In the years since the financial crisis, the nation’s biggest banks have grown substantially. All in all, the top 15 largest banks now hold a combined total of $13.7 trillion in assets.
For a sense of the vast scale of that wealth, $13.7 trillion is enough to buy everyone on Earth a 13-inch MacBook Pro, with a little leftover for accessories. Of course, every year there are changes in this exclusive club. Larger banks trade places with one another, and smaller banks drop out, replaced by faster-growing rivals.
But the questions that might come to your mind is “How do these banks make money? What is their income stream? And as banks What streams of Income can define their success going forward?” All this and more will be answered in this article. These points will stand out.
- Income Stream for Banks
- Who Are The Top 20 Banks in The World?
- New Income Streams For Banks
- How Does Open Banking Help Banks
Income Stream For Banks
1 Interest on loans:
Banks provide various loans and advances to industries, corporates and individuals. The interest received on these loans is their main source of income.
2 Interest on investments:
Banks invest in various government and rated securities and earn interest and dividends from these investments.
3 Fees income:
Banks charge fees for performing services like syndication of loans, accepting bills of ex ..
4 Forex operations:
Banks also deal in foreign exchange and act as brokers for the same, earning an income from these operations.
5 Commission on third party products:
Banks earn commission income by distributing insurance and mutual fund products to their.
Who Are The Top 20 Banks in The World?
Right now, you need at least $220.43 billion in assets to join the club of the biggest banks in the world, a sum so large that, if converted into $100 bills laid end to end, it would reach the moon (with several thousand miles left over to check out the view).
Here are the 15 largest banks in the world by assets in no particular order, according to the latest numbers from S&P Global Market Intelligence, a financial industry research firm.
1. ICBC -China Market cap: $242.3B
The Industrial and Commercial Bank of China Limited is the wealthiest bank in the world according to market capitalization. It is also ranked as the largest bank in the world when rated by total assets. ICBC is a multi-national banking company owned by Chine, with its’ headquarters located in the Xicheng District, Beijing, China. Its subsidiaries include ICBC Turkey, PT Bank ICBC Indonesia and fourteen other subsidiaries. It’s parent organization is Central Huijin Investment.
2. China Construction Bank Corporation Market cap: $203.8B
China Construction Bank Corporation is the second most valuable bank in the world today by market capitalization. When determining ranked size, it is the sixth largest company in the word with regard to assets. Its’ headquarters are located in Beijing, China and the bank is owned by the Government of China. The bank was founded in Beijing in 1954. Subsidiaries include China Construction Bank of Brasil (Banco Multiplo), China Construction Bank, London and fourteen other subsidiaries.
3. Agricultural Bank of China, Limited Market cap: $147.2B
Agricultural Bank of China Limited, is also known as Ag Bank. It is listed as one of the famous “Big Four Banks which are located in the People’s Republic of China. The bank was founded in 1951 and the headquarters are located in Dongchang District, in Beijing, China. The bank is owned by Central Huijin Investment. The subsidiary companies of this bank include ABC International Holdings, and several other subsidiary branches and companies in numerous major cities throughout the world.
4. JP Morgan Chase & Co. Market cap: $304.3B
JP Morgan Chase & Co. is a United States multi-national financial services and banking company. Its headquarters are located in New York City, New York, USA. It is the tenth largest banking institution in ranking according to assets. James Dimon is the CEO and Marianne Lake is the CFO. Subsidiaries of the companies include Chase Ban, J.P. Morgan & Co, and an extensive list of other subsidiary companies scattered throughout the United States as well as the globe. It is the fourth most valuable bank as ranked by market capitalization.
5. Wells Fargo & Company Market cap: $114.677B
Wells Fargo & Company is the fourth richest bank in the world as rated by market capitalization. It is an American international bank and financial services holding company. The headquarters for the company is located in San Francisco, California. There are multiple “hub quarters” which are located at various locations throughout the United States. Wells Fargo & Company was founded by William Fargo and Henry Wells. It is the third-largest bank within the United States as ranked by assets. Subsidiaries include Wells Fargo Advisors, Wachovia, and pages of other companies that fall under the umbrella of the parent company.
