We understand that not all that much changes from day to day in the life of financial institution management. Sure, new regulations like CECL come along and require new data collection and analysis techniques. New methods for Asset Liability Management (ALM) analysis are released and considered occasionally. However, in general, in the span of 24 hours, there aren’t all that many major changes to our work environment. As such, many of us have probably become accustomed to how things are and how things operate. We thought it would therefore be interesting to look at some of the differences between how things operate here in the United States and other parts of the world.
According to news site QZ.com, money transfers via mobile phone are very popular in Sub-Saharan Africa. In fact, it is estimated that this region accounted for 45.6% of all non-bank mobile money transfers WORLDWIDE in 2018. In 2018, this population was estimated to be around 1 billion people, so it appears that 12% of the earth’s inhabitants are making nearly half of the money transfers. All this while it is estimated that 57% of adults in Africa aren’t even participating in the formal financial system. It must be all of the outcast princes who need my social security number in order to reclaim their throne…
In Switzerland, a number of the larger banks go a step further than our traditional US bank lobby vaults. They own and operate actual underground bunkers, mostly in the foothills of the Swiss Alps, designed for storing gold bars, diamonds and other items. Banks have actually been the largest sector of purchasers of these former military bunkers, as they purchased 6 of the 10 bunkers that were sold by the Swiss Defense Department during the 1980’s and 1990’s. Some of these facilities are accessible only via aircraft, and are used exclusively by customers that pass a thorough security vetting. This seems to go a step or two beyond dual control…
China appears to have only started a credit rating system for individuals in the 2000’s. This is probably part of the reason that as of 2002, between 21 and 26% of the loans at China’s largest four banks were rated as “non-performing”. It is also estimated that as of 2009, China had about 1.89 billion bank cards in circulation. Of those, 92% were debit cards, while the rest (about 150 million cards) were credit cards. Research from VISA shows that the average purchase in China was around $253 US dollars, as they typically used their cards to purchase homes, vehicles and home appliances. For comparison, the average credit card purchase in the US is about $164. I must be bringing down the average when I stop at Dunkin’ Donuts…
Meanwhile, Islamic finance is one of the fastest growing portions of the worldwide financial system. Of the top 100 Islamic banks, approximately 40% are located in Iran. According to research group Asian Banker in 2009, “Iranian banks are the predominant Islamic banking players, holding seven out of the top 10 ranks.” Meanwhile, as recently as June of 2016, bankers in Iran agreed to cap the interest rate paid on one-year deposits at 15%, reducing it from 18%. Shorter-termed deposit rates are in the 10-14% range.
This is made even more interesting based on the fact that many in the Islamic culture follow the sharia-compliant finance rules. These rules prohibit charging interest on loans in the manner we’re accustomed to in the USA. For example, one method of giving a loan to a client without technically charging interest is in the case of a client desiring to borrow $1,000 cash. The bank would purchase $1,100 of a commodity and the client would purchase the commodity from the bank for $1,100 on credit to be repaid in 12 months. The client would then resell the commodity back to the bank immediately for $1,000 cash, and the bank then resells the commodity back to the initial supplier. It sounds like the Islamic banking arena may need to work with the Swiss on storage techniques…
Lastly, while technically not another area of the world, let’s talk about the financial habits of millennials here in the USA (although perhaps they are from another area of the world…). According to a recent study by CCG Catalyst, 46% of them use checkbooks, which is the same number who use digital banking to pay bills online. Approximately 39% use remote deposit capture on their mobile phones. The truly staggering number, though, is that 91% of millennials are users of PayPal. This must be at least part of the reason that PayPal was ranked 222nd on the Fortune 500 as of 2018.
Things certainly operate differently around the world, and even in different age groups here in the United States. While we may not judge which practices are the best in the long run, we’re certainly all operating within our own personal “normal.”
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