Another example is catering to the needs of global customers and providing a complete picture of their assets capital, cash flows, and credit utilization and transaction information. In fact Citibank is in the process of developing a common global banking platform spanning across 40 countries to target affluent, high-flying consumers that account for 80 percent of financial services revenue.
A bank’s ability to quickly provide standard products and processes across markets and a global approach to customers will help the bank sustain growth and reduce costs. However regional demands cannot be ignored. Banks may also need to offer product variations from country to country in order to satisfy customers and stay competitive in a market.
Apart from standardized process across the globe and reduced costs a global banking platform offers significant benefits:
Technology prowess gives banks a strong edge in foreign markets. For instance harnessing current customer facing technology, especially advances in mobile technology and providing superior experience across all customer touch points will definitely set a bank apart from its competitors. It also comes with the added benefit of reduced branch network costs. This solution may also prove extremely beneficial to customers in emerging markets especially in countries like Africa where there is a large population with limited access to branch banking.
While there is no doubt that having an efficient global shared services helps a bank reduce costs it can add a great deal of value in other ways too. Having global shared services can help the bank achieve economies of scale, access scarcely available expertise, particularly, in areas of regulatory compliance, risk mitigation and fraud detection, offer global products to customers and maintain service quality and effectiveness across businesses, and times zones.
Citi initially began its shared service center with only 25 employees in San Jose, Costa Rica providing financial reporting operations, having tasted success, this center has now expanded to 1100 employees supporting accounts payable, procurement and HR services and 7 financial products.
Banks need to look at end-to-end processes across organizational, functional, and geographical boundaries to achieve full excellence in operations. This spans across front and back office and includes all channels used to interact with the customer. As banks grow across geographies organically or inorganically their ability to consolidate systems and incorporate standard processes across the globe will help them create cost synergies and remain competitive.
Another important capability a bank can leverage is transferable human capital. Culture plays a huge role in aiding the transfer of this human capital. When markets have a similar culture then processes and human capital is easily transferable, creating an advantage for the bank, for example, cultural links between Spain and Latin American countries have made the latter an attractive expansion market for major Spanish banks.
While capabilities provide opportunities for bank to expand in a foreign market, constraints pose challenges. Now constraints could be the bank’s internal issues such as availability of capital or they could be cultural or external constraints such as customer buying patterns, entry barriers, regulatory environment and competitive structure of the market. Sometimes capabilities can help mitigate constraints for instance a global bank can acquire a bank in a market where setting up a branch may not be viable because of complex regulations and provide global products to customers in that market.
In conclusion the success of the international strategy of any bank depends on whether the bank is able to leverage its capabilities and seize the opportunity a foreign market offers while mitigating internal and external constraints.