6. Bank of China Market cap: $1.406T
Bank of China is a commercial bank and it is also one of the largest commercial banks in China which are state-owned. The company was founded in 1912 by the Republican government for the purpose of replacing the Daquing Bank. It is the oldest bank that is still in existence in mainland China. The headquarters are located in Beijing, China.
The key person in charge of operations is the CEO Chen Siqing, who took the post on February 13 of 2014 and is presently occupying the position with the company. As of 2016, the number of employees for Bank of China was at 310, 042. The Parent organization for this institution is Central Huijin Investment. The subsidiaries include a long list that is led by BOC International and Bank of China Insurance.
7. Bank of Communications Market cap: $353.464B
Bank of Communications, Limited was founded in 1908 and it is one of the largest banks in China as ranked by assets. It is the seventh wealthiest bank in the world as rated by market cap as of September 15 of 2017. The Bank of Communications has a very long history in the country of China. It is one of the first banks in the modern history of the country to have issued banknotes.
The headquarters of this company is located in Shanghai, China. It employs more than 80,000 workers with the key person in charge being Jiang Chaoliang. The parent organizations of the company are Central Huijin Investment taking the lead with others. Its’ subsidiaries include Bank of Communications Hong Kong Branch as the principle, along with several others.
8. Postal Savings Bank of China Market cap: $434.212B
Postal Savings Bank of China is a commercial retail bank. The institution offers the provision of basic financial services, which are aimed at small and medium sized business enterprises which are located in rural and low-income populations. PSBC has spread throughout the country of China and currently has more than 40,000 different branches to provide access to customers throughout all regions of China.
The parent organization for this institution is China Post. Its’ subsidiaries include PSBC Consumer Finance Co., Ltd., and numerous others. Postal Savings Bank of China was founded in 2007 and its’ headquarters are located in China.
9. Bank of America Corporation Market cap: $214.982B
Bank of America Corporation is an American multi-national institution that offers banking and financial services to its’ customers. BOA is ranked as the second largest bank in the United States currently, as ranked by its assets, which as of September of 2017 are $2,187 billion.
The company is currently the ninth wealthiest bank in the world as rated by market cap as a value. It is known for its excellent response to the provision of customer service, technical support and credit card support. Its subsidiaries are Bank of America Merrill Lynch, Merrill Edge and several other companies that fall under the umbrella of this parent company.
Bank of America offers eight different lines of businesses and their focus is on helping individuals to navigate through each stage of their financial business. They work with companies of all sizes from large to small, in driving the economy in a forward direction. BOA has a reputation for providing ideas, insights and institutional investor research that landed in the category of award-winning for outstanding quality. The headquarters for this institution are located in Charlotte, North Carolina.
10. HBSC Holdings PLC ADR Market cap: $99.523B
HSBC Holdings, PLC ADR is the tenth wealthiest bank in the world as ranked by market cap. The institution engages in the offer for both banking and financial services for customers. The company operates through several divisions which include: Retail banking and wealth management, commercial banking, global private banking, global banking and markets and corporate center.
The retail banking and wealth management division offers the management of finances, it works with customers in the activities necessary for the purchase of homes, saving money and making investments for the future. The commercial banking division is inclusive of working capital, payment services, term loans and the facilitation of international trade.
The Global banking and markets division mainly engages in the provision of financial products and services to institutions, governments and companies. The HBSC company was founded on January 1 of 1959. The headquarters of the institution is located in London, England in the United Kingdom.
11. Citigroup Inc., also known as Citi Market cap: $108.774B
Citigroup Inc. is the eleventh wealthiest bank in the world today. Citi is an American, multi-national investment banking and financial services institution. The headquarters are located in Manhattan, New York City, New York in the USA. The current CEO is Michael Corbat, who has held the post since October 16, 2011 to present. Subsidiaries of Citi include Citibank, Banaxex, Aeromexico and several other companies, too numerous to list here. Citigroup is the fourth largest bank in the United States when ranked by its total assets which currently top $1,792 billion.
12. Royal Bank of Canada Market cap: $97.146B
The Royal Bank of Canada is an institution that engages in the delivery of financial and banking solutions. It operates through the following divisions: Personal and commercial banking, Insurance, Wealth management, Investor and treasury services as well as capital markets. The personal and commercial banking division provides services which include retail investment businesses and auto financing. The Wealth management division offers investment services, banking, trusts, credit and in addition to this, other types of wealth management solutions for customers.
