innovation in financial services n.
Download
Skip this Video
Download Presentation
Innovation in financial services

Loading in 2 Seconds...

play fullscreen
1 / 18

Innovation in financial services - PowerPoint PPT Presentation


  • 284 Views
  • Uploaded on

Innovation in financial services. Charles Goldfinger IDATE Montpellier, November 20, 2002. www.gefma.com. www.fininter.net. Innovation in financial services. Discussion points Ubiquitous and paradoxical change IT and financial services: Stormy relationship

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'Innovation in financial services' - chalsie


Download Now An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
innovation in financial services

Innovation in financial services

Charles Goldfinger

IDATE

Montpellier, November 20, 2002

www.gefma.com

www.fininter.net

innovation in financial services1
Innovation in financial services
  • Discussion points
    • Ubiquitous and paradoxical change
    • IT and financial services: Stormy relationship
    • Individual and co-operative systems
      • Card networks
      • Financial markets
    • Cyberfinance: Disruption or integration
      • Internet banking: triumph of click and mortar
      • No disintermediation
financial services
Financial services
  • Financial tornado
    • Major changes
      • Products
        • Complexity
        • Rapid product cycles
        • Quest for liquidity and tradeability
      • Distribution channels
        • Proliferation
      • Market structure
        • Deregulation
        • Hierarchy upheaval
financial services1
Financial services
  • Financial tornado

From geofinance

…to eurofinance

…and cyberfinance

financial services and information technology
Financial services and Information technology
  • Uneasy relationship

Slave?

or

Master ?

financial services and information technology1
Financial services and Information technology
  • Growing dependency
    • Financial services are very important for IT
      • The largest ICT spending sector in Europe
        • 60 Bn ECU in 2000
    • IT is essential for financial services
      • IT spend represents between 2% and 8% of European banks’ revenue
      • IT employment in European banks represents an average of 8% of their total employment
    • IT spending of financial institutions
      • Is growing more rapidly than overall IT spending
      • Represents à higher share of overall revenues
financial services and information technology2

Administration/accounting

Branch

distribution

Product

development

Customer

Management

Risk

Management

Financial services and Information technology
  • Dynamics of use
    • Two major trends
      • From back to front
  • From centralised to ubiquitous
financial services and information technology3
Financial services and Information technology
  • Competitive advantage
    • Asymmetry
      • Competitive advantage requires heavy IT spending
      • Heavy IT spending does not necessarily lead to a competitive advantage
        • IT has to be part of the strategic vision
          • Citibank
          • Lloyds TSB
    • Instability
      • Strategic becomes tactical
        • ATM network
      • Tactical becomes strategic
        • Card as a loyalty vector
      • Frequent technology shifts
duality of financial services systems
Duality of financial services systems
  • Individual systems
    • Branch networks
    • Account management
  • Co-operative systems
    • Payment infrastructure
      • Clearing and settlement
    • Payment services
      • Cards
      • ATM
    • Financial markets
      • Trading
      • Settlement/clearing
      • Custody
co operative systems

Co-opetition

Competition

Co-operation

Co-operative systems
  • Co-opetition
  • Several dimensions
    • Suppliers
      • Competing
        • Banks
        • Network operators
      • Complementary
        • Banks and card networks
        • Producers and distributors
    • Suppliers and customers
      • Banks and retailers
co operative systems1

Greater competition

Easier switching

Lower costs

Larger markets

Co-operative systems
  • Innovation process
    • Card payment networks
      • Extremely successful
      • Complex architecture
        • Networks of networks
      • Protracted and conflictual evolution
    • Critical role of standards
      • Network organisations as standards setters
        • Hidden agendas
      • Interoperability
        • Mixed impact

+

-

co operative systems2

DTC (1973)

Regulation ATS (1999)

Boom in volumes.

“Paper crisis”

NSCC (1976)

1970

1980

1990

2000

UK ”Big Bang”

LSE SEAQ

(1986)

Competitive deregulation in the EU

Trading consolidation:

Euronext (2000)

Virt-x (2001)

Back office rationalization:

Clearstream (2000)

Euroclear (FR, BE, NL, 2002)

Co-operative systems
  • Financial markets

US – Europe evolution

financial markets
Financial markets
  • Growing instrument abstraction and complexity
    • Logic of derivation

Physical commodity

Hedging contract

Financial instrument

Financial derivative

Derivative derivative

Financial portfolio

Synthetic instrument

financial markets1

Sophisticated infrastructure

?

Marketplace

Sophisticated instruments

Financial markets
  • Information technology
    • Impact to date
      • Volume explosion
      • Market proliferation
        • Geographical
        • Instruments
      • Real-time generalisation
      • Physical marketplace displacement
finance and internet
Finance and Internet
  • Love at first sight

Financial services is the domain where Internet impact has been the strongest

E-commerce market share

(in % of total turnover)

internet banking
Internet banking
  • Lessons of experience
    • Iceberg costs
      • Implementation complexity
      • Client acquisition
  • Difficult entry
    • Obstacle course
  • No revolutionary impact

Not a Killer application !

internet banking1
Internet banking
  • No salvation outside “click and mortar”
    • Critical success factors
      • Integration
        • Technology
        • Marketing
      • Early start
    • Success stories
      • Nordea
      • Wells Fargo
      • Bradesco
internet and intermediation

Functional confusion

Markets proliferation

Integration

Infoglut

Unlimited connectivity

Complexity

Fragmentation

Transaction costs fall

Transactions volume

explosion

Relations proliferation

Internet and intermediation
  • Internet impact on intermediation
    • No disintermediation
    • Growing demand for intermediation
      • Brokerage
        • Markets
      • Middleware
        • Systems