Showing papers in "Journal of financial transformation in 2002"

Brand strategy in the U.K. retail banking sector: Adapting to the financial services revolution

Abstract: Segmentation has long been regarded as the cornerstone of a successful marketing strategy [Buzzell (1978)] and acts as a substantive source of differentiation and competitive advantage. The alternative is an unfocused generic strategy not based on the specific needs and wants of a defined target group. For instance, in the car market companies such as Mercedes and Volvo clearly design, price, and brand their offerings to compete in very specific sectors of the market and to appeal to defined psychographic groups. However, in other markets manufacturers and service providers have been slower in implementing marketing strategies which focus on specific consumer segments and utilize a coherent branding strategy to do so. For example, in the U.K., companies operating in the financial services market are noted for deploying generic marketing strategies, particularly the Big 4 retail banks (HSBC, Barclays, NatWest, and LloydsTSB). This paper reviews the marketing strategies of the Big 4 U.K. retail banks and examines in particular their reliance on a monolithic branding strategy, where most of their products and services are promoted under the parent brand name. In particular, it seeks to examine whether such a strategy is still viable given the introduction of on-line banking and the increasing degree of competition that they face.

Can international capital standards strengthen banks in emerging markets

Abstract: This paper deals with the appropriate design of capital adequacy requirements in emerging markets. It divides countries in two groups according to their capacity to enforce regulatory capital. The first group is characterized by an inappropriate accounting standards and reporting systems, improper classification of non-performing loans and deficient legal and judicial frameworks, and high concentration of asset ownership. It is shown that under these conditions, capital ratios can not perform their supervisory role of containing excessive risk-taking activities by banks. The sustainable policy for these countries consists of removing the constraints to the effectiveness of capital standards; however, those policy reforms often take a significant amount of time. During the transition period, it is essential to identify and develop indicators of banking problems that reveal the true riskiness of banks. Recommendations for policymakers, therefore, focus on strengthening the role of market discipline to substitute for the inadequacies of the regulatory capital requirements. In the second group of countries, a continuous increase in the participation of foreign banks from industrial countries is de facto reducing the degree of related-lending activities. The combination of competition induced by the entry of new providers of wealth and improved accounting, regulatory, and supervisory frameworks can contribute towards increasing the usefulness of capitalization ratios. The main recommendation for this group is to design a capital standard that appropriately reflects the risk of banks' assets. The standard should have two basic components. The first is the development of risk-based regulations in loan-loss provisions. The second is the establishment of a reduced number of risk categories to classify assets, with the central qualification being that the categories of risk should reflect the particular features of banks’ assets in emerging markets. Issues that need to be considered include an adequate risk assessment of government paper and the introduction of distinct capital charges for borrowers in the tradable and non-tradable sectors.

Portfolio allocation with hedge funds: Case study of a Swiss institutional investor

Abstract: Asset allocation advisers usually use the mean-variance framework to show the benefits of investing in hedge funds. The authors prove that this is not optimal when the assets are not normally distributed and develop a method based on a modified Value-at-Risk for non-normally distributed assets. We take the example of a Swiss pension fund investing part of its wealth in hedge funds and show that computing a portfolio with mean and variance considerably underestimates the risk of the portfolio.

Achieving ROI from e-business systems in financial services

Abstract: Many, even most, Customer Management projects are said to fail to complete or deliver return on investment. This article outlines an approach which has been proven to accelerate project implementation, business transformation, and ROI, while reducing project costs and risks of failure. Based on extensive research and the global implementation experience, a complete and unbroken journey from business abstract to systems specifics will be clearly explained in this paper.

Productivity miracle in the aging industrial countries

Abstract: The combination of aging population and falling birthrates in the industrial countries will have particularly strong effects on the labor markets in Europe and Japan. It is anticipated that by 2050, the supply of labor in these markets could shrink by 15% and 30%, respectively, which would result in a growing shortage of young workers from the end of this decade. This growing scarcity of the factor labor will in turn result in a relatively strong rise in wages. This paper looks at the implications of a shortfall in the labor factor input and discusses how this potential crisis could be managed.

