A quiet revolution is occurring in the methods and composition of the global banking market as tech-savvy lenders in developing countries grab a major share of the pie, according to an Economist Intelligence Unit report.
Local banks in the emerging markets of Asia, Latin America, and Africa - such as Brazil's Banco Bradesco, India's HDFC and Kenya's Equity Bank and M-Pesa - are expanding rapidly, with plenty of scope for continued growth on their home turf.
Only eight years ago, rich-country banking systems accounted for over 90% of worldwide industry assets, according to EIU data. The financial crisis of 2008-09 marked the beginning of a global shift in the industry and developing-country lenders now account for about 24% of global banking assets, and this share will increase to over 35% by 2016.
This expansion is set to revolutionise banking methods, says the report, 'beyond branches: innovations in emerging-market banking', as innovative business models developed for lower-income markets are deployed across the developed world.
Branded bank branches will become increasingly irrelevant, as financial transactions take place more frequently on mobile phones, over the Internet, in partner retail locations and even through home visits. A gradual decline in the use of cash will also make branches and ATMs of steadily declining importance.
Mobile banking and payments have received the most attention, particularly in Africa, but the EIU highlights other technological breakthroughs as well, such as widespread wireless Internet access, which now allows banks to reconcile financial transactions as they take deposits, honour withdrawals and grant loans nearly anywhere.
Low-cost business models are another key driver, argues the report, with financial firms in developing countries accustomed to serving many low-balance account holders. To do so, they have created appropriate systems for customer service and account maintenance, often saving money by reducing their own costs for expensive staff and locations, instead relying more heavily on technology.
Jason Karaian, the report's author, says: "Tapping into underdeveloped markets has required a greater use of mobile and virtual banking. Now, as these new actors take to the global banking stage, they are set to transform the way the industry operates worldwide. This is both an opportunity and a major threat to the existing giants of world retail banking."