Welcome to 2008 folks, and I hope you all had a
wonderful holiday break. I did … but what goes on at Xmas, stays in Xmas as
they say (hic!).
Anyways, a year ago, I made a bunch of
forecasts for the year 2007. This year, I’ll go a step further and
make some concrete predictions. However, before doing that, I was looking
back at last year’s forecasts and they weren’t far off, although I tend to
over-estimate the speed of change and under-estimate the impact. For
example, I hoped that 2007 would be the year of Web 2.0 for retail banks.
A year later, I hope that 2008 will be the year of Web 2.0 for retail
banks. It didn’t happen last year. 2007, as mentioned before
Christmas, was the year some banks woke up to Web 2.0, but most were still
fixating upon branch transformations. Nothing wrong with that, but things
are moving at such a pace in our socially networked world that many are going
to miss a trick.
So, here’s a bit of wishy-washy forecasting for
2008 and then five firm predictions that will definitely happen before 31st
First to the wishy-washy.
2008 will be the year of the customer.
Wow! What a surprise. Did we forget
the customer in 2007? Nope, not really. However, 2008 will be the
year of the customer because the banks will start to deliver what the customer
banking, this means best execution and transparency. That is what
MiFID, RegNMS and a host of other global regulations is trying to force into
the market but it doesn’t need regulation to make this happen. It just
needs customers – fund and asset managers in the institutional investment firms
in this instance – to demand it. And they have been and are making those
demands. Those demands, combined with the regulatory regime, will mean
that the bankers who try and duck the customers’ scrutiny will get caught
out. So yes, there will be an investment bank that gets hauled over the
coals for failing to deliver best execution in 2008.
delivering what the customer wants is all about the dialogue banks were having
through 2007 around supply chains. Supply chain management is the
bankers’ focal point for turning around their internal scrutiny on bankers
processes and trying to understand their customer’s processes. Why is
this important? Because banks want to demonstrate their true value to
their customers before their customers chuck them out. Therefore, 2008
will be all about how to create real-time, value-adding, corporate information
services into the financial processes that support the supply chains of bank’s
customers. That will be a critical dialogue.
And, as mentioned already, for retail
banks it will be a rush back to the internet to focus upon social
networking. 2007 was all about branch transformation strategies being
delivered. 2007 was all about creating branch experiences and turning
tellers into sellers. 2008 will now be around how to leverage the branch
experience with a consistent and complementary electronic experience using
social networking as the underpinning. Again, it will be about giving the
customer what they want face-to-face locally and electronically remotely.
So, as can be seen, all aspects of banking will be
focusing upon giving the customer what they want, whether that is best
execution and transparency in investment operations, real-time information
services in supply chains, or experiences that exceed expectations locally or
remotely, online or offline.
In other word, 2008 will be the year of the
OK, that’s the wishy-washy stuff out of the
way. Now to the real meat of 2008 – what’s really going to happen?
Here are five predictions … and yes, I am
playing safe but you would not expect a wild and wacky view here would
you? OK you might, but as you’ll pick these up in January 2009 I think
it’s better to be safe. Also, these predictions are all about banking, as
predicting that Barrack or Hilary would be in the White House in a year, or I
love Huckabee is not part of this ritual.
So here we go.
Prediction #1: A Top 10 US Bank will be
majority-owned by a foreigner
It was interesting over the winter break that the
business editors at The Times commented on Warren Buffet’s investments, and how he’s totally avoided
supporting US domestic banks during the credit crunch crisis. In fact,
he’s gone into low-tech industrial services instead with a major investment in
Marmon, who make railway tankers, plumbing materials and household
wiring. Meanwhile, the dollar-bleeding subprime casualties of Bear
Stearns, Countrywide Financial, Citigroup, Morgan Stanley, UBS and Merrill
Lynch have all been ignored by Warren. Instead they’re being
propped up by saviours from Asia and the Middle East in the form of Sovereign
Therefore, I reckon there will be a major storm mid-2008
as a Sovereign Wealth Fund from China, India or the United Arab Emirates –
what?! – gains a 51% or higher stake in a major US bank. This will then
form the source of a major debate in the middle of the presidential battle,
with the likes of Michael Bloomberg and Steve Forbes jumping to support the
Obama and Huckabee campaigns. The fight will be wonderful to watch as
quiet diplomatic support meets hell and brimstone outrage, and presidential
candidates fight over the loss of American leadership in the financial markets.
