The global top 15 banking giants generate their combined revenues and profits at a rate that is well above the average performance of smaller competitors. These “winning banks” have made significant investments in digital technology to accelerate their growth. These global giants’ success can be a lesson for other financial institutions, especially banks that focus on growth markets.
Our data shows that there is a significant divide between the global banks giants and the 35 institutions making up the top 50 banks in the world. This group of 15 industry leaders is growing its profitability and market capitalization faster than the combined performance of all major global banks.
Multinational banks in the trail of the winning banks need to act quickly to avoid being overtaken by global powerhouses. While they cannot match their technology spending, they can learn from their successes. The best banks can be transformed by farsighted institutions. They can increase their profits and revenues by using some of the technology strategies and business models used by the 15 largest global banks.
Win bank strategies
Let’s take a look at the innovative business models used by big banks to increase revenue growth.
- Asset and wealth Management: Morgan Stanley, MUFG, and other progressive banks have transformed their retail business by using cloud services like banking as a Service (BaaS). These technologies are being used to improve their wealth and asset management activities. In the coming years, revenue from asset and wealth management will rise.
- Digital banking: Many banks have established successful digital banking businesses in order to compete with a variety of rapidly-growing neobanks. Standard Chartered and BBVA, for instance, use their digital channels to offer a variety of low-cost, simple banking products. These products are quickly gaining acceptance, particularly among young customers, and will provide new revenue streams for big banks.
- Transaction banking: Large banks use their technology infrastructures for third-party services. Goldman Sachs is one example of a bank that uses application programming interfaces (APIs), to provide its corporate customers with access to a variety of banking functions.
- Trade and supply chain financing: Several banks including HSBC, Standard Chartered and HSBC have teamed up with fintech firms and cloud computing service providers to offer small-businesses cloud-based finance transaction processing. Initial offerings will focus on trade and supply chain financing. They will likely be expanded to include other banking services.
- Technology service provision: The success of winning banks is dependent on digital technology. Some of the big banks are reorganizing themselves as technology companies. JPMorgan Chase plans to invest US$12 billion in technology this year, and considers itself a “technology disruptionor”. Winning banks will be able to market their technology-intensive financial products more effectively if they are rebranded as technology companies rather than traditional banks. They can also increase their retention and recruitment of scarce technology skills. DBS Bank in Singapore, and Siam Commercial Bank Thailand have transformed themselves into technology businesses. Other banks will soon follow.
- Technology innovation: Large winning banks such as JPMorgan Chase and HSBC have begun investing in new technologies like quantum computing, responsible AI (RAI), and Web3/DeFi apps. These investments will give big banks a headstart in integrating innovative technologies into their products and banking applications.
The financial services market is still challenging. However, the top 15 global banks have demonstrated how digital technology can be used to increase revenue and profit growth. It doesn’t mean that smaller banks have to suffer. They can increase their profitability and secure new markets by focusing technology resources in areas where they have a competitive edge.
My colleague Soichiro Muto and I will be discussing the importance of digital banking in global growth markets in my next blog post. Contact me here if you want to learn more about how to build a winning bank.