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Тема 1. RECENT DEVELOPMENTS IN BANKING
1. Make sure you are familiar with these words and phrases: cash, opportunity, deregulation, insurance, community, database, customer, ownership, profitability, safety, digital.
2.Before you read the text below, discuss these questions:
1. What technological innovation contributed to changing the modern banking industry?
2. Can non-banks compete with usual banks nowadays?
3. Are traditional banks so popular nowadays as before? Why?
Recent developments in banking
At the beginning of the 21st century, the biggest banks in the industrial world have become complex financial organizations that offer a wide variety of services to international markets and control billions of dollars in cash and assets. Supported by the latest technology, banks are working to identify new business niches, to develop customized services, to implement innovative strategies and to capture new market opportunities. With further globalization, consolidation, deregulation and diversification of the financial industry, the banking sector will become even more complex.
Over the past decade there has been an increasing convergence between the activities of investment and commercial banks, because of the deregulation of the financial sector. Today, some investment and commercial banking institutions compete directly in money market operations, private placements, project finance, bonds underwriting and financial advisory work.
Furthermore, the modern banking industry has brought greater business diversification. Some banks in the industrialized world are entering into investments, underwriting of securities, portfolio management and the insurance businesses. Taken together, these changes have made banks an even more important entity in the global business community.
The Banking Industry has evolved tremendously over a period of time. Nowadays, modern banking sector is doing away with its traditional methods and shifting focus to a more advanced and digitally connected network. As we all know, banking, in recent years, is not all about depositing and taking loans but much more. It will not be surprising to say that the biggest competition that banks might be facing will not be from other banks but from non-banks like Tech companies (PayPal, Google, Amazon), Telecom Companies (AT&T, T-Mobile) or even Wholesale/retail stores (Costco, Wal-Mart). But a complete replacement of banking functions by these industries seems like a distant dream. The boundaries between various industries will get thinner if banking services through non-banking outlets becomes popular. T-Mobile has already created a stir by introducing the prepaid checking account called ‘Mobile Money’. The T-Mobile Visa Prepaid Card can be used to make online, phone and mail order purchases, worldwide. Such innovations will raise competition for banks, especially when they are still trying to adapt to the ‘new digital revolution’.
Digital Revolution, undoubtedly, surpasses most of the recent developments in banking history. Traditional banking is becoming practically non-existent, as banks get more and more digitally equipped. The revolution will surpass even the trouble of taking out cash through ATMs. One would even skip writing physical checks as P2P technology gains momentum.
So, what exactly is P2P technology?
Well, P2P technology enables an accountholder to transfer money within seconds to another accountholder either online or through his mobile device. Big banks like JP Morgan Chase, Wells Fargo and Bank of America are already using this technology. This technology is slowly gaining popularity as more and more customers are finding mobile payments simpler and quicker.
Untested and one of the biggest innovation in the banking technology is the new ‘watch bank’. Straight from the pocket on to the wrist, it’s as stress-free and convenient as it can get. The market is still at its nascent stage with many customers still using internet banking through mobile phones. But if this technology picks up, then banks will need to create applications for wrist watches to sustain themselves in the rigorous banking competition.
In future banks will use richer analytical database to gain insights to retain old customers and also create new customers keeping in mind the reasons why one bank is preferred over the others. Retail banking leaders can benefit from these positive trends by using predictive analytics and customer data (customer sentiment, demographic data, product ownership information) to categorize high-value or target customers to help attract comparable prospects that could generate more revenues. Benefits of using banking analytics are many: increase transparency and understanding the degree of risk exposure, measure customer and product profitability, improve performance and make informed decisions.
Banks are gradually getting an image makeover and this effort will only be worth it if customers are guaranteed the safety and promptness in banking services. Whether this shift will bring down cost for banks or not is another question altogether. The new technologies will come with a price too. One would think that since banks will get digital, efficiency might get a bit compromised. Updating technology will definitely be expensive and competition especially by non-banks could get intense. Moreover, with technology, banks would also need to digitize their employees and not just the branch. The employment part of the banking sector could be a cause of serious concern. There could be elimination of banking jobs and closure of many branches as the banking sector gets more digital, simply because more customers would conduct their banking online or through phone.