Why is this prediction likely? Well there
were already forays into American banking from China last
year with Blackstone, the leading US private equity manager, is now 10%
owned by the Chinese, as is Bear Stearns. Over the course of 2008,
Sovereign Wealth Funds will stretch their muscles even further and, with the
dollar weak and the economy teetering into a recession, American financial
firms will look like a cheap target throughout the year.
Prediction #2: A bank will be fined over $1
million for non-compliance with MiFID
We all know that MiFID has been implemented in a
fairly roundabout fashion, with some countries still to transpose.
However, certain markets have been very proactive and vigorous in getting MiFID
in place to demonstrate best practice, with the FSA in the UK being the first
to get their teeth into the implementation. As a result, the FSA will
also be the first to find and set an example of a bank that is undermining the
spirit of MiFID’s best execution policies.
The test case will occur towards the end of 2008,
by which time they will believe that most banks have had more than enough time
to get used to MiFID’s requirements, nuances and policies and hence will be
viewing any non-compliance as flagrant disregard. The worst offender will
be picked out and heavily wrist-slapped with a fine that will be viewed as one
of the highest of 2008 but, in comparison to earnings and profitability, will
actually mean diddly-squat in practice.
Why is this prediction likely? Because it
will demonstrate to the European Union that the London markets are once again
at the forefront of leading the charge towards transparency and a level playing
field, whilst maintaining London’s and the FSA’s integrity, and pushing the
markets to view the City as one of the world’s best trading grounds therefore.
Prediction #3: PayPal reaches 200 million
users, Facebook 100 million and a major bank launches a social network for
In November 2007, PayPal claimed 164 million user
accounts in almost 200 markets and 17 currencies worldwide. PayPal’s rise
and continued rise staggers. In March 2007, for example, they had 133
million accounts in 103 countries, 100 million in February 2006 in 55
countries, and only 16 million back in May 2002.
Facebook’s rise is equally dramatic, claiming 2
million new users each week and over 50 million users worldwide in December
2007, of which 10 million are in the UK. Compare that with 7.5 million
users in July 2006 rising to 18 million in February 2007 and you can see the
phenomena in action.
The network is in action and dramatic social
interaction at that. The power of the network is such that each time
someone is added to it, they multiply the number of people communicating and
hence fuel the rapid rise of communication. This is why “If 100,000
people join my group, my wife will call our second child Spiderpig” gained
100,000 members on Facebook during the summer … in days. This is why “Stop
the HSBC Graduate Rip-Off” stopped the HSBC graduate rip-off by gathering
over 6,000 members on Facebook in a fortnight.
This is also why Zopa, Propser, Boober, Smava and
many other social finance sites are starting to build new models of investing
and borrowing. Therefore, 2008 will be the year that banks start
experimenting with social lending and social finance.
Why is this prediction likely? The idea is
already on the rise, with Fortis and Bank Of America building business
community sites, but no bank has really got into trialling these ideas in a
retail context. Why would they as it undermines their business
model? The Zopa style low margin platform is totally at odds with a
bank’s credit-debit offset model. But I feel a bank will try to bring in
more social connections in their retail operations, even if it’s just a bit of
blogging around your bank statement online. Watch this space closely in
2008. After all, banks cannot ignore markets that grow from nothing to
100 million or more users in under two years.
