Analysis

Closer Look series

Take a closer look at what's happening in the financial services industry

Our Closer Look series provides quick insights on deep dive issues. Learn what’s happening in the Banking & Securities, Insurance, Investment Management, and Real Estate markets in these short reads.

Business development companies: Middle-market financiers of the future?

Business development companies

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Just a few years ago, banks originated most of the commercial loans for the middle-market. Now, nonbank institutions, such as business development companies (BDCs), are taking on a greater share of the lending.

Read this Closer Look to learn benefits and growth drivers for BDCs; approaches financial services companies can take to enter the BDC market; and important regulatory, valuation, and tax considerations for potential sponsors and investors.

Learn risks, challenges, and opportunities for BDCs and how they may become the financiers of the future for the middle-market.

Insurance Capital Standards cause stakeholders concern at IAIS meeting

It may have been California dreamin’ to expect the emergence of consensus at the recent International Association of Insurance Supervisors (IAIS) Capital-related Stakeholder Meeting held in Newport Beach.

But as the daylong session on insurance capital standards (ICS) wore on, the gap between the international supervisors and most US stakeholders became evident. While various stakeholders had differing opinions on what the final standards should be, the need for a principle-based framework that still recognized and was compatible with local regulatory regimes was a central theme.

This Closer Look provides an overview of the meeting; general, valuation, capital resources, and capital requirements comments resulting from the proposed ICS; and suggestions on next steps for industry stakeholders to shape the debate, evaluate, and plan for the final proposal.

Falling oil prices: Should banks be worried?

Oil prices down by 60 percent, worries of state-level economic impact, and, in the background, fears about unforeseen consequences for financial firms: bankers who remember the 1980s probably feel a strong sense of déjà vu—and more than a little concern.

While the impact on the overall US banking industry is probably moderate, banks concentrated in oil-related industries or geographies will face meaningful challenges. Read this Closer Look for an examination of the likely effects of low oil prices on different banking activities and potential strategic implications for banks.

The Apple venture into NFC payments

The Apple venture into NFC payments

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On October 20, 2014, Apple© released its Apple Pay™ mobile payments solution. Following the release of the iPhone© 6 mobile device and iOS 81 on September 9, Apple has added the last component for an integrated mobile payments solution with near-field communication (NFC) technology.

 

Certainly, both financial institutions and the general public have been very interested in this development since its announcement more than a month ago. How might this launch represent a change in the dynamic surrounding NFC-based mobile payments in particular, and what barriers may remain for NFC payment adoption to present a disruptive change to the incumbent payment players: banks, card issuers, merchants, payment networks, and financial services-oriented technology companies?

What are the options for a U.S. insurance group capital standard?

U.S. state insurance regulators may be expected to adopt group capital standards for large U.S.-based internationally active insurance groups.

While the standards strive to promote financial stability and drive the importance of enhancing group supervision, U.S. stakeholders have been hesitant to adopt a seemingly bank-centric approach to insurance regulation.

However, a directive by the G20s Financial Stability Board to the International Association of Insurance Supervisors to begin work on capital standards broke the stalemate. The insurance industry may wish to analyze different options that the standards may take and join the discussion now to help influence the outcome of critical areas.

Read our Closer Look to understand the three approaches – including Group RBC, aggregated entity, and cash flow stress testing – to the standards and important considerations for each.

Delivering client value in transaction banking

How can transaction banking leaders adapt to the "new normal" by reexamining the ways in which value is delivered to corporate clients, better understanding the cost of serving them, and building a clearer picture of the profitability of these relationships?

While the transaction banking business enjoyed strong financial results in the early days of the financial crisis, revenues have recently flattened or declined. With increasing costs around technology and compliance, transaction banking leaders are being forced to adjust to the "new normal," making difficult decisions to hive off parts of their business that might not deliver returns and focus on best-bet opportunities.

To get to a more profitable future, transaction banks need to differentiate themselves by understanding their clients' views on banking relationships.

Take a Closer Look at our paper to understand:

  • What clients may be looking for in their banking relationship
  • How cost-cutting and automation may be negatively impacting the banking relationship
  • Strategies banks can take to improving client satisfaction while improving bottom-line growth

Mobile banking in a post-channel world: New vision and new strategies

Mobile banking in a post-channel world

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In spite of growing usage rates, many customers have yet to adopt mobile banking. Perhaps more troubling, the industry remains stuck in a me-too mode: slight innovations, quickly replicated, bring no significant advantage to the pioneer. Meanwhile, many banks have yet to go beyond cost control and drive revenues through mobile. And perhaps more importantly, banks haven't fully leveraged the mobile technologies available today, such as biometric authentication, video features and location sensing.

The growing ubiquity of mobile devices, the proliferation of mobile endpoints, and the rapid evolution of mobile technology challenge banks to revisit old assumptions about mobile's role in customer interactions. In the not too distant future, the notion of "mobile" will evolve to include a multiplicity of devices, beyond smartphones and tablets. This will force banks to rapidly adapt to the "post-channel" world, where channel distinctions are less important and improving customer experience becomes the supreme goal.

How can banks increase mobile adoption rates, differentiate the mobile experience to boost customer loyalty, and move beyond cost savings to monetization?How can banks increase mobile adoption to maximize potential impact, differentiate the mobile experience to boost customer loyalty, and move beyond cost savings to monetization? View this Closer Look for a quick read on mobility trends in banking.

Mobile engagement: Insurers look to connect with consumers on the go

Mobile engagement

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While many insurance companies have adapted their basic online services for mobile platforms, the Holy Grail of differentiation has yet to be seized by most industry players. To accomplish that feat, carriers will have to better capitalize on the unique capabilities of smartphones and tablets as well as other types of mobile technology so they can engage more fully with both clients and their own personnel over such devices.

How can insurance carriers better capitalize on the unique capabilities of the mobile channel and rise to the mobile technology challenge?  This Closer Look offers insight into mobility trends in insurance.

Investment management, mobility, and managing investor security concerns

The investment management industry, like many other industries, is in the process of developing mobile offerings for both clients and advisors. In many ways, the current state of the mobile channel harkens back to the early days of the Internet. Remember when simply having a website could set you apart from your competitors? Investment managers had vociferous debates about the value of the Internet, the return on investment of websites, what types of information and functionality to offer, and of course, on the safety and security of the Internet channel. These very same debates are happening now with regard to the mobile channel.

How can investment management firms capitalize on the demographic of mobile users, many of which fall into the affluent or emerging affluent segment? How can firms overcome security concerns? View this Closer Look for a quick read on mobility trends in investment management.

Chinese investment in U.S. real estate: Collaborate and benefit

Chinese investors have been riding the U.S. commercial real estate (CRE) wave, perhaps motivated by the gradual shift in the Chinese government’s policy to promote outbound investments and their preference for investing in real estate that provides comparatively modest and stable returns.

From January 2005 to March 2014, Chinese investors made direct acquisitions of $8.5 billion in U.S. CRE. Of this, $5.8 billion has been invested in the 15-month period, January 2013 through March 2014. Consequently, China has emerged as the second-largest foreign investor, after Canada, with an eight percent share of the total cross-border investments in U.S. CRE.

What does this mean for the U.S. CRE sector?

Download this Closer Look to hear our analysis on the Chinese investment strategy in U.S. CRE and ways in which U.S. real estate players can benefit from the trend.

 

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Jim Eckenrode

Executive Director | Center for Financial Services

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