Banking
BEST OF BREED

Daniel Marovitz, Earthport’s European President
The banking industry has a number of characteristics that make it distinct; not least that it is the last bastion of near total vertical integration in any major industry. If you question the absurdity of this, look to everyone’s favourite business example – Apple. Apple dominates the smartphones market almost completely, especially when you look not at unit sales (where they certainly don’t do badly), but where it really counts: profit. In the last year, Apple took 97% of all profits in the global smartphone market. They are the indisputable kings of the next generation global computer platform, which in itself is amazing. What’s more amazing is what they don’t do. They don’t manufacture a single component in the phone. Even better, they don’t even screw the things together. The biggest engine in smartphones and the biggest engine in Apple’s profit juggernaut – in the world’s most valuable company – is outsourced.
The fascinating thing is that nobody would ever question Apple as a mobile phone titan. It’s taken as cold hard fact. Which it is; and it isn’t. Apple is the master of design – both hardware and software – and they are ruthless and effective masters of managing supply chain. They have mastered controlling for quality, innovation, and cost (hence all those jealousy-inducing profits) but they know what their core competence is – and what it is not.
Given the towering pile of cash that Apple is sitting on($142 billion at the start of the year) they could easily buy any of the various companies that are core to the phone, glass, microphones, storage, video processing chips, etc, but they don’t. They don’t take the controlling and protective step to “own” the companies that make the parts upon which they so deeply depend. Instead, they manage them, brilliantly. What Apple owns is the Product with a capital P, not the hardware which is the manifestation of the idea. They understand that managing the experience means owning the customer – the pretty, slimline phone is just the artefact of the product.
Banks are only just beginning to think this way. The industryhas not successfully completed the soul-searching to answer the questions; What is a bank? Is it marble branches? Is it websites? It is Apps? Is it giant customer service centres? Or is a bank something deeper: trusted access to money, an easily accessible way to manage income and bills, visibility and insight into your financial life.
So, what part does the bank need to own? There was a time in the not too distant past that every bank ran telephone lines and data lines directly to key clients. Yet there was also a time in the not too distant past that enterprises around the world had generators onsite because they didn’t trust the grid. (In many parts of the developing world that is still standard practice today.) Would a bank in New York City not trust the local utility for core power? Would a bank in London not be willing to use the public phone networks to talk to clients? This is inconceivable these days.
So let’s go further; would a bank buy, rather than build, the core banking software that keeps accounts and deducts fees? Increasingly, yes. There are now a number of large scale “bank in a box” providers that count among their clients the largest banks in the world. If this is the case, what about their ability to pay out the money they hold in accounts managed by that outsourced software?
This is exactly where Earthport comes in. We have created a focused, high quality, resilient, cross border payment service. We wake up every morning and we worry about increasing the scope of our service, adding more resilience to our network, increasing the power of the tools we give clients, and we keep abreast of the never ending stream of formatting and regulatory changes that affect the more than 60 markets in which we do business. What we do is narrow, but we are very deep. We are a classic best-of-breed solution: we don’t solve every payment issue a bank might have (we are not collections specialists, for example) but we provide a solution for a $13 trillion problem with unprecedented scope. Think of as that blazingly bright and clear screen on your shiny new iPhone. Our screen is useful because 100 other vendors provide all the other things that make the phone powerful when we all work in concert. The bank of the future envisions its experience, manages its architecture and vendors, and allows each part to be the best – so they can be the best possible bank.
Daniel’s twitter id – @marovdan
Banking
Commerzbank to lose 1.7 million clients by 2024 – Welt am Sonntag

FRANKFURT (Reuters) – Commerzbank expects to lose 1.7 million customers by 2024 as part of its current restructuring, resulting in a 300 million euro ($364 million) hit to revenue, weekly Welt am Sonntag reported, citing sources close to the bank.
The lender hopes to offset the drop by growing its loan business as well as by expanding its business with corporate and very wealthy clients, the report said, without giving any further detail of why customer numbers were expected to decline.
It also didn’t say if any specific category of client was most likely to be lost.
Commerzbank declined to comment.
According to the bank’s website it serves around 11.6 million private and small-business customers in Germany and more than 70,000 corporate and other institutional clients worldwide, so the reported loss of customers would suggest a drop of around 15%.
The bank earlier this month reported a $3.3 billion fourth-quarter loss, sinking further into the red as it continued a major restructuring and dealt with the fallout of the COVID-19 pandemic.
The bank’s restructuring plan involves cutting 10,000 jobs and closing hundreds of branches in the hope it can remain independent.
($1 = 0.8253 euros)
(Reporting by Christoph Steitz and Tom Sims; Editing by David Holmes)
Banking
Citigroup considering divestiture of some foreign consumer units – Bloomberg Law

