under the category “High Impact Certification Programme” for Role Based Certifications. In HR policies, your Bank received 3-Gold Awards at ET Human Capital Awards, namely HR Leader of the Year - Large Scale Organisations; Excellence in Business Continuity Planning & Management and Most Valuable Employer during COVID-19.

Your Bank was adjudged the “Winner”, for the fourth year in succession, in Best Digital Financial Inclusion category among Large Banks in IBA Annual Banking Technology Awards 2022. In home loans, Government of India awarded “Best Performing Bank under CLSS” under ‘PMAY-U Awards 2021: 150 Days Challenge’.

ICAI recognized your Bank’s financial reporting standards by awarding the Gold Shield-Category-I for Public Sector Banks- FY 2021-22. Additionally, your Bank also bagged “India’s Best Annual Report Awards 2022.

For its ESG initiatives, your Bank has been awarded CDP score of “B”, the highest score in the last 5 years by CDP (formerly Carbon Disclosure Project), the global disclosure system for companies to manage their environmental impact. The score of B represents that the organisation has addressed the environmental impact of their business and has ensured good environmental management.

Your Bank was awarded “Issuer of the Year Private Placement” at the 5th National Summit & Awards on Corporate Bond Market 2022 by Associated Chambers of Commerce and Industry of India (ASSOCHAM). Further, NASSCOM DSCI Excellence Awards 2022 awarded “Best Security Awareness and “Best Security Operations Centre of the year”.

Way Forward

Overall FY2023 has been a good year for the Bank. Despite the geopolitical headwinds, resurgence of COVID-19 in China, Indian economy showed remarkable resilience and the same reflects in your Banks financials.

Nevertheless, last financial year was not without its share of surprises. The episodes of financial instability in the US and European banking took markets by surprise but did not impact the Bank. However, vulnerabilities may emerge as interest rates normalise from their ultra-low levels. This warrants proactive identification and mitigation of risk in the current financial year.

Your Bank has had a healthy run of reporting robust financial results successively for the last three years. Despite the challenges, your Bank’s ability to absorb unexpected losses has improved. Healthy internal accruals reinforce its ability to tap capital markets, if warranted, in future. Risk management practices have been strengthened over the years and incremental improvements remain a perpetual work in progress.

Accommodating environment induced financial risk in the bank's overall risk management strategy is the next milestone that the Bank will aim for in FY2024. It is widely expected that RBI will make tangible progress in this direction during this financial year. Your Bank remains committed to incorporating principles and practices that promote sustainable banking operations and the same reflects in our CDP score of “B” for FY2022, highest in last five years.

The conscious strategy to structurally transform your Bank through digitisation of systems and process has progressed well. The Bank’s flagship digital offering SBI YONO has shown growth across products and business lines. The Bank aims to be agile and imaginative in respect of its digital offerings so that YONO becomes a “Primary digital bank of choice” in coming years.

The use of business analytics and AI/ ML in decision making and operations will be taken to the next logical level by deploying NextGen Data Warehouse and Data Lake. Mutually beneficial partnerships with fintechs and NBFCs under RBI’s co-lending framework will be explored.

Your Bank is comfortably placed in terms of growth capital in the current year. With declining credit cost, opportunities for lending in sunrise sectors such as sectors identified under PLI scheme, renewables as well as electric mobility will be explored to diversify the portfolio. The RBI’s guidelines on green deposits opens new opportunities on the liability side to green the Bank’s balance sheet.

Summing up, despite the economic headwinds, your Bank has innovated well to respond to the challenges posed by the operating environment. I am more than hopeful that the performance achieved in FY2023 will continue in FY2024.

“Innovation is the ability to see change as an opportunity- not as a threat”

Yours Sincerely,

Dinesh Kumar Khara

  • STATE BANK OF INDIA
  • SECTOR : BANKING AND FINANCE
  • INDUSTRY : BANKS

State Bank of India

NSE: SBIN | BSE: 500112

/100 Valuation Score : 61 /100 Momentum Score : 64 /100 "> Strong Performer

643.75 7.30 ( 1.15 %)

New 52W High in past week

20.5M NSE+BSE Volume

NSE Dec 21, 2023 03:31 PM

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Metallurgicheskii Zavod Electrostal AO (Russia)

In 1993 "Elektrostal" was transformed into an open joint stock company. The factory occupies a leading position among the manufacturers of high quality steel. The plant is a producer of high-temperature nickel alloys in a wide variety. It has a unique set of metallurgical equipment: open induction and arc furnaces, furnace steel processing unit, vacuum induction, vacuum- arc furnaces and others. The factory has implemented and certified quality management system ISO 9000, received international certificates for all products. Elektrostal today is a major supplier in Russia starting blanks for the production of blades, discs and rolls for gas turbine engines. Among them are companies in the aerospace industry, defense plants, and energy complex, automotive, mechanical engineering and instrument-making plants.

