Banking for 7 billion and 7 million

GLOBAL INVESTOR 3.06 Lead — 11
Banking for
7 billion and for
7 million1
Today’s global population is far larger than ever before, and is shifting spatially, financially and
socially at a pace without historic parallel. New banking technologies drive a new financial services
industry fit for twenty-first century clients. As recently as ten years ago, banking for individuals
was almost entirely aimed at middle-income groups, with private banking services for high net worth
individuals as an important, but niche, market. Now, the scale of private banking is rising rapidly
to serve the new pools of wealth created by globalization, but at the bottom end of the pyramid,
a completely new business of large-scale, very cheap but fair-quality banking services is being
created off new technology platforms.
Giles Keating, Head of Global Research, Christine Schmid, Equity Sector Analyst
Over the last five decades, the world’s population has expanded on
an unprecedented scale, from just three billion to approaching seven
billion now. Nothing like this has ever been seen in human history.
The large majority of the population increase has occurred
in very poor regions (see figure 1 and 2, on page 4), but now a very
rapid migration, part spatial, part social, is bringing tens of millions
of people out of poverty and into at least the lower end of the income
scale of modern society. This is occurring through vast movements
of people from countryside to cities in China, through the
creation of new jobs within the world’s mega-cities from Mexico
to Bangalore, and more controversially, through large-scale population
shifts from poor regions to the world’s rich nations, whether
across the Mexican-US border or into Spain, which even on official
figures has gained some five million people over the past five years.
As these shifting populations acquire jobs, income and homes,
their need for quality banking services – at a very low price, but in
aggregate in very large quantities – has created an extraordinary
opportunity for those banks astute enough to seize it.
At the opposite end of the spectrum, the private banking business
is exploding thanks to new wealth growth of some 6% p.a.
created by globalization. The high net worth population grew at a
record pace between 2004 and 2005 in emerging market countries:
South Korea led the way at 21.3%, followed by India (19.3%),
Russia (17.4%), Indonesia (14.7%) and 14.4% in Hong Kong (see
figure 2 on page 4, figure 3 on page 5, and figure 5 on page 14). Intergenerational
wealth transfer in the developed western part of the world