We are finally reaching the end of the financial turmoil; it was bad but not as bad as anything close to the great depression. China is a key factor although many are skeptical. The dilemma facing Beijing will be to balance the use of its huge foreign reserves to boost its own slowing domestic economy against continuing buying U.S. Treasury bills. As the second-largest holder of U.S. Treasury bills, China will inevitably end up financing the $700 billion bailout plan ultimately went to the banks and auto industries.
If China chooses to stop buying U.S. securities, or even to sell off its holdings, the effects could be devastating; there are no reasons why they won’t continue to finance their biggest customer. It is like walking into a dealership buying a car and they won’t lend you the money to make a sale. For now, Beijing seems willing to help maintain U.S. financial stability and continue to purchase government-backed treasury bills. It also announced a $586 billion national infrastructure program, the largest stimulus effort ever undertaken by the Chinese government to lift its economy.
For the banks and other financial services, it is time to start thinking forward, time to deal with new realities. Suddenly an industry that was traditionally recognized as stable now needs to rethink their business architecture. What lessons they can learn from others that can help bankers to reframe, rethink and reinvent the future.
With times of change, bank executives and corporate strategist need to think, work and execute beyond the normal - to drive the banking industry into uncharted paths and directions and be better equipped as change agents. There are a lot of complex problems to solve, trust to rebuild and new meanings to drive and support organizational change. No longer is yesterday’s “normal” the standard or all your benchmarking is a throwaway. Imagining and leading in the future requires a deeper involvement to tackle the daily issues and the big picture issues.
How banking and the personal financial services might respond post turmoil? Understanding this shift requires banks to likewise shift, to reinvent themselves by rethinking architecture, products, customer experiences and relationships. Here are some possible approaches: Bankers should redesign their product development approach and process so they can be more agile and responsive to rapidly changing market needs.
- Bankers should replace their mass-market thinking and start thinking individual segments. It is time to write off some of those millions of (sunk) investments of useless CRM systems.They need to out serious effort in creating differentiated products and services. They need to figure out how to attach meanings and emotions to financial products.
- Bankers should sort help to rethink product platforms completely differently than before, re- emphasizing capital preservation over aggressive cross-selling of investment products. Banking must relentlessly eliminate complexity in all products and services. What simplicity means for personal financial services is a good starting point. Making sure relevancy, value and convenience are the core of the value equation.
- Bankers should revisit the fundamental design of internal processes. From product development to product and service integration, there are plenty of broken links. Bankers must re-design risk management at a model level, not just relying on models with a normal distribution curve of risk, they need to reassess risk algorithms to deal with abnormal market periods.
- Bankers need to accept and prepare for more government involvement. Example is Credit Card issuers need to revamp internal systems and overhaul how they communicate with customers and it will spread to other financial service products. The new rules limit fees, restrict changes to interest rates etc.
- And for Swiss bankers, this is the end of Swiss banking as we know it. No bank will be shielded by the banking secrecy anymore with the diplomatic showdown between the US and Switzerland. Swiss banks will race to rethink their value propositions and market positioning.
The list is non-exhaustive and I can write another 10 pages. But need to get back to my day job and have some rest, my jet lag from the Asian trip is killing me.