The insurance division is mainly dedicated to the provision of a wide range of insurance products. These include home, health, life, travel, auto, wealth and group as well as reinsurance products. The investor and treasury services division provides services within institutional investing clients accomplished through custodial, advisory, asset servicing, financing and other services for the purpose of safeguarding assets, maximizing liquidity and managing risk. This segment also provides short term funding and the management of liquidity.
The Capital Markets division involves the provision of services within institutional investors, both public and private companies, government and central banks, which include both corporate and investment banking, debt origination and distribution, equity, as well as structuring and trading. Royal Bank of Canada was founded in 1964 by Jeremiah Northup, George P. Mitchell, JohnTobin, William Cunard, James B. Duffus, T.C. Kinnear, Edward Kenny and J.W. Merkell. The headquarters are located in Toronto, Canada.
13. Toronto-Dominion Bank Market cap: $ 112.491B
The Toronto-Dominion Bank engages in the provision of financial products and services. The TDB operates through the following divisions of business which include: Canadian Retail, U.S. Retail and Wholesale Banking. The Canadian Retail division provides a variety of financial products and services, as well as the provision of telephone, Internet, and mobile banking services to customers.
This division mainly offers financing, investment, cash management, international trade services, and day-to-day banking needs. These are offered to both medium and large Canadian businesses. It also provides financing options to customers at point-of-sale transactions for automotive and recreational vehicle purchases through the company’s auto dealer network; credit cards; direct investing, the provision of advisement, and asset management services.
These are offered to both retail and institutional clients; and they include: home, auto, credit protection, travel, as well as life and health insurance products. They also offer credit card balance protection products through direct channels. The United States retail division offers commercial and retail banking services and in addition, offers wealth management services within the country of the United States.
The segment also offers the institution’s financial services and products which are provided through a network of retailers which have locations based along the east coast of the United States, which range from the States of Maine through Florida. These include mobile, telephone and internet banking as well as automated banking machines.
The Wholesale banking division offers a wide range of capital markets as well as investment banking and corporate banking services and products. These comprise both underwriting and the distribution of new debt and equity issues, advisement on strategic acquisitions and divestitures, as well as meeting the daily funding, trading and investment requirements to institutions, governments and companies in financial markets throughout the world. The Toronto-Dominion Banks has its headquarters located in Toronto, Canada and the institution was founded on February 1 of 1955.
14. Banco Santander S.A. ADR Market cap: $42.461B
Banco Santander SA is an institution that engages in the provision of banking services for companies, individuals and institutions. It operates throughout the following divisions: Retail banking, Real Estate operations in Spain and Global corporate banking. The retail banking division covers all levels of customers’ banking business which includes private banking.
The Santander global corporate banking division involves the coverage of global corporate banking, investment banking and markets worldwide which includes all globally managed treasuries both distribution to customers and trading. The real estate operations in Spain division is inclusive of dealing with the business of loans to customers in Spain if the activity is mainly related to the development of the real estate, equity stakes in real estate companies and foreclosed assets. The Banco Santander SA ADR company was founded on March 21 of 1857 and its headquarters are located in Madrid, Spain.
15. BNP Paribas SA Market cap: $43.68B
BNP Paribas SA is a French banking institution that engages in the provision of financial and banking services. The bank operates through retail banking and services and corporate and institutional banking business activities. The retail banking and services business provides international and domestic markets financial services.
The corporate and institutional banking business is comprised of global markets, corporate banking and securities services to customers. The BNP Paribas SA company was founded on May 23 of 2000 and it maintains its headquarters in the city of Paris, France. It was the fifteenth wealthiest bank in the world as of 2017.
16. Goldman Sachs Market cap: $72.336B
Goldman Sachs Group, Inc. engages in global investment banking, investment management and securities. The institution provides a wide range of financial services and options for financial institutions, corporations, individuals and governments.
Goldman Sachs operates through a variety of business segments as follows: Investment Banking, Investing and Lending, Institutional client services and investment management. The investment banking division maintains a focus on the provision of financial advisement services for both public sector and private sector clients throughout the world.
