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NEW YORK - Thursday, January 24th
2013 [ME NewsWire]
- Information Businesses Linked to US Banking Could Have
Higher Market Capitalization Than US Banks by 2020
- All Financial Services Firms Can Drive Long-Term
Prosperity by Monetizing Their Information Assets
-(BUSINESS WIRE/ME
NewsWire)-- According to global management consultancy Oliver Wyman, the value
in financial services is quickly shifting from balance sheets and physical
distribution to information. This trend is occurring globally, but is perhaps
most easily observable in US banking. There, information businesses related to
banking such as independent payment networks, credit bureaus, ratings agencies,
exchanges, and data providers, among others, may be more valuable than the
industry’s traditional balance-sheet based businesses by the end of the decade.
Oliver Wyman’s annual State of the Financial Services Industry 2013 report
titled, A Money and Information Business, finds that most financial
services companies have an opportunity to become information-driven companies
that grow and monetize their information assets. Firms that exploit this
opportunity will find areas to prosper even in the face of challenging
macroeconomic conditions and regulatory uncertainty. On the other hand, firms
that fail to identify how the evolving information landscape is affecting their
business could suffer from a similar kind of disruptive change witnessed by the
travel, media, telecommunications and music industries.
Banks and insurers continue to
control a unique and extraordinarily valuable array of information assets. The
16th annual Oliver Wyman report finds that once a firm understands its
information assets and how the evolving financial services information
landscape can help monetize those information assets or threaten them, it can
build what Oliver Wyman calls the "information balance sheet”.
"We conceived the idea of the
information balance sheet as a mechanism by which executives can begin to get a
grasp on their information assets, exposures, opportunities and threats. In
short, it provides a framework to understand the aggregate impact of
information and inform on how changes in information are going to change and
affect earnings, as well as prioritize potential investments in information,”
said Aaron Fine, Partner at Oliver Wyman and primary author of the report.
Other key findings of the report
include:
- "Coopetition” between traditional financial services
companies and information companies may be among the most dynamic forces
in financial services going forward, bringing together the complementary
strengths and weaknesses of partnering firms. Such partnerships can
produce significant tactical earnings opportunities in short periods of
time.
- Digitalization and the free flow of information have
given clients in many areas a clearer view of the cost associated with
each component of what used to be bundled services and the opportunity to
be more selective in their spending.
- "Information shocks”, defined as changes in firm,
competitor or client information-related behaviour that have a significant
impact on earnings, may affect earnings as much as interest rate shocks
and other macroeconomic factors. An example of an information shock:
clients becoming more price elastic as the information environment
evolves.
- Long-term success in using information depends not on
the number of "hits” but on the size of the "misses”. Firms that hope to
be successful must establish strong controls that ensure they avoid
critical mistakes.
"‘Money’ is a value business,
‘information’ is a growth business. The value of money has never been lower and
so financial services firms that define themselves by their monetary balance
sheet will struggle to grow. Those that instead define themselves by the growth
potential of their information have a very different future,” said Fine.
Key exhibits from the report
include:
- Market Capitalization of US Banks vs. Bank-Related
Information Businesses
- The Rise of Information
- The Shifting Balance of Money and Information
- Impact of the Changing Value of Information and Money
on Financial Services Margins
- The Economy Viewed Through Financial Services Data
- Potential Information Opportunities from Consumer
Deposit and Payment Data
- Information Opportunities Across Financial Services
- Strategic Threat #1-Cooperation with Information
Companies Reduces Barriers to Entry and Opens the Door to Greater
Competition
- The Global Financial Services Information Company
Landscape
- Strategic Threat #2-Value Migration from Traditional
Players to Information-Driven Companies (Global Telecom)
- The Information Balance Sheet (for an Illustrative
Firm)
- Information Tactics Archetypes
- Information-Driven Banking and Insurance – Example:
Advanced SME Lending & Support
The Oliver Wyman State of the
Financial Services Industry 2013 report is available at: http://www.oliverwyman.com/state-of-financial-services-2013.htm.
About Oliver Wyman
Oliver Wyman is a global leader in
management consulting. With offices in 50+ cities across 25 countries, Oliver
Wyman combines deep industry knowledge with specialized expertise in strategy,
operations, risk management, and organization transformation. The firm's 3,000
professionals help clients optimize their business, improve their operations
and risk profile, and accelerate their organizational performance to seize the
most attractive opportunities. Oliver Wyman is a wholly owned subsidiary of
Marsh & McLennan Companies (NYSE: MMC). For more information, visit www.oliverwyman.com. Follow Oliver Wyman on
Twitter @OliverWyman.
Contacts
Oliver Wyman
Jung Kim, 646-364-8355
jung.kim@oliverwyman.com
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