The Bankwatch

Tracking the consumer evolution of financial services

Posts Tagged ‘deloitte

Deloitte report | “The Shift Index: Recession masking long-term competitive challenges”

Deloitte put out some good stuff, but this one is superlative.  The context here is is for planners thinking about the future and wondering how to think about the future.  That context is hard to achive with so much information, and so much new information every day.  For example we have all seen and heard the Iran/ Twitter discussion, and impacts here and here.  We have seen government influence Twitter to keep the ‘people influence’ moving.  We see internet advancing rapidly, Google supposedly taking over advertising, yet Facebook with over 200M users, actively resisting advertising.  We see online banking growing rapidly, yet banks are stuck with expensive branches and staff in them.  We see concerns about bandwidth yet it grows inexorably.  We see PR and Marketing continually trying to force fit old methods into new models with little success.

These are simply examples that point to the understandable confusion both for planners, and for the people they must show their plans to.  Everyone is a participant personally as well as corporately in the 21st Century changes, and we need better mental models to work it through.

In short there are too many data points, and too many of them are seemingly contradictory.  One thing we all agree on is that things are changing, yet what is happening, and how can I make rational projections within these changing times that support planning for the next 2 – 20 years?

Enter this new paper from Deloitte with a well constructed index that looks at three indexes they refer to as waves:

The Shift Index:  Recession masking long-term competitive challenges | Deloitte Center for the Edge [121 page pdf link off this page]

Deloitte’s Shift Index pushes beyond cyclical measurement and looks at the long-term rate of change and its impact on economic performance. The Shift Index is focused on three sets of main indicators:

* Foundations, which set the stage for major change
* Flows of resources, such as knowledge, which allows businesses to enhance productivity
* Impacts, which help gauge progress at an economy-wide level

Index data points – click through for detail.


This paper resonated with me because it offers a simple model that is understandable, yet when I study the detail in behind, it captures the host of data points that provide the confusion and contradictions.  It deals front and centre with the reality that corporations, including banks, are not exploiting the digital infrastructure that is presented not the new capital, talent and knowledge flows that are present.

In simple terms the model has three waves, with the first two being drivers of change, and the third being the corporate outcomes.  The current situation is, understandably that, the impact wave is lagging the first two waves.  In short companies are failing to react and explout the opportunities offerred by the new digital infrastructure and knowledge flows that are available.  The result is more of what they refer to as toppling – companies failing.  They also note the recession is masking the longer term shift that is really happening.  This document screams – plan for the future, not the recession.


Written by Colin Henderson

June 23, 2009 at 12:29

Deloitte Report – “The New Financial Services Marketplace” | How are you redesigning your Bank?

This new report (12 pages) with the subtitle ‘Restoring Broken Markets’ deals with the new reality of frozen securitization markets and the renewal of traditional banking – re-intermediation – as the backstop point along with 5 others including industry consolidation, government ownership, and consumer protection.  This is the first in a series, and I for one cannot wait.

Its a fantastic read, and ideas just start leaping off the page as you work through it.  But before we get into design, lets look at current state.

The Deloitte Center for Banking Solutions

The Deloitte Center for Banking Solutions is pleased to present the first in a series of papers on the new financial services marketplace. Entitled “Restoring Broken Markets,” the current piece explores the emerging trends that signal a paradigm shift in the financial services sector and the resulting implications for institutions, corporate America and the consumer.

The report makes for a good backstop to add to the mix when considering strategic options for the next few years.  This is the time to consider the implications on product and channel development in the context laid out here.

The first paragraph sums up precisely how I see things at the moment (emphasis mine)

The global financial system is undergoing a dramatic transformation. A period marked by high leverage and ever more complex financial products has come to an end. In its place, a new financial services marketplace that is now emerging will require different strategies and different business models.

I highlighted words in that initial paragraph to emphasise a point that I have been harping on – recovery does not mean a return to 2007.  The fundamentals have shifted, and I see three core characteristics that apply to bank strategy:

  1. Leverage is now too high relative to new asset values, be it homes, stocks or corporate asset values.  Asset values will not go back to 2007 values so debt must come down.
  2. Products are not longer relevant to the new marketplace.  Bank products are largely established based on criteria that apply to 2007 securitization rules.
  3. Trust is eroded and customers have lost what little faith they had in Banks to do the right thing.

The trends outlined in the report are critical trends.  It is essential that Banks take a close look at their reponse to those trends.  Already we see a shift towards even more online deposit gathering, including account opening and GIC gathering.  We see Ally Bank with a return to a simplicity, online only, no small print, approach, that is clearly aimed at the new marketplace.

Ally is a great start and a return to the simplicity needed in this new environment we are entering.  Even there though the offerring is predicated (today) on rates.  Notwithstanding the other attributes Ally offers it is clear to me and I am sure to them, they will need to shift beyond rates in terms of meaningful offerrings when other banks enter the fray.

This is what I find fascinating about the space we are entering.  We will see hosts of ‘me too’ offers from the financial utility banks, but it is the innovators that will design products that capture new market share.

One contention I have long held is that product definition and channel definition (online, phone, branch) are not mutually exclusive.  We can go further and look at product defintions between products as also not being mutually exclusive.  In 2007 it was important to have products with uniform definitions that formed contiguous bundles for shipping off to the securitization market.  Now, instead of designing for securitization, banks must design for customers.


  • Credit Cards are designed to eliminate bank origination costs and shift default cost to the consumer through high rates.  Surely there is a better model in there?
  • Mortgages are designed to allow the consumer to, in effect, forget about an enormous debt burden, while interest is maximsed and principal reduction minimised.
  • Chequing and savings accounts is a brilliantly successful method of ensuring free deposits by separating funds into a vehicle that customers manage by leaving extra cushions of funds to protect against monthly automated debits.
  • Personal Loans (short term 2 – 3 year) are with their intrinsic predilection towards principal reduction are downplayed in favour of credit cards – see above.
  • GIC / CD products are designed to match the mortgage securitization market precisely and at current rates the customer will be paying the bank to hold GIC’s soon.

It is easy for armchair bankers to criticize product design now, and I realise I was there through all of it.  All I am saying is that the current product design is obviously designed to match an environment that is long gone; this is an exciting time to be in product design. Read the Survival 2.0 section of the report, and I challenge you to not be both scared and excited.

One early step for banks would be to ensure that product groups are amalgamated during design exercises, and do not forget those lonely channel folks in ATM and Online banking.  Collaboration is good.

This report offers real context and implication for new designs.  Anything less will merely provide more of the same and we know where that got us.

Written by Colin Henderson

June 10, 2009 at 14:49

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