Characteristics of Business Model Transformation of International Mainstream Commercial Banks

Since the late 1980s, in an increasingly stimulating international competitive environment, large mainstream international banks have consolidated their core businesses through targeted divestiture, outsourcing of non core businesses, and continuous expansion and mergers and acquisitions. Their business strategic positioning has changed from extensive all-round and diversified expansion to selective development of core businesses.

Transform from extensive all-round and diversified expansion to selective development of core business

Since the late 1980s, in an increasingly stimulating international competitive environment, large mainstream international banks have consolidated their core businesses through targeted divestiture, outsourcing of non core businesses, and continuous expansion and mergers and acquisitions. Their business strategic positioning has changed from extensive all-round and diversified expansion to selective development of core businesses.

1 Divestiture and outsourcing non core business

In the past 10 years, most international mainstream banks, such as Citigroup, Bank of America and UBS Group, have adjusted their business structures and separated non core businesses with poor operating results or inconsistent with their development strategies through continuous stripping and outsourcing (see Table 1).

2 Consolidate core business by means of endogenous development and external mergers and acquisitions

While stripping off non core businesses, international mainstream banks focus more on their own core businesses. Through active market development and frequent mergers and acquisitions, core businesses have achieved faster growth, thus quickly establishing a leading competitive position in the world (see Table 2).

In the past 20 years, the choice of international mainstream banking business model has also proved that the scale advantage of commercial banks in non banking financial business is more reflected in the distribution channels than in self operation and research and development. The selection and adjustment of business scope should not be restricted to having a "comprehensive" business system, but should pay more attention to the cultivation of core banking business and the improvement of competitiveness in key business areas.

The relative importance of retail financial business in the business system is rising

Since the 1980s, international mainstream commercial banks have been excluded from the wholesale financial market, and the proportion of retail financial business has been rising. Take the United States as an example. In 1980, consumer loans from American commercial banks reached US $454.87 billion, accounting for 44% of the total loans. Especially in the late 1990s, the market interest rate continued to be low, driving the U.S. residential market and even mortgage refinancing activities to increase significantly. By 2007, the U.S. consumer loan data had become 4584.92 billion dollars, accounting for 70% .

The consumer loans of major banks have risen significantly, for example, the consumer loans of Huaqi Bank increased by 11.3% in 2001 compared with 2000, and 13.2% in 2002 compared with 2001; J. P. JPMorgan Chase Bank's consumer loans increased 16.6% in 2001 compared with 2000, and increased 10.9% in 2002 compared with 2001. With the adjustment of business focus, the profit structure of international mainstream commercial banks has also undergone great changes. For example, the proportion of global consumer service revenue of Huaqi Group increased from 42% in 1998 to 56% in 2006. In 2007, the importance of consumer service revenue became more prominent. In that year, the net income of Citigroup's global consumer service business reached 7.868 billion dollars, but the company and investment banking business suffered a huge loss of 5.253 billion dollars, and the selective investment lost 1.644 billion dollars. The contribution rate of HSBC Group's personal financial business to pre tax profits rose from 33.5% in 2001 to 42% in 2006; The share of corporate banking, investment banking and capital market businesses in pre tax profits declined significantly, from 39% in 2001 to 26% in 2006. The growth of private banking business was also fast, and its share in the overall business was also rising

To sum up, in order to survive in the market, the international mainstream commercial banks, in the process of implementing the all-around development strategy, are still selective and focused in their goals from the perspective of operation and management, as well as in terms of business varieties and business methods. The rise in the proportion and importance of retail business income also confirms this process.