Study the vocabulary list:
аssets n- активы
consolidation n- укрепление, консолидация
diversification n – разнообразие, многообразие
convergence n– сближение, конвергенция
bonds n- облигации
entity n– организация, объект
purchase n– покупка, приобретение
evolve v - развиваться
tremendously adv–чрезвычайно
surpass v – превосходить, превышать
equipped adj– оснащенный, оборудованный
accountholder n– владелец счета
retain v– сохранять, удерживать
revenue n– доходы
rigorous adj – неумолимый, суровый
sustain v– выдерживать, поддерживать
transparence n- прозрачность
promptness n– быстрота, своевременность
shift n– изменение, сдвиг
efficiency n– эффективность, продуктивность
concern n– беспокойство, забота
branch n– филиал, отделение
1. Practice reading the following words and collocations.
a) Variety, assets, niches, globalization, implement, capture, diversification, convergence, tremendously, entity; surpass, nascent, rigorous; sustain; transparency.
b) Increasing convergence; underwriting of securities; various industries; distant dream; raise competition; digitally equipped; gain momentum; within seconds; nascent stage; wrist watches; gain insights.
c) Develop customized services; implement innovative strategies; through non-banking outlets; prepaid checking account; mail order purchases; categorize target customer; degree of risk exposure.
2. Find in the text English equivalents for the following:
Предлагают широкий спектр услуг; реализовывать инновационные стратегии; открыто конкурируют; за последние годы; брать кредит; стираются границы между; повышать конкуренцию; создавать приложения; набирает обороты; получить представление; удерживать старых клиентов; вызывает серьезные опасения, сокращение рабочих банковских мест.
3.Give the most suitable Russian equivalents for the following expressions:
Сustomized services; bonds underwriting; financial advisory work; distant dream; mail-order purchases; created a stir; take out cash through ATM; at its nascent stage; increase transparency; make informed decisions; target customers; updating technology; to digitize employees; closure of branches.
4. Match the following words and phrases to make complete expressions from the text:
A
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corporate commercial real securities digitally transfer mobile predictive customer demographic generate |
sentiment payment data equipped loans clients estate analytics money underwriting revenue |
B
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complex wide product cause of measure money |
serious product financial variety market variety |
of services concern information profitability organization operations |
1. Match the following words with their synonyms in the brackets: Revenue, cash, cause, loan, diversification, branch, global (income, lending, affiliate, world, variety, money, reason).
6. Consult your dictionary and give the Russian equivalents for the following:
Market: market share, stock market, market research, flea market, black market, target market, market value, capital market, market price, labor market
Banking: online banking, retail banking, investment banking, banking system, banking services, home banking, Internet banking, banking sector, banking account, branch banking
Investment: foreign investment, return on investment, foreign direct investment, capital investment, investment bank, investment banking, investment banker, investment income, investment grade, investment company
Customer: customer care, customer services, customer base, potential customer, customer profile, regular customer, prospective customer, know your customer, retail customer
Business: business call, business centre, business efficiency exhibition, business package, business card, business equipment, business school, business address
7. Match the following words and phrases with the correct definition from the list below:
compete, management, demographic, benefit, deposit, portfolio, non-bank, sector, ATM
1. the process of dealing with or controlling things or people.
2. receive an advantage; profit; gain.
3. a financial institution that is not a bank.
4. the total collections of investment
5. strive to gain or win something by defeating or establishing superiority over others who are trying to do the same.
6. a sum of money placed or kept in a bank account, usually to gain interest.
7. an area of the economy, e.g. oil, pharmaceuticals, etc.
8. relating to the structure of populations.
9. machine which allows money to be taken out of a bank account when a special card is inserted and special instructions given.
8.Complete the sentences with the words from the box.
profit, deposits, payment, customers, organizations,
loan, policy
1. A bank ………….. is a specified sum of money to an individual or business (the borrower by a commercial bank, saving bank, finance house, building society or another financial institution.