Prediction #4: There will be another major
European merger of banking goliaths
You thought the Royal Bank of Scotland, Fortis,
Santander fight with Barclays for ABN AMRO was a humdinger in 2007? Think
again. There will be another one in 2008. In fact, there will
be lots of little sparks of merger as demonstrated by the fact that Santander
has already been trying to woo Alliance & Leicester, but this one will be a
major ding-dong in mainland Europe. No names mentioned, but it wouldn’t
surprise me if there may even be a non-European bank playing an instrumental role
in the battle.
Why is this prediction likely? Well, what
the hell is the point of what Charlie McCreevy is doing with SEPA and MiFID and
the rest, if it’s not meant to move Europe towards a more harmonised,
rationalised and efficient market. And right now, Europe is far from that
as 9,500 banks is an awful lot for a territory that can only sustain about
Prediction #5: Green Computing becomes a hot
It’s funny that I spoke about green computing over
a year ago and was met by blank stares. Then a couple of banks, Dutch
ones being at the forefront, started telling me that they were willing to
refresh their technology on a three-year cycle rather than four years, if it
could demonstrably reduce carbon emissions and power outage. In 2008, I
reckon a lot of other banks will get this message if, for no other reason, than
to look good. Many banks this year will therefore start talking about
their green credentials and will ask technology providers to do the same, as
demonstrated by the most recent Finextra headlines.
Why is this prediction likely? Come on,
everyone wants to be green these days, especially after Al Gore won a goddam
Peace Prize for harping on about it. So you gotta show you’ve got a green
finger or greensleeves these days haven’t you? Thing is though, most of
us don’t actually give a stuff. I mean, I’m all for green but cancel my
holiday to Barbados? Get outta here.
This is the view of most of the investment banks I
talk to: green is of zero interest. Their only focus is on power and
latency and their issue is being hampered by space. They cannot actually
get all the processing power they want into the office space that’s available.
However, what you will see this year, is lots of processing power going
into banks, and core technology refreshment to exploit speed, power, mips …
all under the label of green. This looks good from a marketing viewpoint
and you never know, it just might win us the FT’s Sustainable Banking Award in 2009!
So there you go folks, five predictions for 2008:
- A Top 10 US Bank will be majority-owned by a foreigner
- A bank will be fined over $1 million for non-compliance with MiFID
- PayPal reaches 200 million users, Facebook 100 million and a major bank launches
a social network for consumers
- There will be another major European merger of banking goliaths
- Green Computing becomes a hot topic
These are all safe bets, and there are many more I
could cover but I thought they were too obvious. For example, a bank will
have a payments problem due to SEPA or a bank will find fraudulent activities
rise rapidly due to their trials with mobile and contactless payments.
These are valid but I wanted to stick to the top five that were slightly off
radar, which are above. And a top six or top seven doesn’t sound as good
My other predictions? Well, I had a few
wilder ones such as a bank implodes due to their technology exploding, but
decided to stick with safe and sound. However, just in case, here’s ten
more for those who wanted the weird and wacky:
#1: Britney Spears will enter rehab
#2: Britney Spears will leave rehab
#3: Britney Spears and Lindsay Lohan will enter
and leave rehab together
#4: Paris Hilton will marry Kevin Federline, with
Britney and Lindsay as bridesmaids
#5: Celebrity Big Brother will merge
formats with I’m a Celebrity … get me out of here and Strictly
Come Dancing to form I’m a Dancing Celebrity’s Brother
#6: The Doors will reform to cash in on the latest
mega-group band reunions wave, with Jim Morrison’s vocals performed by Robbie
#7: Hilary Clinton will be found in the Oval
Office with Barrack Obama
#8: José Manuel Barossa will be found in The Hague
with Angela Merkel
#9: David Cameron will be found in the Houses of
Parliament with Michael Portillo
#10: This year’s Christmas #1 download will be the
YouTube clip of Chris Skinner being arrested for spreading false rumours.
Here’s to a great 2008 and a Happy New Year to all