Cross-border banking consolidation continues, creating new challenges for being both global and local

The rapid pace of consolidation across the global retail banking industry is likely to continue through and beyond 2008. This finding was shared by Kathleen Khirallah, managing director of the TowerGroup Banking practice, in a presentation at the company's 2007 Financial Services Business & Technology Conference & Exhibition held in Boston.

In her presentation titled "Performance Management in Retail Banking: Be Global, Act Local," Khirallah noted that while the number of high-profile cross-border acquisitions is on the rise, not all are or will be successful. Pressure on acquiring banks is intense especially in large cross border deals, because of the risk involved in moving into a new geography.

"These mergers and acquisitions are using a variety of global ownership models to try to mitigate risk while addressing the intensified pressure being placed on institutions by customers, shareholders and regulators," said Khirallah. "We are seeing a number of joint ventures as well as controlling interest deals to try to offset the potential downsides. But no matter what business model or deal structure an institution pursues in a cross-border move, it must put tools in place to compete effectively on local terms while still leveraging its global scale."

Khirallah discussed the role to be played by an evolving class of technology tools called performance management solutions. These tools are critical in providing better visibility into and control over far-flung operations. Performance management tools offer a means of monitoring and tracking daily operations across a line of business or an enterprise. These tools can help improve decision making at all levels of the organization, better link corporate strategy to daily operations, and use current data to effect "midcourse" corrections - as well as change behaviors for the future.

"Local knowledge can clearly give local competitors an edge," said Khirallah. "It is critical for a financial institution moving into a new region to successfully 'act locally' without losing its own global advantage. Performance management solutions can help an organization adapt operations to reflect local customs, while still functioning in a truly global manner through its network of services."

TowerGroup predicts that technology spending on performance management solutions will increase at a compound annual growth rate of 7% from US$855 million in 2005 to US$1,214 million in 2010. "This growth demonstrates a recognition among banks of the need to be more responsive and flexible when adapting to a burgeoning global market," added Khirallah.

(This is the press release of TowerGroup)

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