2. The public generally holds its …………….. with banks in the form of accounts.
3. He was appointed managing director with the assignment to improve the company`s …………..
4. A demand note is sent automatically when ………….. is late.
5. IBM holds one of the main leading positions in the world supplying trade …............................ and stores with electronic systems.
6. The equipment will help in conducting a flexible price …………… and increasing the commodity circulation of shops.
7. Groups of banks are setting up automatic teller machine networks for the …………………… to use their debit cards to withdraw cash, transfer funds and check balances in other states.
9.Translate into Russian.
1. When a bank makes a loan, it is uncertain about whether the loan will be repaid.
2. In the case of individual borrowers banks use such signals as length of time in a job, ownership of a home, marital status, age.
3. Technological innovations and increased competition in the face of deregulation are changing the face of American banking.
4. The Bank of England is the central bank of the United Kingdom. Very generally, a central bank is ultimately responsible for the organisation of its country`s official monetary and financial policies.
5. The origin of the Bank of England can be traced back to 1694 when it received its charter as a joint stock company. The Bank, in fact, was established in order to improve the fund raising capability of the British government.
6. The Banking Act of 1979 required the Bank of England to publish lists of recognised banks.
7. If you decide to deposit some money in a bank you will have to choose between either deposit account or a current account.
8. Cheque is a printed piece of paper that you write an amount of money on, sign and use instead of money to pay for things.
9. The World Bank is the world`s foremost intergovernmental organization concerned with the external financing of the economic growth of developing countries. The official title of the institution in the International Bank for Reconstruction and Development (IBRD).
10. Software developers can produce solutions which are tailored to the customer.
10.Answer the questions:
1. What changes took place in the banking industry?
2. What has caused the convergence between the activities of commercial and investment banks?
3. Why is the banking industry doing away with its traditional methods?
4. Do modern banks face fierce competition from non-banks?
5. What is P2P technology and why is it so popular?
6. Which banks already used P2P technology?
7. What is one of the biggest but untested innovation in the banking technology?
8. What are the main advantages of using banking analytics?
9. What are the drawbacks of the new technologies in the banking sector?
11.Say if the statements are true or false.
1. Recently there has been an increasing convergence between the activities of investment and commercial banks.
2. Modern banking sector stick to its traditional methods nowadays.
3. Banking is all about depositing and taking loans.
4. P2P enables an accountholder to transfer money within seconds to another accountholder online or using his mobile device.
5. Analytical database let retain old customers and create new ones.
6. Customer data implies only customer sentiment.
7. New technologies have some drawbacks too.
8. Updating technology will definitely be cheap and available for most banks.
12. Say what you have learnt from the text about
• Recent changes in the banking system
• Digital revolution in the banking sector
• Future perspective of bank development
13. Read the dialogue between a bank manager and one of her customers.
A: We`ve been short of space for sometime, now and finally, we`ve decided we must move to bigger premises. We`ve looked at a number of properties in the area and come down in favour of this one, in the centre of town.
B: How much are they asking for it?
A: $300,000. But we think we`ll get it for $280,000.
B: I see. That’s a major investment for a firm of your size.
A: We realise that, but we see it as a valuable resource for the business, which will help us to expand, and at the same time a sound investment.
B: I understand. Are you looking for a loan to cover the total price?
A: Well, we`ve considered that. We could raise $50,000 by cutting back on management bonuses and one or two investment projects.
B: But ideally you`d like to borrow the full $300, 000?
A: That`s right.
B: What sort of term were you thinking of?
A: Well, either fifteen or twenty years. Could you give me a quote for both terms?
B: Yes, just a moment… I`ll check my tables. Well, over fifteen years over fully fluctuating interest it`d be $3.500 a month, that`s based on 2 per cent above current base rate. And over twenty years it`d be $3,000 a month.
A: Yes, that`s roughly what we calculated. I think we`d prefer the twenty year loan.
B: Right, let`s come back to that. Have you brought some up-to-date figures for me?
A: Yes, I have. As you can see, turnover is up on last year by about 20 per cent and profits look like being even better – about 25 per cent higher than last year. That means a net profit of around $30,000.
B: That sounds very healthy. Have you done any projections?