The business variety has increased rapidly, the product innovation has become more complex, and the innovation focus has been shifted to off balance sheet

Since the 1990s, international mainstream banks have spared no effort to increase product innovation, develop diversified financial products, make them more convenient and value-added, consolidate and expand their core business position. The focus of innovation extends from liability business and asset business to off balance sheet business, and various new business varieties emerge in endlessly. The most prominent performance is the development of asset securitization, which transforms interest income into service fee income by securitization of asset businesses with long-term stable cash flow, such as housing mortgage loans, credit card loans, auto loans, etc. From 2000 to 2006, the scale of global securitisation issuance soared from 500 billion dollars to 2.3 trillion dollars. Banks also further derivative securitization products to reduce the dependence of business expansion on capital. From 2003 to 2007, the global credit derivatives (CDS) market expanded more than 15 times, reaching US $50 trillion. In addition, it uses its convenient branches and outlets to distribute the products of insurance companies, fund companies and other financial institutions to provide three-dimensional and comprehensive product series services centering on customer needs. In the early 1970s, the financial products and services provided by the world's best commercial banks were only more than 50, reaching more than 200 in the 1980s and more than 500 in the 1990s. As an inevitable result of diversified development of business varieties, the financial aspect is reflected in the continuous decline of interest income of commercial banks, which traditionally rely on deposit and loan businesses, while the types of income of emerging business varieties brought about by innovation have increased, while non interest income has continued to rise, and the relative importance has continued to increase .

From the perspective of business product innovation process itself, various banks have adopted a large number of engineering technology methods, such as mathematical modeling, numerical calculation, network diagram, simulation, etc. The most advanced technical equipment, such as large computers, Internet, communication satellites, etc.: use to form a rational basis for some intuitive behaviors in the financial field and transform them into operable financial products. More innovative products can be combined to use a variety of financial instruments, and financial products become more complex.


Business processes are more standardized and rationalized, and customer service channels are more transformed from traditional to electronic 

In the early 1990s, the international mainstream banks made a large-scale transformation of their business and management processes with the help of modern information and communication technologies. First, a large number of IT integration technologies were used to reorganize the decentralized closed system and then create an integrated network system, and their own data warehouse was established, providing strong support for the scientific analysis and management decision-making process of banking business. The second is to develop from simple business processing to an organic combination of business processing, management decision support and customer service. For example, Huaqi Bank has centralized the global business documents to four document processing centers with highly automated network connection. With this processing system, customers can handle various businesses around the clock and very conveniently. Third, in terms of credit business processing, with the help of information systems, the process and procedures will be more standardized and rationalized, the loan application will be more responsive, and the rights and responsibilities of loans will be clearer. The fourth is to contract out auxiliary business processes other than core business processes to specialized operating agencies, shorten the business process chain, reduce operating costs and improve profitability. At the same time, the application of ATM, online banking, telephone banking and other service means based on information and communication technology has made the international mainstream commercial bank customer service more electronic channels. Electronic channels have shown more and more advantages in convenience, security, speed, cost, etc., making their services more efficient and fast, and even free from time, place, and method constraints, to achieve "anywhere, anytime, and any way (Anywhere, Anytime, Anyhow)" all-weather services. In 2005, the online banking business volume in the United States accounted for 50% - 60% of the traditional banking business volume.

Focusing on the adjustment of the business system, reshaping the organizational structure

1、 Emphasize the system management of the bank, and focus on business lines to gather business departments. After repeated adjustments, the basic trend of international mainstream commercial banks' organizational structure is that business lines become more and more comprehensive and clear. Many business departments are converging according to three business lines, namely, retail business, corporate and investment banking business, and wealth management business, to build a customer oriented organizational structure based on strategic business units.

2、 Strengthen the management functions of the Head Office's business departments. At present, the international mainstream commercial banks take the head office department as the operation and command center, and adopt the structure of "big head office, big department, small branch". There are many branches of the bank, but they are not necessarily large. Their functions are generally single. Many businesses are concentrated in the departments of the head office. There are not many departments in the head office, but all of them are large. The "big head office" is reflected by "big departments". A business department is a business system and a front. The department gathers major business professionals, with a fine division of labor and strong professionalism.