Headquarters Ulitsa Zheleznodorozhnaya, 1 Elektrostal; Moscow Oblast; Postal Code: 144002

Contact Details: Purchase the Metallurgicheskii Zavod Electrostal AO report to view the information.

Website: http://elsteel.ru

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Russia’s BN800 fast reactor fully fuelled with mox

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MOX fuel assemblies within the BN-800 fast reactor core

Beloyarsk 4 was connected to the grid and resumed electricity production after the completing its latest regular maintenance and refuelling outage. It was refuelled with mox fuel assemblies (FAs) produced at the Mining and Chemical Combine (MCC) in Zheleznogorsk, Krasnoyarsk Territory). Unlike the enriched uranium FAs traditionally used in NPPs, the raw materials for the production of mox fuel pellets includes plutonium oxide obtained during the processing of used fuel from conventional VVER reactors alongside depleted uranium oxide, obtained by defluorination of depleted uranium hexafluoride (DUHF – “tails" from enrichment production).

The first serial mox-FAs were loaded into the BN-800 core in January 2020. The first complete refuelling of the BN-800 with mox fuel took place in January 2021, and then, over the next two refuellings, all fuel assemblies were gradually replaced with innovative mox assemblies.

Other important work performed during the outage of unit 4 included overhaul of the main circulation pump with the replacement of the removable parts, maintenance and repair of pumps, heat exchangers, steam generators and a turbogenerator. Also, the operational quality control of metal and welded joints of pipelines was carried out as well as tests of the system for monitoring the tightness of shells using a metrological assembly.

“Today, Beloyarsk NPP is one of the flagships bringing the Russian nuclear industry closer to a new technological platform based on a closed nuclear fuel cycle,” said Beloyarsk NPP Director Ivan Sidorov. “The use of mox fuel will make it possible to increase the fuel base of the nuclear power industry tenfold. And most importantly, in the BN-800 reactor, after appropriate processing, used nuclear fuel from other NPPs can be recycled.”

Alexander Ugryumov, Senior Vice President for Scientific and Technical Activities at TVEL said completing conversion of BN-800 to mox fuel is a long-awaited event for the nuclear industry. “For the first time in the history of the Russian nuclear power industry, we will be able to operate a fast neutron reactor with a full load of uranium-plutonium fuel and a closed nuclear fuel cycle. This is exactly the milestone for which the BN-800 was originally designed, a unique nuclear power unit supported by automated fuel production at the Mining and Chemical Combine. Advanced technologies for recycling nuclear materials will significantly expand the raw material base of nuclear energy by processing irradiated fuel instead of storing it, and it will also reduce the amount of waste generated.”  

Industrial fabrication of mox fuel began at the end of 2018 at the MCC. To create this unique production, broad industry cooperation was organised under the coordination and scientific leadership of TVEL, which also acts as the supplier of mox FAs for the Beloyarsk NPP. Initially, during the start-up of the BN-800 reactor, a hybrid core was installed, partly equipped with uranium fuel produced by Mashinostroitelny Zavod in Elektrostal (Moscow Region), and partly with experimental mox fuel assemblies manufactured at the Research Institute of Atomic Reactors in Dimitrovgrad, Ulyanovsk region.

Image: MOX fuel assemblies are loaded into the BN-800 fast reactor core at Beloyarsk NPP (courtesy of TVEL)

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Investor boost for Moscow Metro brings new line and less gridlock

Investor boost for Moscow Metro brings new line and less gridlock

For the first time Moscow Metro management is looking to attract private investors to build a new subway line in the east of the city. Several Russian and foreign companies are already lining up to take part in a project.