A: Yes, we have. As you know, it`s difficult to forecast accurately in our line of business, but we reckon turnover should continue to increase at this sort of rate for the next five years and our margins, if anything, should get better.
B: Good, perhaps, you can leave the figures with me.
A: Of course.
B: What worries me is your cash flow – at present you`re operating at close to the limit of your $50,000 facility – in fact, sometimes you`re straying the wrong side of it. Do you see any improvement in that area?
A: Well, as you know, on our line of business, we`re always going to have a cash flow problem. As we expand, it`s difficult to avoid pushing up the need for working capital.
B: I realize that, but you`re thinking of taking on an additional major drain on cash. On the present figures, you may well have problems financing the payments.
A: We`re confident, we can get the sales to justify this investment. Also I`m sure you`ll find the security on the building is more than enough. We`ve had the property valued and been told it`s worth at least $350,000. On top of that, our fixed assets stand as $75,000 on the last balance sheet.
B: That`s true – but what worries me is your current liabilities – to the bank and also your current creditors. According to these figures, that stands as nearly $90,000.
Complete the information according to the dialogue.
Reason for loan:__________________________________
Amount of loan:___________________________________
Term of loan:_____________________________________
Interest rate:______________________________________
Current instalment:________________________________
Security type:_____________________________________
Market value:______________________________________
Turnover:_________________________________________
Profits:___________________________________________
Assets:___________________________________________
Liabilities:________________________________________
5. Translate into English:
1. При поддержке новейших технологий, банки работают над разработкой индивидуальных услуг и реализацией инновационных стратегий. 2. Такие нововведения будут способствовать повышению конкуренцию среди банков. 3. Традиционные банковские операции практически не осуществляются, так как банки все чаще приобретают цифровой формат. 4. Безусловно, новые технологии будут дорогостоящими. 5. Многие клиенты осуществляют банковские операции онлайн или используя свои мобильные устройства. 6. Если эту инновацию подхватят, банкам придется создавать приложение для наручных часов, чтобы удержаться на плаву в условиях жесткой конкуренции. 7.Цифровая революция, несомненно, более значима по сравнению с большинством последних событий в истории банковского дела. 8.Эти отрасли в любом случае не способны осуществлять все банковские функции. 9. Границы между различными отраслями промышленности будут стираться, если банковские услуги через небанковские торговые точки приобретут популярность. 10.Маркетинговые исследования основаны на информации. На фирмах создаются так называемые «Маркетинговые информационные системы», которые представляют собой расширенные банки данных, которые собирают, аккумулируют и анализируют всю внутреннюю и внешнюю информацию, которая интересует данную фирму и позволяет руководству планировать, анализировать и оценивать деятельность фирмы и вовремя реагировать на все изменения.
6. Work in groups.
Role-play
Three different groups of unexperienced young business people in a small town require capital for their businesses. They all apply to the local branch of Megabank. The three groups of would-be borrowers must develop financial arguments that they think will convince the bankers. The group preparing the role of the bankers has to think of questions about the viability of the future businesses: will they be successful, and why? Or, why might they not be successful?
The roles are:
1. A junior manager at the bank , responsible for new local small businesses. To lend or not to lend , that is the question.
2. A group of young people, who want to open a small specialist shop selling CDs of black music – jazz, soul, funk, reggae, rap, house, and any new trends.
3. A group of young people, who want to buy existing take-away pizza business (the lease on the premises, the kitchens, the delivery scooters, and so on).
The business if profitable, and well-known in the town, with loyal customers. The new owners can keep the same telephone number, and either keep or change the name.
• A group of students, who already operate a part-time computing consultancy service, advising small businesses on what hardware and software to buy, and how to set up an Internet home page. They want to borrow money to buy more computers for themselves, on which to try out elaborate new software programs.
You have to prepare your questions or arguments in a group, after which one of two members of the groups of borrowers will be chosen to negotiate with the bankers.\
7. Writing
Comment on the following quotation by John F. Kennedy: “Change is the law of life. And those who look only to the past or present are certain to miss the future.’
Write on the following topic: “Banks of future”.