GLOBAL COMMERCIAL BANKING MARKET
Commercial banks are complex institutions whose core function is to act as a financial intermediary filling the gap between the demand and supply of capital. This demand leans on business and consumer confidence along with the level of activity that requires financing. The industry works in tandem with the economic performance in the world market.
Their primary function includes accepting deposits and lending funds. Lending activities include, but are not limited to, refinance loans, mortgage loans and industrial loans. Secondary business includes acting as an agent and utility services. Commercial banks play a pivotal role in growing and supporting the economy.
TRENDS IN COMMERCIAL BANKING MARKET
Partnering with fintech companies will accelerate the process of digitization and enhance customer satisfaction. Over the past decade, USD 27 billion have been invested in fintech in the commercial banking space. Similarly, Royal Bank of Scotland has acquired 25% stake in fintech, Loot.
HSBC has also teamed up with Indentitii and Bud to incorporate technological innovation. Lloyds Bank has partnered with Demica to create a new platform to facilitate digital onboarding. AI is also an evident turning point in this industry in the near future.
AI driven decision making helps banks manage their portfolio and mitigate risk in a time and cost-efficient manner.
Banks have started using AI in the decision making for values under USD 25 million and 75% of those decisions are made in a day. NatWest and RBS have deployed AI for decision making in high value commercial portfolios.
Approximately USD 800 billion to USD 2 trillion is lost annual owing to money laundering of which only USD 26 billion have been recovered in fines over the last decade. This leads to loss of confidence in consumer banks.
AI and ML driven algorithms can enhance anti money laundering strategies. Banks are also building data infrastructure, subscribing to cloud services and turning away from traditional informational infrastructure.
The banking industry grapples with many challenges, customer retention being primary. There are several regulations that banks have to comply with such as Basel III, the Dodd-Frank Act, CECL and ALLL.
These regulations restrain resources and activity and non-compliance results in copious fines. Increased competition from various financial institutions is another challenge that has resulted in partnering with these firms to eliminate competition.
COVID IMPACT ON GLOBAL COMMERCIAL BANKING MARKET
The Global commercial banking industry was still recovering from the 2008 global financial crisis when the Covid-19 pandemic shocked the world. Cutting costs and building on their core competencies to gain competitive advantage is the optimal strategy to combat this. The US banking industry faces loan losses to the tune of USD 52.7 billion in the quarter ending March for the year 2020.
The situation worsened in the next quarter when unemployment plummeted to an all time low. Commercial banks today confront a profitability crisis since deposits have increased 30% as compared to the previous fiscal, but loan growth has come to a standstill. European banks are plagued with USD 472 billion in credit losses.
The NPA ratio has risen to 7.7%. This stagnation will bounce back by the year 2022. The pandemic has expedited the need for digital banking leaving the bank branch with an uncertain future. 56% of banks in the US saw a steep decline in ATM transactions while 26% witnessed a 90% increase in revenue from their digital services.
India will witness material level of recovery in 2021, as there has been a rise in the levels of weak assets. Profitability to deteriorate for the near future. Public sector banks hit harder by the pandemic as compared to private sector banks.
Chinese banks top the rankings for the top Tier 1 capital banks in the world. They have a collective USD 14.81 trillion worth assets under management. The ROC for Chinese banks was a strong 14.4% this year, down just by 1.2%.
Though these banks have been experiencing a slow growth rate, they still surpass the rates witnessed by other banks even in the top 10. These top 4 companies have an estimated market share of 12%.
Other notable players include J.P. Morgan Chase, HSBC Holdings and Wells Fargo. India has the second highest number of establishments, standing at 402,525 but comes in fifth in terms of revenue generation revealing a highly fragmented and untapped market.
OPPORTUNITY IN COMMERCIAL BANKING MARKET
SMEs play a key role in the economic performance and commercial banks lend support to these SMEs by making credit available, in turn aiding economic progression. SMEs contribute to over 98% of the business activity in Brazil.
In the US, SMEs generate over USD 7 trillion in sales. Large commercial banks are not always accessible to the organizations. Commercial banks need to develop strategies to acquire and onboard these enterprises to boost revenue.
The commercial banking sector in India faces high pressure to strike a balance between reducing the bulk of NPAs and providing adequate credit supply to the economy, making it a gradual process. More than 60% of the population in India reside in rural areas and their banking needs are largely unmet. Technology is a key driver for this industry.
North American banks spend 37% of their IT budget on new technology investments whereas European banks spend 27% on the same.
|2||Scope of the report|
|7||Insights from Industry stakeholders|
|8||Cost breakdown of Product by sub-components and average profit margin|
|9||Disruptive innovation in the Industry|
|10||Technology trends in the Industry|
|11||Consumer trends in the industry|
|12||Recent Production Milestones|
|13||Component Manufacturing in US, EU and China|
|14||COVID-19 impact on overall market|
|15||COVID-19 impact on Production of components|
|16||COVID-19 impact on Point of sale|
|17||Market Segmentation, Dynamics and Forecast by Geography, 2020-2025|
|18||Market Segmentation, Dynamics and Forecast by Product Type, 2020-2025|
|19||Market Segmentation, Dynamics and Forecast by Application, 2020-2025|
|20||Market Segmentation, Dynamics and Forecast by End use, 2020-2025|
|21||Product installation rate by OEM, 2020|
|22||Incline/Decline in Average B-2-B selling price in past 5 years|
|23||Competition from substitute products|
|24||Gross margin and average profitability of suppliers|
|25||New product development in past 12 months|
|26||M&A in past 12 months|
|27||Growth strategy of leading players|
|28||Market share of vendors, 2020|
|30||Unmet needs and opportunity for new suppliers|