What do your customers really know? Bank managers and compliance cost perceptions

Abstract: In April 2002 new anti-money-laundering rules were enacted in the United States. The new regulations were based on the concept of active collaboration by the intermediaries, i.e. autonomous conduct aimed at reporting abnormal situations in the management of financial flows, using the 'Know Your Customer' (KYC) approach. As Byrne (2000), Bruton (1999), Jackson (2000), Burkhold (2002) and others have pointed out, the KYC approach is the cornerstone of modern regulations designed to combat the money-laundering phenomenon. The objective of this paper is to stress the link between the effectiveness of anti-money-laundering regulations and the characteristics of the relative compliance costs for banks, with particular attention to the bank—customer relationship. A bank's information assets can produce public advantages in the war against money laundering, but only if the regulations take the problem of compliance costs into due consideration. The bank’s customers, moreover, must correctly perceive the real features of these regulations. Here, we present the principle findings of an experimental analysis, based on this theoretical approach, comprising a survey conducted in conjunction with an Italian bank present in 11 of Italy's 20 regions. The survey was concerned with how banks perceive the relationship of customers to the obligations imposed by the anti-money-laundering regulations and provides a better understanding of the nature and extent of compliance costs within banking operations.

A taxonomy of electronic payments

Abstract: The Internet is just beginning to realize one of its true callings: the facilitation of fast, friendly, low-cost business-to-business payments. Yet dystopian fragmentation among today's B2B exchanges, disintermediators, tech-led pilots, corporate spinoffs, and bank joint ventures could lead to distraction from the genuine payments needs of businesses, corporates, and governments. This paper will identify industry- and region-specific gaps in existing payments solutions, and sketch a taxonomy of emerging players in the B2B epayments space as a workable means of catalyzing a less-paper future.

Return on investments in information technology: Beyond the productivity paradox

Abstract: Understanding the return on investments in information technology is the focus of a large and growing body of research. In this paper, we develop an overall framework for understanding the research on the relation between information technology investments and accounting or market measures of firm performance.

The implications of strategic network management for firm behavior

Abstract: An understanding of strategic network management and its impact on the sources of competitive advantage for financial institutions is becoming increasingly important as the traditional boundaries for products, firms, and industry sub-divisions change The repeal of the Glass Steagall Act in the US, the emergence of online banking, the recent consolidation movement in banking, and the current economic slowdown are examples of the forces which are altering the landscape and influencing firm behavior This paper focuses on examining how network-based efficiencies in the physical branch network of commercial banking can be strategically managed to allow for growth of existing capabilities, but at a lower cost This paper especially emphasizes growth of online banking as a tool for managing over-used or overly expensive physical branch networks, but also discusses the role of acquisitions and cross-equity agreements

Internet banking in the U.K.: From new distribution channel to new business models

Abstract: The Internet is shaking the foundation of the banking industry. Simply deploying the Internet as a more efficient distribution channel will not bring sustainable strategic advantages. To compete effectively, banks will need to embrace a new set of strategic thinking, based on the ‘unbundling’ of banking services and processes and the ‘deconstruction’ of the integrated banking model. Based on my research of Internet banking in the personal banking area in the U.K. since the late 1990's, this paper explores a series of emerging issues, such as the adoption of various strategies and business models, channel development and coordination, and product and service offering through the Internet. As a new distribution channel for financial services, the Internet has lowered barriers to entry, allowing new players, often equipped with new technologies and business models, to enter the market. These new players are posing a serious threat to existing banks by changing the rules of competition and raising the general expectation of customers for services from all financial companies. Established banks and building societies must radically overhaul their business strategies to maintain their competitive position, and indeed, to survive in the long-term.

Les Banquiers Suisses: Can They Remain Leaders in Private Banking?

Abstract: In this paper, we review the historical reasons behind the success of Swiss private banks and discuss whether they possess the attributes necessary to be successful in the future. We suggest that although Swiss banquiers are well positioned to retain their global supremacy, they do need to make important strategic decisions concerning the way they manage their businesses and the technological support they provide for their clients and advisors.