FINANCIAL SERVICES

Financial services firms are facing an unprecedented range of strategic challenges, both from within and outside the industry. Consumer behaviors and financial needs are changing as a result of demographic shifts, social change, and the acceptance of new technology as a means of delivering financial services. The availability of data and the resulting ability to understand customers better is increasing rapidly, inspiring a move away from product-centric approaches and toward more customer-centric models. Traditional business models are being disrupted directly by these trends, and by the emergence of the new fintech models, they enable.

Political events such as Brexit, and (new and existing) restrictions on international capital flows, are likely to alter the natural evolution of global markets and change how international firms do business across borders. Regulation is becoming increasingly proactive and detailed in many jurisdictions.

A decade after the onset of the global financial crisis, its aftereffects persist in the form of historically low-interest rates and an ongoing lack of trust in the major traditional financial services brands. These challenges are forcing established companies to think strategically about where to invest and which new avenues of growth they may want to explore. They also create opportunities for disruptors that can offer customers both a new ethos and a new approach to delivering financial products and services.

The market and regulatory landscape in which retail and commercial banks operate continue to present a number of strategic opportunities and threats. Post-financial crisis, large banks had to address material legacy issues, clean up their balance sheets and bear the costs of new regulation, including significantly tighter prudential regulation through capital adequacy rules, while facing the pressures of a “lower for longer” interest rate environment. These issues continue to be relevant, but the focus has now shifted toward adapting to the new world of “open banking” and big (or at least bigger) data and investing heavily in technology to respond to nimbler, innovative models adopted by challenger banks and fintech players.

Those banks adopting “challenger” models face important strategic choices of their own, principally:

• “Where to play” against larger institutions to generate attractive returns
• “How to win” with compelling propositions, often tech-enabled
• “How to configure” their business model, including routes to market

In addition, banks of all sizes face the challenge of changing consumer behavior, driven by a combination of significant and increasing customer preferences for digital means of managing their finances and ongoing low engagement of most customers combined with a loss of trust in major brands.

TNG helps financial institutions of all sizes navigate this environment and achieve tangible results in terms of growth and shareholder returns.

How we support

Our clients in the banking sector include financial institutions large and small, brokers and other intermediaries for banking products, and providers of critical services to banks, including services such as staffing, regulatory compliance, and technology solutions.

Our banking team offers an in-depth understanding of the key challenges and factors that drive value in banking to:

• Provide certainty about their participation strategies: Clients turn to us to navigate uncertainty and for a bespoke assessment of where they should play ― geographically, in a value chain, across customer segments, or across product categories. The questions we answer are often unique for our clients and their circumstances and include everything from “What are the most attractive and sustainable market niches in SME lending?,” “Should we further develop our direct proposition for mortgages?” and “How can we differentiate our current account proposition?” through to “What will be the real impact of fintech models trying to disrupt our business model, and how should we respond?”
   
• Help them win: Clients appreciate our distinctive and value-driven analytical approach that complements our deep sector knowledge. We bring these to bear in helping our clients win and grow in their respective markets through optimizing their routes to market, helping them improve their pricing or customer origination or retention capabilities, creating or enhancing their product propositions, and improving their competitive positioning to gain share.
  Investors, in particular, look to us to help identify the growth levers and uncover the potential that lies within banking businesses in which they seek to invest, and help realize the potential in their portfolio companies.
   
• Bring their strategies to life: Clients look to TNG to help provide pragmatic support in aligning their business and people toward a common goal. Our work in this space involves the definition and implementation of target operating models, guidance on the role of technology within banking businesses, development and alignment of incentive mechanisms for front-line staff, and unlocking of opportunities for performance improvement as business models evolve.

Debt management (debt purchase and debt servicing) has developed into an important service industry to all companies that offer unsecured credit to consumers (e.g., lenders, telecommunication providers, utility companies, insurance providers, eCommerce providers, and publishers). More recently, debt sales have been deployed as a management tool by lenders in other asset classes, in particular secured lending, SME lending, and other commercial loans.

Debt management is currently a series of individual domestic markets due to country-specific regulations and vendor behaviors, but significant cross-border consolidation has created a quasi-European market. As a result, all leading providers now operate across multiple countries and increasingly compete for the same investment opportunities.

Now an established industry and an accepted risk by the capital markets, leading European providers predominantly finance themselves either through public listings and/or public bonds, which has reduced their funding cost significantly.

