Banking
How UK banks can draw inspiration from across the pond

By Ramesh Ramani, Head of Banking & Financial Services Europe, Cognizant
It is a challenging time for UK banks, with an increasingly complex landscape and imminent events such as Brexit posing a threat to stability. Traditional banking institutions also face the rapid success of digital-first challenger banks and fintech firms, with an ever-increasing number of new entrants snapping at their heels. The pressure is on for UK banks to become more resilient by adopting customer-centric strategies, evolving with market trends and piloting emerging technologies.

Ramesh Ramani
Many US banks have been lauded for their ability to remain buoyant in a tough market. However, direct, ‘like for like’ comparisons between US and UK banking institutions should always be made with caution, bearing in mind that they come under distinctly different sets of regulations. For example, European banking rules have recently been made far more stringent, due to the avalanche of regulations that flooded the European financial sector following the fall-out of the 2008 crisis. However, UK banks would do well to take inspiration from their US counterparts’ strategies for keeping agile in a competitive environment.
For example, Temenos’ 2019 State of Digital Sales in Banking report found that the largest US banks now lead the world in digital sales adoption for personal banking compared to European and Australian institutions, with up to 75 per cent being mobile-enabled.
This is largely due to significant and rapid developments in automated credit decisioning, allowing lenders to develop smoother and swifter business processes. This is underpinned by the use of shared utility models, which enable faster credit checks by giving institutions access to a utility service provided by a third party, so they only pay for the services and data they use.
A bird’s eye view of differences between the UK and the US
Some may argue that these differences have arisen because, in the US, the onus is on the customer, not the bank. US banking institutions can take more risks in terms of credit positioning and lending, bending the rules to take advantage of shared utilities and services to disperse loans as quickly as possible. Comparatively, the responsibility sits with the lender in the UK, so institutions tend to be more cautious, relying on their processes rather than third parties where they could be held accountable. This may hold them back in terms of new digital advances.
In the US, banking regulations have become less stringent in recent years, further relaxed by the Trump administration with loosened rules on short-term, small-dollar lending. This means banks have been able to take more risks, using shared utilities to get loans and credit decisions to the customer as quickly as possible.
For example, the banking sector has a shared utility platform called ‘Early Warning’, led by JP Morgan in conjunction with other banks, that allows banks and credit unions to tap into a pay-as-you-go service and make checks based on a database of fraudulent customers. This platform has enabled the US banking sector to be bolder and widen the ecosystem of partners both within and outside of core industries, to provide customers with a well-rounded and holistic experience. Whereas European banks invariably have to put on the brakes due to tighter regulations, their US counterparts are less risk-averse, leading to more fintech partnerships opening up and transforming the system.
What does it all come down to?
It is the truly customer-centric approach, with a focus on services catering to specific customer needs, which is setting US banks apart. For example, Huntington National Bank spent two years listening to customer feedback to create its digital banking hub that helps customers manage their finances. It should be noted that some UK banks are making moves in the right direction, including Starling Bank, which has a user-friendly app as well as a marketplace for customers to access a range of complementary financial services and products. It is offerings like this that have seen Starling Bank take the title of best British bank two years in a row. However, more can be done across the board to stay ahead in the current, competitive landscape.
US banking institutions are partnering with companies in other markets so they can be involved in their customers’ journeys throughout life, not just anyone stage of it. Ally Bank, for example, collaborates with other digitally-minded companies to provide convenient end-to-end customer solutions, including a recent partnership with Better.com – one of the fastest-growing digital mortgage disruptors in the US. When it comes to collaboration, the US has a distinct advantage; access to Silicon Valley, a much vaster tech ecosystem than that of Europe, enables more proliferation and tying up between banks and tech firms. The key is to provide a seamless experience for customers by creating and expanding on partner ecosystems.
UK companies can follow the US banking system’s lead by working more closely with digital partners who can propel the process along. This, combined with an extra layer of intelligence so they can get actionable insights, will ultimately help banks become closer to their customers.
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)