The Chief Executive of the Moscow Metro Igor Besedin says negotiations are underway with a Spanish investor.  The companies are interested in developing both underground and above ground with retail and other services offered to passengers. The first private line with 9 stations stretching 19 km would be the longest subway line built in recent years.  Its cost could be about $3.2 billion, according to the Russian consulting firm FBK. The new line leading from Aviamotornaya station to Lyubertsy fields should be completed by 2015.  Moscow has a serious traffic problem, and authorities think a new subway line will help reduce the gridlock. Currently the city has 300km of underground railway split across 12 lines with 182 stations. About 7 million people use the Moscow Metro every day. Moscow Metro system has no privately owned lines yet, but the Mykinino station in the west of Moscow was built by a private investor. Private subway lines are common in big cities all over the world. Private lines operate in Tokyo and in London.

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Analyst Presentation 2021 - 22. Analyst Presentation 2020 - 21. Analyst Presentation 2019 - 20. Analyst Presentation 2018 - 19. Analyst Presentation 2017 - 18. Analyst Presentation 2016 -17. Analyst Presentation 2015 -16. Analyst Presentation 2014 -15. Last Updated On : Saturday, 04-11-2023.

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Q4 FY2019-20. SBI Card Investor Presentation March 2020. Download. "SBI Cards and Payment Services Limited" was formerly known as "SBI Cards and Payment Services Private Limited". Site best viewed in browsers I.E 11+, Mozilla 3.5+, Chrome 3.0+, Safari 5.0+ on all desktops, laptops, and Android & iOS mobile/tablet devices. Business ...

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The BN-800 fast reactor at unit 4 of Russia's Beloyarsk NPP has for the first time been completely switched to using uranium-plutonium mixed oxide (mox) fuel after a scheduled overhaul, according to Rosatom's fuel company TVEL. Beloyarsk 4 was connected to the grid and resumed electricity production after the completing its latest regular ...

In 1954, Elemash began to produce fuel assemblies, including for the first nuclear power plant in the world, located in Obninsk. In 1959, the facility produced the fuel for the Soviet Union's first icebreaker. Its fuel assembly production became serial in 1965 and automated in 1982. 1. Today, Elemash is one of the largest TVEL nuclear fuel ...

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Russia’s BN-800 refuelled with mox: full mox core planned for 2022

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The first full refuelling of Russia’s BN-800 fast reactor at unit 4 of the Beloyarsk NPP with only uranium-plutonium mixed oxide (mox) fuel was completed during the recent scheduled maintenance outage, fuel company TVEL (part of Rosatom) announced on 24 February. The unit, which was shut down on 8 January, has been reconnected to the grid and has resumed electricity production. The first 18 serial mox fuel assemblies were loaded into the reactor in January 2020, and another 160 fuel assemblies have now been added to them. Thus, the BN-800 core is now one-third filled with innovative fuel and in future only mox fuel will be loaded into the reactor.

“Beloyarsk NPP is now one step closer to implementation of the strategic direction for the development of the nuclear industry - the creation of a new technological platform based on a closed nuclear fuel cycle,” said Ivan Sidorov, Director of the Beloyarsk NPP. “The use of mox fuel will make it possible to involve in fuel manufacture the isotope of uranium that is not currently used. This will increase the fuel base of the nuclear power industry tenfold. In addition, the BN-800 reactor can reuse used nuclear fuel from other NPPs and minimise radioactive waste by “afterburning” long-lived isotopes from them. Taking into account the planned schedule, we will be able to switch to a core with a full load of mox fuel in 2022.”

The fuel assemblies were manufactured at the Mining and Chemical Combine (MCC, Zheleznogorsk, Krasnoyarsk Territory). Unlike enriched uranium, which is traditional for nuclear power, the raw materials for the production of mox fuel pellets are plutonium oxide produced in power reactors and depleted uranium oxide (obtained by defluorination of depleted uranium hexafluoride - DUHF, the secondary "tailings" of the enrichment plant.

