Banking, Mortgages & Credit Industry Market Research

With few exceptions, the banking and lending industry has rebounded to a much healthier condition after suffering intensely from the Great Recession that officially ended in 2009, along with the related financial meltdown that brought the world of banking into a state of crisis.  Meanwhile, global financial regulators have steadfastly continued the struggle to improve banking reserves and oversight to the point that future meltdowns might be avoided.

On the positive side, banks in much of Asia, as well as Europe and the U.S. have been put through stress tests by regulators, and have been forced to dramatically increase their levels of capital.  Banks are holding very high levels of capital that give them a significant cushion of reserves against potential losses.

Since the 2008-2009 financial crash, consumers in America have been more reluctant to go into debt than in the past.  This trend changed to some extent during 2016-2019.  While many consumers continue to think conservatively, some forms of credit have been growing: 1) Consumers greatly increased their purchases of automobiles, and the total amount of car loans has been on the rise.  This is due to the fact that consumers delayed car purchases during the recent recession, have a more confidence now and were taking advantage of low interest rates.  2) Total student debt rose significantly in recent years.  3) Mortgage debt has been on a slow rise as the housing market picked up.  Home equity borrowing has also risen.

The drop in credit card and consumer debt was dramatic after the 2008-2009 financial crisis.  Today, borrowing on revolving credit is increasing.  By the second quarter of 2019, balances were $870 billion (which, for example, was up from $678.3 billion for the same quarter in 2014).  However, the number of open credit card accounts has fallen, from 496 million in 2008 to 373 million as of the second quarter of 2019, according to the American Bankers Association. In other words, banks are being more careful about issuing cards to people with shaky credit, while many consumers are more interested in paying cash than making monthly payments.

Banking has become a highly globalized industry.  This was fueled by four factors:  1) the availability of global electronic networks for distribution of funds and real-time management of information; 2) the easing of local restrictions on ownership of banks by foreign entities; 3) the opportunity to serve the needs of multinational corporations; and 4) the increasing attractiveness, from a banker’s point of view, of rising household wealth in emerging economies.  New opportunities were sought out globally by major banks.  However, regulations in many emerging economies restrict the level to which foreign firms can own local banks.

U.S. Financial Regulations to Change as a Result of the 2016 Presidential Elections:  The results of the 2016 presidential election in America dramatically changed the outlook for banking regulation.  The Trump administration has focused on streamlining Dodd-Frank, in particular making the burden lighter on smaller banks while retaining reasonable capital requirements on large banks.  Another step by the Trump administration has been to curtail the power of the recently-established CFPB, the Consumer Financial Protection Bureau.

In the U.S. and Europe, one rapid result of the global financial crisis was a cry in the halls of government for greatly increased supervision and revamped regulation of the financial industry, from banking to insurance to the investment sector.  Regulations enacted after the financial crisis of 2007-2009 put banks, insurers, investment managers and credit card firms under pressure, making it more difficult to operate and harder to earn profits. 

The “Shadow Banking” System:  Non-bank companies that offer financial services are a competitive threat to traditional banks.  Retailers, automobile manufacturers, stock brokers, insurance companies and other business sectors are offering a growing array of bank-like services, from loans and mortgages, to credit cards, to money market accounts with checking account-like features.  Wal-Mart has become a retail financial services giant by opening banks within its stores in Mexico, along with “Money Centers” within hundreds of its U.S. stores.  Its Bluebird cash card enables customers to pay bills, cash checks and perform other non-depository business.  In September 2014, Wal-Mart announced a partnership with Green Dot Corporation whereby the retailer now offers low-cost checking accounts called GoBank, through a Green Dot-owned bank.

Hedge funds and other alternative investment companies are making corporate loans, taking market share away from commercial banks.  More recently, trends in financial technology have enabled non-bank lending firms to proliferate, reaching borrowers via the Internet.

Financial Technology (FinTech) Becomes a Hotbed of Innovation:  A revolutionary wave of apps for smartphones that act like debit cards and manage financial accounts is sweeping Asia and slowly taking root in Europe and the U.S.  Firms on all sides of this market are trying to gain an early lead, including tech companies like Google and Apple; cellphone manufacturers like Samsung and Huawei; and credit card companies like Visa.

Financial services technologies receiving the most investment and effort include those for:

• Advanced platforms that enable mobile payments via smartphones, such as Apple Pay and Alipay (as an alternative to credit/debit cards and cash).

• Online insurance sales (eliminating the traditional broker/middleman).

• Artificial intelligence-driven, online management of investment accounts (“robo-investing”), with the effect of reducing management fees while increasing convenience for consumers.

• Online lending, by firms such as OnDeck, is enjoying soaring growth while taking some of the friction and frustration out of the borrowing process, particularly for small businesses, but also for consumers.