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BFSI- Banking, Financial Services Insurance

Sector

BFSI

Mahesh Shinde
Mahesh Shende

Sector Expert
   

Snapshot

Asia-Pacific region would exhibit the highest CAGR of 43.9% during 2019-2026
Total industry assets estimated US $163,058 billion in 2017 & to grow at CAGR of 8% over the next five years
Market estimates believe that by 2022, the financial services market is expected to reach $26.5 trillion
The global banking sector is considerably healthier now than it was 10 years ago, at the start of the global financial crisis
Global premiums in 2018 reached $5.2 trillion
Globally, most banks anticipate return on equity will continue to improve over the next three years
Adoption of FinTech providers for money transfer and payment services rose from 18% in 2015 to 50% in 2017.
$ 1 Trillion
Banking Sector Market
$ 1 Trillion
Total Assets of Banking Industry
$ 1 Trillion
Global contactless in-store Payments by 2020
INDUSTRY SCENARIO FOREIGN INVESTMENT INDUSTRY TRENDS MAJOR PLAYER

Europe’s debt crisis and the large government budget deficit in the US are expected to reduce government spending, resulting in sluggish short-term economic growth in both regions. Rising middle class populations and escalating household incomes in emerging markets provide substantial opportunity for global banks. Rapid technological advances are leading to dramatic shifts in the banking industry as the processing cost per transaction is approaching zero while simultaneously improving efficiency. These advantages are likely to increase trading volumes at the institutional level. APAC alone is expected to contribute about 70 percent of the global growth of Insurance Sector until 2020 for life, followed by North America, which is projected to contribute about 15 percent to total growth in the industry.

  • Global investment in banking start-ups has quadrupled from 2014 to 2018 and could reach US$39 billion in 2019 if the strong investment flows of the first three quarters of 2019 continue
  • Global assets declined to US$122.8 trillion, mainly due to the disposal of noncore assets by European banks
  • 62% of global banks expect to be digitally mature in 2020, compared with just 19% in 2018
  • 70% of banks will invest in technology to strengthen their competitive positioning and build market share over the coming three years
  • Europe dominates the global banking industry with 43% of total market share

The industry will likely be bifurcated, with a few large, global investment banks—mostly in the United States—and another group focused on local markets and specialized segments. As industry convergence accelerates in the broader economy, the need for cross-industry knowledge could become more important. Meanwhile, technologies such as AI and blockchain could become central to the operation of capital markets businesses and for tailored client insights. 2020 will likely be another year of rationalization in the investment banking industry. Large US banks, despite the economic challenges ahead, have a head start in readjusting to a new world. Most European banks, on the other hand, will be forced to rethink their global ambitions and pick the businesses they want to succeed in, though they must be careful not to discard core functions to remain competitive in the future. Asian banks are expected to continue to build their capabilities to serve local markets

  • Payments is the Hotbed of investments and M&A
  • Venture Capital funding investments amounted to $15.3 Bn with 55 Deals
  • Payments processing investments and M&A amounts to $43.2 Bn with 67 Deals
  • Adyen’s $1 billion initial public offering in Europe97
  • PayPal’s acquisition of iZettle to expand its in-store payments98

As corporate clients start to adjust their financing needs in response to a potential global slowdown in 2020, transaction banks can add more value to their clients. In this low/negative rate environment, transaction banks increase their focus on proactively advising their corporate clients on optimizing their working capital and providing advice on mitigating potential financial risks—especially within cash management, treasury services, and trade finance. Growth in corporate banking globally has been a mixed bag in 2019. In Asia, the ongoing US-China trade conflict has begun to weigh on business lending. Even with recent efforts by Chinese regulators to stimulate lending and offset the impact from declining exports, corporate loans in China have sharply fallen over the year and corporate bond defaults have soared.

  • Global deposit growth over the last year has been relatively flat, with a 1.3 percent decline as of mid-year 2019
  • Globally, banks account for approximately 55 percent of the US$3.2 trillion leveraged loan market and it continues to be a major concern for regulators and analysts worldwide, given the increasing risks
  • The lackluster performance of the US$3.2 trillion hedge fund industry was a reality check for many prime brokers, prompting them to reassess their exposure and tighten due diligence
  • Steady, predictable returns, an attractive cost structure, and sticky customers typically make Transactional Banking business highly attractive
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