The global mega-bank model is getting more expensive and less popular
08 June 2021
Big banks are pulling back from the heights of their global ambitions for retail banking.
Why it matters: The globalization dogma says bigger is better, and that more markets offer more opportunities for making money. But increasingly, the international mega-bank model is getting clunky, more expensive — and less popular.
Tech disruption is driving competition — and costs — to new levels, especially in payments and lending.
- Digital competitors like Dave, Monzo and Venmo litter the web and have no costly branches.
- Investors are paying attention. Banking app Dave, launched in 2017, said on Monday it would merge into a SPAC at an expected equity value of $4 billion.
Meanwhile, traditional banks are unwinding retail banking purchases made in the pre-cloud era.
- HSBC is the latest, selling its unprofitable U.S. business to Citizens Bank and Cathay Bank.
- BBVA also recently sold its underperforming U.S. retail business to PNC. And Citi announced in April it's selling its Asia retail business.
What they're saying: "What we’re seeing today would have been a surprise 10-15 years ago," says Greg McBride, chief financial analyst at Bankrate.
- "There are limited synergies in running a global consumer business. It's all about local scale," says Jan Bellens, EY's global banking sector leader.
- That's because many products don't translate across national boundaries. Mortgages, for one.
The intrigue: International banks are increasingly looking for cost savings, like shedding underperforming assets, and using that to invest in digital banking platforms, says Wedbush analyst Peter Winter.
- To adapt, legacy banks have also gotten into bed with fintechs.
Case in point: Signature Bank and Customers Bank both struck deals for their customers to use blockchain-powered real-time B2B payments platform TassatPay.
What to watch: The re-globalization of banking — driven by cloud-based fintechs unburdened by old technology or brick-and-mortar infrastructure. They'll be best positioned for expansion, Bellens says.
The bottom line: Consolidation in traditional retail banking is expected to continue.
- A former Santander executive told the FT in December that the Spanish bank had been "outmaneuvered" by BBVA’s U.S. asset sale, and that Santander "should have lined up such a favorable exit itself."
Transcripts show George Floyd told police "I can't breathe" over 20 times
Section2Newly released transcripts of bodycam footage from the Minneapolis Police Department show that George Floyd told officers he could not breathe more than 20 times in the moments leading up to his death.
Why it matters: Floyd's killing sparked a national wave of Black Lives Matter protests and an ongoing reckoning over systemic racism in the United States. The transcripts "offer one the most thorough and dramatic accounts" before Floyd's death, The New York Times writes.
The state of play: The transcripts were released as former officer Thomas Lane seeks to have the charges that he aided in Floyd's death thrown out in court, per the Times. He is one of four officers who have been charged.
- The filings also include a 60-page transcript of an interview with Lane. He said he "felt maybe that something was going on" when asked if he believed that Floyd was having a medical emergency at the time.
What the transcripts say:
- Floyd told the officers he was claustrophobic as they tried to get him into the squad car.
- The transcripts also show Floyd saying, "Momma, I love you. Tell my kids I love them. I'm dead."
- Former officer Derek Chauvin, who had his knee on Floyd's neck for over eight minutes, told Floyd, "Then stop talking, stop yelling, it takes a heck of a lot of oxygen to talk."
Read the transcripts via DocumentCloud.