“In parallel with loading the BN-800 core with mox fuel, Rosatom specialists are continuing to develop technologies for the production of such fuel at the MCC,” said Alexander Ugryumov, vice president for research, development and quality at TVEL. “In particular, the production of fresh fuel using high-background plutonium extracted from the irradiated fuel of VVER reactors has been mastered: all technological operations are fully automated and are performed without the presence of personnel in the immediate vicinity. The first 20 mox-FAs incorporating high-background plutonium have already been manufactured and passed acceptance tests, and they are planned to be loaded in 2022. Advanced technologies for recycling nuclear materials and refabrication of nuclear fuel in the future will make it possible to process irradiated fuel instead of storing it, as well as to reduce the amount of high-level waste generated.”

Serial production of mox fuel began at the end of 2018 at MCC. To achieve this, broad industry cooperation was organised under the coordination and scientific leadership of TVEL, which supplies the mox-fuel to Beloyarsk NPP. Initially, the BN-800 reactor was launched with a hybrid core, partly equipped with uranium fuel produced by Mashinostroitelny Zavod in Elektrostal (Moscow Region), and partly with experimental mox assemblies manufactured at the Research Institute of Atomic Reactors (NIIAR) in Dimitrovgrad, Ulyanovsk region).

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bank branch strategic plan

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bank branch strategic plan

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bank branch strategic plan

IMAGES

  1. Branch Banking Strategy Ppt Powerpoint Presentation Infographics

    bank branch strategic plan

  2. (PDF) Strategic Planning in Banking

    bank branch strategic plan

  3. New Branch Strategies for Branch Styles that Adapt Flexibly to Customer

    bank branch strategic plan

  4. PPT

    bank branch strategic plan

  5. Fillable Online Sample One Page Bank Strategic Plan. One Page Bank

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  6. Strategic Planning

    bank branch strategic plan

COMMENTS

  1. Digital banking and branch strategy: PwC

    1. Customer choice and convenience rather than digital versus physical In an environment with many different paths and unknowns for digital banking adoption, the best strategy might be to focus on convenience.

  2. PDF Six Strategies to Consider on Your Branch Transformation Journey

    Branch transformation requires addressing six strategies: business model and management processes, marketing and sales, human resources, distribution/layout, omnichannel and customer engagement. By Chris Zaske, Global Vice President, Strategic Operations, Verint Systems

  3. Six strategies for improving banks' operating efficiency

    1. Business realignment The basic premise of business realignment is to exit business lines that have low margins and move instead into lines that are inherently more cost-effective and increase bank profitability.

  4. 10 Steps for Crafting an Effective Business Plan for Your Bank

    Strategic plans identify aspirational targets and itemize strategies to reach them. Business plans spell out exactly where the bank expects to be one year on and how it will get there. Strategic plans should not have numbers; business plans should be full of numbers. Don't Mix Up the Two:

  5. Bank of 2030: The Future of Banking

    11 Apr 2019 5 minute read Bank of 2030: Transform boldly Future of banking To be successful, the bank of the future will need to embrace emerging technology, remain flexible to adopt evolving business models, and put customers at the center of every strategy. Learn how we can help you transform boldly. print Adapting for the future

  6. 7 Steps to Bank 'Branch of the Future' Transformation Success

    1. Create a Positive Self-Service Experience Research on bank customer behavior by Lextant looked at the reasons why customers decided to go to a teller rather than an ATM and reveals a lot about what customers want from self-service options. To be successful, it was determined that in-branch self-service options must be:

  7. 3 Steps to Rationalizing Your Branch Network

    Transaction Mix - Identify branch and overall channel preferences of your customers (i.e.: look at teller arrivals, personal banking arrivals, deposits/square foot, % of branch customers banking online, P2P, etc.); including the transaction patterns of people who never visit any of your branches.

  8. A Marketer's Guide to Branch Planning

    That's because different branches should have different strategic directions, which might include: Targeting efficiencies; Maintaining the base; Accelerating new-to-bank acquisition; Using data on a branch's current and past performance, customer base, and potential of the market, each branch manager can create an informed plan for success.

  9. A retail banking strategy for a new age

    The rate of branch reduction is often tied to customer willingness to purchase banking products online or on mobile devices. Eighty to 90 percent of banking customers in the Nordics, for example, are open to digital product purchases for most financial products, compared to 50 to 60 percent in North America and Southern Europe.

  10. Five initiatives for streamlining your branch operations

    Branch transformation leaders deploy five proven initiatives to streamline branch operations. 1) Eliminate. Eliminating non-value-add tasks is clearly the low hanging fruit. It doesn't require a big investment and can generate immediate expense reduction. 2) Automate.

