Financial Services

The drivers of significant reform

The global financial services industry has undergone unprecedented change since the outbreak of the global financial crisis in 2007. One of the main drivers behind this change has been the wall of regulatory and legislation changes that were introduced for two main reasons. The first was to ensure that financial institutions, particularly those identified as systemically important, can better withstand significant adverse events. The second reason was to ensure that banks, insurance companies and asset managers, certainly in the Western world, become more focused on customer outcomes.

Market impact

The change required as a result of these developments has now to a large extent been identified, planned and in some cases implemented. Therefore, and as many developed economies have stabilised and returned to growth, financial institutions are able to look forward with more confidence and shift their focus onto growing their businesses. This focus on growth covers growing the existing business (either through M&A, partnerships or organically), launching new products and services and entering new geographical markets.

Keeping up with the pace of change

At the same time as the financial institutions have been dealing with the fallout of the financial crisis, the way that customers want to interact with their financial providers has changed. Over the last 4-5 years other industries have seen a dramatic change in the way they interact with their customers, including digital solutions such as mobile, online, social media, and the use of video. However, many financial institutions lag behind their counterparts in other industries and financial companies are now committing significant investment and resources to catch up as they realise that the reward of getting this right can be substantial.

In this new, more growth focused environment, private equity has also significantly increased its focus on the financial services industry. M&A transaction processes have seen a substantially increased level of private equity activity which has also led to a large number of completed deals. Their interest often lies in the sectors where lower capital intensity and lower regulatory complexity is combined with substantial growth and/or consolidation opportunities.