The institutional client services division offers facilitation services for clients in the arena of buy and sell financial products, risk management and fund-raising activities. International Investing and lending division deal with the company’s investing and relationship lending activities that covers a variety of asset classes. The investment management division provided wealth advisor and investment services. The Goldman Sachs company was founded by Markus Goldman in 1869 and its headquarters are currently located in New York, New York.
17. Lloyd’s Banking Group Market cap: $29.375B
Lloyd’s Banking Group is a retail banking company. It is a major British financial institution that has been created through the acquisition of HBOS by Lloyds TSB. This process was completed in 2009. The CEO of the institution is Antonio Horta Osorio, whom has been in the position since March 1 of 2011 and remains in the position currently.
Lloyd’s Banking Group headquarters is located in London, United Kingdom. The revenue for 2016 was $39.61 billion in Great Britain Pounds. It currently employs 75,000 workers. The subsidiaries of the institution include Lloyds Bank, Halifax, Bank of Scotland, BHOS and several others. The parent organizations of the group are Lloyd’s Bank and ESOTERIX Inc.
18. Japanese Post Bank, Co., Ltd. Market cap: $31.467B
Japanese Post Bank, Co., Ltd. is a Japanese based company that engages mainly in the business of banking. The institution operates a banking business division. It engages primarily in deposit business, securities investment business, lending business, exchange business, investment trust and counter sales of insurance products, government bonds, credit card business and intermediary business. The main services of the bank include asset and liability management, financing and fee based business.
19. Sumitomo Mitsui Financial Group, Inc. Market cap: (USD). $41.881B
Sumitomo Mitsui Financial Group, Inc. is the nineteenth wealthiest bank in the world. The institution is a Japanese bank holding and financial services company that has been established by the Sumitomo Mitsui Banking Corporation. This corporation is the second largest bank in Japan as ranked by market value. The headquarters are located in Chiyoda, Tokyo, Japan. It was founded on December 2, 2002. Key people in charge of business are Koichi Miyata and Takeshi Kunibe. Its subsidiaries include Sumitomo Mitsui Banking Corporation and numerous other financial institutions and divisions throughout the country of Japan and abroad. The total assets as of 2015 were 9.753 trillion JPY.
20. Credit Agricole SA Market Cap (USD): $23.422B
Credit Agricole SA is the twentieth wealthiest bank in the world today based upon market capitalization. The institution provides banking and financial services. It operates though the segments of French retail banking, International retail banking, specialized financial services, management and insurance, corporate center and corporate and investment banking. The French retail banking division offers financial services including baking for small businesses, farmers, individual customers, insurance and in addition offers a variety of wealth management products.
The International retail banking division provides coverage of foreign subsidiaries and investments that have to do with retail banking. The savings management and insurance divisions provide asset servicing for institutions, asset management activities, personal insurance, life insurance, credit insurance activities, and property and casualty insurance.
Private banking activities are conducted for the most part by CA Indosuez Private banking and by Credit and by Agricole subsidiaries. The specialized financial services division offers consumer financing services as well as specialized financial services which include leasing and factoring. The Specialized financial services division is the segment that handles all of the group subsidiaries which offer financial services and products to corporates, small businesses, individual customers and local authorities within the country of France and also those countries abroad.
New Income Streams For Banks
Creating a healthy bottom line is the biggest goal for most financial institutions. If your bank can’t consistently turn a profit, you’ll quickly be out of business.
Maintaining a profitable bottom line requires a consistent flow of revenue. This can be difficult, especially for financial institutions that rely on both retail banking and enterprise customers to generate revenue.
Why is that? Because 40 to 60 percent of all retail banking customers are not profitable, according to a report by Zafin. Combined with the fact enterprise customers are consistently asking for a more robust product suite with high-tech payment options, turning a profit becomes difficult. Banks can alleviate the pressure by finding new ways of generating revenue that will improve the organization’s profitability.
Here are four ways you can create new revenue streams:
Reloadable Cards
If revenue has stagnated, it may be time to reinvigorate your product offerings. A good place to start for retail customers is reloadable cards. A report published by Allied Market Research, titled, “Prepaid Card Market – Global Opportunity Analysis and Industry Forecast, 2014 – 2022” predicts the global market for reloadable cards will reach $3.6 billion in 2022.
