Banking for 7 billion and 7 million

GLOBAL INVESTOR 3.06 Lead — 13
will increase dramatically. Both developments call for a clear shift
in front units’ service strategies as well as in product and wealth
management structures towards an embedded wealth management
model.
Infrastructure investments to boom further — The search for
work and prosperity is fueling the growth of the mega-cities. The
United Nations expects close to 60% of the world’s population to
be living in urban areas by 2030, up from 48.7% today. To grasp
the true dimension of this development: this growth is equal to
roughly one new city the size of Barcelona emerging every 10 days!
The lion’s share of growth is expected to stem from the less developed
regions in Asia and Africa. The percentage of the population
living in urban areas in Africa is expected to increase from 14.7% in
1950 to 50.7% in 2030, roughly 3.5 times more than at present.
The same metrics in Asia imply more than a tripling of the urban
population over the same period. The fact that investments in the
infrastructure of emerging countries are necessary goes without
saying. However, this is also true of older cities in developed markets,
which have not been designed for the mobile urban citizen or
the sheer size of the 21st century city. This will result in tremendous
and costly long-term infrastructure investments as well as a
trend towards more decentralization of the biggest cities around
the globe. To find a way to finance the infrastructure investments
of the 21st century, further privatization, such as plans currently
calling for the privatization of parts of the German highway system
– until now the country’s “sacred cow” – might soon become
reality.
Migration gains — The World Bank estimates that a rise in migration
from developing countries would generate gains for the world
economy to the benefit of all of us. Migration amounting up to 3%
of the workforce of high-income countries could lead to a global
output gain of USD 356 billion by 2025. This is estimated to be
double the global gain from full trade liberalization. Migrants’ level
of education and salary has an effect on the amount of the remittances
they send home. Studies done for the United States suggest
that highly educated and well-paid migrants – 80% of Indians
working in the USA have a college degree – tend to save and invest
in the host country. It is quite likely that the majority of well-educated
migrants come from well-situated families not requiring as
much support from abroad. By contrast, less educated workers
such as the Hispanics in California or Texas tend to send home a
higher amount, which is estimated at up to USD 500 per month on
average. The migration revolution discussed thus far is leading to
new opportunities in banking:
Banking for 7 billion people: Today’s migration is impacting the
whole range of banking services. Many of today’s migrants are
displaced or are refugees with the potential to become the retail
banking client of the near future. On top of this, the mobility of the
21st century citizen is, thanks to short travel distances, higher than
ever before, resulting in a rising number of high-skilled economic
refugees and the flex-patriate group at the top end (see figure 7).
Banking for 7 million people: The vast growth in private banking
is currently being driven by Asia and Latin America. Aging in the
developed part of the world leads to a generational wealth transfer
in private banking. The different needs of new and younger clients,
who, as studies show, have a higher degree of investment sophistication,
are leading to changes in the structure of private banking
services offered.
Labor migration to heat up retail banking
Globally, the number of people living outside their home countries is
estimated to be at 175 million and rising rapidly. Although migrant
remittances are an old issue in the migration debate, they have
received greater attention in recent years. The obvious reason for
this is the sharp rise in the flow of remittances into developing countries
(see table 1, figure 4), which makes this volume-driven business
attractive. The aim of these people is often to support the family left
at home. To do so, some form of money transfer service, and hence
banking relationship, is required. Migration is likely to give rise to a
new group of banking clients and banks will have to adapt their
Table 1
Remittances to developing countries
Today’s migration is impacting the whole range of banking services. Globally, the number of people living outside their home
countries is estimated to be at 175 million and rising rapidly, with a corresponding sharp rise in the flow of remittances into developing
countries at the lower end of the banking range.
Source: World Bank, United Nations
in USD bn 1990 1995 2000 2001 2002 2003 2004 2005 Change 2001–2005 in %
Latin America 5.8 13.4 20.1 24.4 28.1 34.8 40.7 42.4 74
South Asia 5.6 10.0 17.2 19.2 24.2 31.1 31.4 32.0 67
East Asia 3.3 9.7 16.7 20.1 27.2 35.8 40.9 43.1 114
Middle Asia and North Africa 11.4 13.4 13.2 15.1 15.6 18.6 20.3 21.3 41
Europe and Central Asia 3.2 8.1 13.4 13.0 13.3 15.1 19.4 19.9 53
Sub-Saharan Africa 1.9 3.2 4.9 4.7 5.2 6.8 7.7 8.1 72
World (developing and industrial) 65.6 101.6 131.5 147.1 166.2 200.2 225.8 232.3 58