It has become common practice and a reflex to say that the terrorist attacks of September 11, 2001 “changed everything.” In banking as well as in politics, travel, warfare and more. However it was only following the fall of Lehman Brothers in 2008, that the true challenges in Banking started to emerge and was seen as the nail in the coffin for the economy as a whole.
Still, there have in fact been many changes in the banking industry in the past ten years, and a lot of those changes can be directly connected to the two main events which I’ve mentioned and the subsequent industry and government responses.
Here are some of the changes following these events, an incomplete list I’m sure but some food for thought in the interim:
Financial Centres - Anywhere?
Partly spurred by the rethinking on data center and facilities locations, and also by the emergence of new global financial services players in emerging markets in Asia and the Mideast, the definition of a "financial services center" definitely has broadened in the past ten years or so. New York and London still dominate, but they are challenged by players in regions as diverse as Dubai, Hong Kong, Sydney and Sao Paulo. Technology of course makes it possible to conduct financial transactions anywhere, anytime but regulation, politics and economics have played a key role, as well. Offshoring and nearshoring of certain banking functions has been a major development in the last five years!
Security, Privacy and Fraud - An Unholy Alliance?
Closely related to the data management challenges, concerns about how much information and insight is too much (whether it involves banks, the government, or criminals) have been debated constantly since 9/11, with few satisfactory solutions in sight.
More ‘red tape’ than ever before. The Sarbanes- Oxley Act (passed in 2002) and the Dodd-Frank act passed in 2010. The common themes: transparency and accountability, which are not necessarily bad things for financial institutions to provide but have definitely been key topics and areas of growth since Lehman’s demise.
Recreating Data Centres?
9/11 provided a wake-up call to many financial institutions that had taken for granted that the locations and provisioning of their data centers and back-up sites would be safe, secure and accessible. The past decade has seen tremendous innovation and reinvention in data centres, with the implementation of virtualisation and cloud strategies, as well as energy-saving green strategies. Not only are banks saving money and running more efficient data centers today, they also have an operational flexibility that did not exist in 2000.
The Emergence of Mobile communications?
Today, mobile communications are ubiquitous and mobile is the fastest-growing platform for banking interactions and transactions. Yet questions remain about how well mobile communications will work in a crisis, when millions of people are simultaneously trying to place calls or texts.
Social Media - Who Knew?
The mind boggles trying to imagine what it would have been like (for better and for worse) if facebook, Twitter and LinkedIn had existed on 9/11. Today, banks actively use social media to communicate with customers in about everything from new credit card offers to branch closures following a hurricane. We can only conjecture as to the role these networks might have played 10 years ago.
Reviewing these developments, it's almost easy to forget the sense of uncertainty and dislocation in the industry following the devastating attack on one of the world's primary financial centres and the crash of one of the largest Investment Banks of our generation. That the banking industry not only survived but grew and evolved is a very good thing, even though it has been challenging at times.
Who knows what the next decade holds of us? Are there any other major events you think have changed the banking industry since the millennium? Please feel free to comment below.