The benefits customers receive from reloadable cards are exceptional—fraud protection, no credit risk, and spending limits—and the profits financial institutions can reap are even better.
With reloadable cards, financial institutions can charge customers a variety of fees, including a fee to purchase and use the card, and a fee to withdraw funds for PIN-based transactions. Reloadable cards can also provide depository income.
White Labeling
White labeling can be a great way to generate new revenue streams by letting bank treasury departments resell funds disbursement platforms to their business customers. This makes payments more convenient for customers by speeding up and streamlining the process.
By reselling the right platform, banks can gain a competitive advantage by offering multiple emerging payment methods, such as virtual cards and real-time payments, to business customers. These high-tech payment methods are becoming more and more popular, helping financial institutions win new customers and retain established accounts.
Mobile Device Payments
The demand for mobile payment capability has been steadily growing since early 2000. Now, with digital natives like Gen Z entering the workforce, financial institutions have an opportunity to create mobile payment strategies that focus on customer satisfaction and retention.
This is still an emerging space, but one that holds many possibilities for delivering products and services customers want and need. White labeling and reselling a funds disbursement platform, including mobile payment options, can help treasury clients in this area.
Improve Data Analytics
While not a revenue stream per se, analyzing data more effectively can help you identify new ways of increasing revenue unique to your business. For instance, if your analytics reveal many of your customers are small businesses struggling with treasury management, consider launching products and services that help.
The more you know about your consumers and the way they interact with your organization, the better equipped you’ll be to address their needs. Advanced customer data analytics will allow you to improve performance and add products in multiple areas of your financial institution, including:
- Credit revolvers
- Credit cards
- Lending programs
Thoroughly analyzing customer data can also improve your ability to target new services and products to customers who want them.
Bank as a platform
By sharing access to their own APIs and those of innovative Fintechs and third parties, banks can open up entirely new avenues to generate revenue, accelerate innovation and deliver the types of new services customers crave. A ‘bank as a platform’ approach will be a key competitive differentiator in the future of financial services – particularly at a time when banks are faced with diminishing returns from their existing portfolio.
Historically low interest rates and a squeeze on margins across the board is impacting profitability. Failure to explore new partnerships and revenue streams will make it more difficult to compete against the tech giants who could potentially cross-subsidise banking services should they decide to offer them. It’s this same approach that banks need to take – for example, spotting opportunities to cross sell holiday insurance when customers are booking travel through online partners, or a loan when customers are looking to buy a new car. The use of APIs to make these interactions as frictionless as possible for the customer will be key to their success.
Collaborate to innovate
It’s not news that banks have struggled to innovate. In a recent report from Celent, Gareth Lodge, Senior Analyst highlights that despite “significant strides” being made by banks over the past 10 years, relative to other industries over the same timeframe, they are still lagging.
Working with Fintechs, not against them, is crucial to addressing this challenge and platforms are the perfect environments to facilitate this collaboration. By providing an ecosystem for Fintechs to share ideas and work together on concepts, banks can innovate their offerings and continually create new opportunities to generate revenue and improve their business proposition.
Find New Products and Services that Appeal to Your Customers
Use your data and experiences with current customers to find areas where they’re struggling. Can you step in with a new offer that solves their problems? Options for improvement with existing customer accounts are the best new revenue streams for your financial institutions.
We’ve seen many banks succeed specifically by optimizing fee collections, delivering white-labeled products to improve customer convenience, and taking advantage of emerging payments technology. Use these revenue streams as a starting point, customizing them for what’s right for you and your customers.
How Does Open Banking Help Banks
Open banking is an initiative that allows third-party financial services companies to access users’ banking data through the use of APIs. The primary goal of open banking is to put power back into the hands of customers, enabling them to securely use third-party financial products and services that rely on banking data or functionality.
With the introduction of new regulations like the European Union’s Second Directive on Payment Services (PSD2), many banks have no choice but to open up, giving others access to their users’ data for not much in return… or so it may seem! In reality, there are plenty of strong reasons for banks to embrace open banking, with concrete financial incentives. Let’s look at six of them.