(Reuters) – Citigroup Inc is considering divesting some international consumer units, Bloomberg Law reported on Friday, citing people familiar with the matter.
The discussions are around divesting units across retail banking in the Asia-Pacific region, the report https://bit.ly/3pD57WP said.
“As our incoming CEO Jane Fraser said in January, we are undertaking a dispassionate and thorough review of our strategy,” a Citigroup spokesperson told Reuters.
“Many different options are being considered and we will take the right amount of time before making any decisions.”
The move, part of Fraser’s attempt to simplify the bank, can see units in South Korea, Thailand, the Philippines and Australia being divested, the Bloomberg report said.
However, no decision has been made, according to the report.
Revenue from Citi’s consumer banking business in Asia declined 15% to $1.55 billion in the fourth quarter of 2020.
The divestitures could be spaced out over time or the bank could end up keeping all of its existing units, the Bloomberg report said.
The firm is also reviewing consumer operations in Mexico, though a sale there is less likely, the report said, citing one of the people.
Last month, New York-based Citigroup beat profit estimates but issued a gloomy forecast for expenses. Finance head Mark Mason said the lender’s expenses could rise in 2021 in the range of 2% to 3%, weighing on its operating margins. (https://reut.rs/2ZwXRB1)
(Reporting by Niket Nishant in Bengaluru; Editing by Maju Samuel)
Banking
European shares end higher on strong earnings, positive data

By Sagarika Jaisinghani and Ambar Warrick
(Reuters) – Euro zone shares rose on Friday, marking a third week of gains, as data showed factory activity in February jumped to a three-year high, while upbeat quarterly earnings boosted confidence in a broader economic recovery.
The euro zone index was up 0.9%, with strong earnings from companies such as Acciona and Hermes brewing some optimism over an eventual economic recovery.
The pan-European STOXX 600 index rose 0.5%, as regional factory activity was seen reaching a three-year high on strong demand for manufactured goods at home and overseas.
Another reading showed the euro zone’s current account surplus widened in December on a rise in trade surplus and a narrower deficit in secondary income.
Still, the STOXX 600 marked small gains for the week, having dropped for the past three sessions as investor concern grew over rising inflation and a rocky COVID-19 vaccine rollout.
But basic resources stocks outpaced their peers this week with a 7% jump, as improving industrial activity across the globe drove up commodity prices.
“This week’s slightly adverse price action has all the hallmarks of a loss of momentum temporarily and not a structural turn,” said Jeffrey Halley, senior market analyst at OANDA.
“There is not a major central bank in the world thinking about taking their foot off the monetary spigot, except perhaps China. (Markets) will remain awash in zero percent central bank money through all of 2021 (and) a lot of that will head to the equity market.”
Minutes of the European Central Bank’s January meeting, released on Thursday, showed policymakers expressed fresh concerns over the euro’s strength but appeared relaxed over the recent rise in government bond yields.
The bank’s relaxed stance was justified by the euro zone economy requiring continued monetary and fiscal support, as evidenced by a contraction in the bloc’s dominant services industry in February.
The STOXX 600 has rebounded more than 50% since crashing to multi-year lows in March 2020, with hopes of a global economic rebound this year sparking demand for sectors such as energy, mining, banks and industrial goods.
London’s FTSE 100 lagged regional bourses on Friday due to a slump in January retail sales and as the pound jumped to its highest against the dollar in nearly three years. [.L] [GBP/]
French carmaker Renault tumbled more than 4% after posting a record annual loss of 8 billion euros ($9.68 billion), while food group Danone and German insurer Allianz rose following upbeat trading forecasts.
(Reporting by Sagarika Jaisinghani in Bengaluru; Editing by Sriraj Kalluvila and Shailesh Kuber)