  11. Branch Transformation Strategies

    Part of the challenge is for banks to start now with a 10-year transformation plan. While this is outside the planning time horizon of many banks, branch transformation demands a longer-term view. This is something that banks will have to adjust for—creating a strategic plan that goes from the traditional three years to a ten year horizon.

  12. 10 Growth Strategies for Banks and Credit Unions

    10. Foster a strong employee culture. Your bank or credit union is only as good as its weakest link. Build a strong employee culture that empowers everyone no matter their position to play key roles in the growth of your FI. Establish a robust team culture by: Prioritizing remote worker considerations and implications.

  13. Branch Transformation: How to Plan for Your Bank's Future

    Branch transformation is more than a cosmetic "facelift." In fact, true branch transformation reaches far beyond a bank or credit union's physical appearance. And it's certainly not a new fad; retail banking spaces have been evolving and transforming since the introduction of the ATM and the pneumatic deposit tube.

  14. New Branch Strategies for Branch Styles that Adapt Flexibly to Customer

    For future bank branches, Hitachi classifies the forms taken by bank branches into four main types with the aim of improving operational efficiency and speeding up branch deployment in accordance with the characteristics of the region and location. The four types are: unstaffed strategic branches, strategic branches designed to handle customer ...

  15. The Strategies Banks Need For 2020 To 2025

    1) Improve risk management with powerful analytical tools. The consulting firm encourages banks to better evaluate liquidity risks, and cautions that these risks "are further amplified by the...

  16. Three Factors Can Make or Break Your Bank's Strategic Plan

    1. The Right Sales Culture for Banking Endorsing a "sales culture" has become a bit taboo in banking as a strategic initiative. Some say you desperately need it, and some say it will ruin your organization. If you look at the definition of sales, "the exchange of a commodity for money," it's clear this dispute is over semantics.

  17. 2024 banking industry outlook

    A slowing global economy, coupled with a divergent economic landscape, will challenge the banking industry in 2024. Banks' ability to generate income and manage costs will be tested in new ways. Multiple disruptive forces are reshaping the foundational architecture of the banking and capital markets industry.

  18. PDF Regions Bank Strategic Plan

    Under the Strategic Plan in effect during for the years 2017-2020, the Bank consistently increased its investment in Qualified Investments. For the year 2019, the Bank purchased $9,408,812 in Qualified Investments and granted $70,734 to causes supporting LMI individuals and communities in our assessment area.

  19. JPMorgan Chase Is Growing the Old-Fashioned Way: New Bank Branches

    JPMorgan Chase is giving the humble bank branch some swagger. Hundreds of branches at rival banks are being closed each year, and customers are shunning the teller and choosing the mobile app. But ...

  20. sbi investor presentation 2022

    Your Bank has deployed 20,137 Barcode Based Passbook Printing Kiosks (SWAYAMs) at 17,643 branches and 13 lakh transactions are processed on daily basis, migrating ~3.65 Crore passbook printing transactions every month from branch counters. Your Bank has also deployed 33,077 GCC terminals at 21,446 retail branches for transactions through debit ...

  21. 5 Points to Keep Your Branch Strategy on Track

    1. Who?: Nailing Down Who Your Institution Really Serves Understanding who you serve today is critical. There is much discussion about the pursuit of the younger Gen Z and Millennial segments, but is your brand resonating with them? You can't plot a path forward until you determine your starting point.

  22. PDF Joint stock company Bank Vozrozhdeniye (V.Bank)

    20. Board of Management of the Bank 20 21. Major transactions 20 22. Interest in a transaction of the Bank 21 23. Control of the Bank's financial and business activities 22 24. Organization of internal control in the Bank 23 25. Accounting and reporting in the Bank 24 26.

  23. Russia's BN-800 refuelled with mox: full mox core planned for 2022

    The first full refuelling of Russia's BN-800 fast reactor at unit 4 of the Beloyarsk NPP with only uranium-plutonium mixed oxide (mox) fuel was completed during the recent scheduled maintenance outage, fuel company TVEL (part of Rosatom) announced on 24 February.

  24. Central Bank of Iraq

    Central Bank of Iraq. Architect: Zaha HADID Architects. Area: 54.000 m² ...