1. Compliance
Of course, the main reason banks are implementing open banking practices is compliance — or at least preparation for compliance. While the European Union’s PSD2 is the best example of a sweeping regulation that requires banks to share customer data with third parties (this is known as X2SA — Access to Account), it’s not the only one.
For example, Hong Kong has its Open API Framework, while Australia has the Consumer Data Right (CDR) act. Other significant jurisdictions are moving in the same direction: the US Treasury has recommended the introduction of financial data sharing regulations, despite the country’s hitherto market-driven approach.
How it affects the bottom line: Of course, compliance isn’t about driving additional revenue: it’s about staying in business. With that said, one could say that compliance improves profitability by avoiding unnecessary fines and fees
2. Improved Digital Agility
A major challenge of open banking is being able to share data securely, quickly, and efficiently. As a result, many banks are having to redesign their entire data architectures, often employing an API-based microservices approach to make data more accessible. Greater digital agility, then, is both a necessity and benefit of open banking.
In turn, improved digital agility has its benefits. Not only does open banking improve security and transparency, but it also makes it easier for banks to leverage their own data internally — e.g. for service personalization or to create frontend applications — where it may have been impractical, or even impossible, to do so previously.
How it affects the bottom line: An improved digital infrastructure enables data to be better used internally to improve the customer experience, thereby increasing customer lifetime value.
3. Premium API Products
One particularly exciting benefit of open banking is the potential to create new, revenue-generating API products with relative ease. For an example, look no further than Nordea: they’ve used the open banking shift as a springboard from which to create paid banking APIs for their corporate customers. Offering API-driven payments, instant reporting, and various foreign exchange tools, these “Premium” APIs go well beyond compliance, building on the hard work that was involved in opening up their systems for open banking.
How it affects the bottom line: By developing and selling access to new API products, banks are able to create additional direct revenue streams. These premium APIs can also be used as up-sells or cross-sells for other banking products (such as certain corporate accounts).
4. Increased Customer Satisfaction
Open banking gives customers huge amounts of freedom as to the number and scope of financial services available to them. On the one hand, this appears to be a clear negative for banks, as it allows third-party organizations to capitalize on user data, where previously only they could.
However, a greater selection of financial service integrations — whether or not they are the bank’s own — ultimately improves the customer’s banking experience, making them less likely to seek alternatives. As they say, a rising tide lifts all boats!
How it affects the bottom line: Since the customer is more satisfied with their banking experience, they are less likely to look for alternatives. This increases customer lifetime value, improving long-term profitability in a predictable way.
5. Potential for Collaboration
As mentioned earlier, open banking is designed to make it possible for third-party financial services companies to gain access to customer data. If banks are willing to take this a step further, they can actively assist these third-party companies in doing so for a whole host of benefits.
For example, banks can offer additional functionality, dedicated support, or even developmental collaboration to chosen third parties. In exchange, these third parties can return the favor with various non-monetary offerings, such as additional product functionality for the bank in question or cross-branding.
How it affects the bottom line: By building collaborative relationships with third-party financial services companies, banks are able to create unique value propositions and employ creative marketing strategies, thereby winning new customers.
6. Wider Client Base
Until now, we’ve focused on the benefits of sharing data with others. However, it’s important to recognize that open banking is a two-way street: in other words, it could allow banks to gain access to user data from other participating financial institutions (especially other banks). This creates a massive opportunity for banks to create their own integration-based financial products and services.
How it affects the bottom line: Whereas banks could previously only offer additional financial products and services contingent on banking data to their own customers, they can now serve customers of other banks, with the potential for significantly more revenue.
It may be compliance that has pushed banks to invest in open banking, but there’s no doubt that the movement has numerous other benefits with tangible financial impacts. Many of these benefits, such as direct improvements to customer satisfaction and digital agility, resulting in increased customer lifetime value. However, open banking also improves security, opens new doors for collaboration, and allows banks to make bigger plays with additional financial products and services of their own.
Finally
There is a growing recognition that a ‘bank-as-a-platform’ approach will play a major role in the industry. Those banks with the vision to capitalize on this new era of platform to innovate their business model and uncover new sustainable revenue streams will be best placed to compete, collaborate and thrive in the future, alongside the digital giants.