At the same time, providers deploy data warehouses and sophisticated pricing tools and analytics to maximize recovery rates and optimize operational efficiency. These effects, combined with ambitious growth plans, have created “sellers’ markets” across Europe, characterized by declining profitability, very keen pricing, and stern competition for portfolios in all asset classes (unsecured, secured, and commercial).

How we support

This business environment requires domestic and multicounty providers to respond to a number of vital strategic and operational challenges in order to achieve their strategic goals, maximize value for stakeholders, create viable investment opportunities and, last but not least, position themselves for the emerging “end game” in European debt management.

TNG works with clients to provide an empirical, fact-based and independent perspective, which provides stakeholders with strategic insight and practical recommendations. Our rigorous approach is trusted by finance providers, resulting in confidence from banks and maximum value for shareholders.We have advised management teams and investors in debt management for over 15 years and have an unrivaled understanding of trends and dynamics in European debt management markets, in terms of debt flow, regulation and competition.

Key questions we address include:

• Is our current strategic position tenable in this fast-moving and fiercely competitive European environment? What strategic and operational plans are required to achieve the short- and medium-term strategic goals of our shareholders, management and staff?
• In which countries should we be operating, including the immature markets, and what services should we be offering, e.g., purchase vs. debt servicing?
• Which end markets should we be focusing on, e.g., financial services vs. utilities?
• Which asset classes should we be servicing, e.g., unsecured consumer debt, secured consumer debt, SME, or commercial debt?
• What IT systems, capabilities, and back office do we need to meet creditors’ and debtors’ needs?

The wealth management, investment management and life insurance industries across the Western world are in a state of seismic change, just as the wealthiest generation of our times ― the baby boomers ― enters retirement. Combined with the needs of this aging population, regulation in all guises ― including RDR and pension freedoms in the U.K., MiFID II and Solvency II across Europe, and the Fiduciary Rule in the U.S. ― is impacting the nature of permissible business models, distribution and service propositions.

This is providing opportunities for our wealth and investment management clients to embrace discontinuities and step-change their participation in one of the most attractive sectors within financial services. Our clients also continue to explore opportunities both in pensions, including DB and DC pensions for the retired population, and in technology enabled “Robo” solutions for millennials. Clients turn to TNG to provide clarity and strategic support in their search for sustainable business models and profitable growth.

How we support

We work with participants across the investments and life insurance value chain, providing in-depth experience in working with discretionary wealth managers, financial advisory firms (IFAs, RIAs), investment platforms (B2B and B2C), open/closed book life insurance companies, asset managers and funeral plans providers. Our clients also include several important service providers in this sector, including trust services, pension administration, tax-efficient wrap providers, technology providers, and actuarial consultancies. We have broad-based international coverage across the sector.

Our experienced team offers a profound, holistic, and deep understanding of the market context, key business challenges, and value levers in the investment industry. Our approach is bespoke, often complemented by an independent perspective of the external environment in which companies operate. We work with senior leadership teams, boards, and investors to:

• Develop organic growth strategies: Challenges center around creating winning and future-proof business models that help win new clients, both through expanding into new markets and gaining market share. Questions we address include everything from “Which customer segments should we target and how?” “How should our routes to market evolve in light of regulatory change?” “Should we be a vertically integrated investment firm?” “How do we continue to grow on an organic basis?” and “What does it take to win against our competitors?” through to “Who could be the winners and losers as new competing products grow, and what does this mean for our business?”
   
• Develop and assist in executing inorganic growth strategies: We assist both corporate and private equity clients in the full life cycle of investments in these markets ― from framing the investment thesis and supporting the commercial assessment of the opportunity at acquisition, including synergy assessment, to creating value enhancement strategies for portfolio companies and helping position businesses for success at the sale.
• Optimize businesses for success: We help our clients maximize the value within their businesses, including meaningful and actionable customer segmentation, proposition design, pricing structure reviews, cost-to-serve assessment and optimization, and the appropriate leverage of technology to drive business improvement. Our approach is fact-based and uses data and analytical approaches to uncover value that is uncommon in the wealth management industry.

There are multiple reasons why high street banks may not wish to lend to potential retail or business customers that apply to them for their borrowing needs. In the near-prime and subprime sectors, these include poor or little/no credit history, insufficient income, and over-indebtedness. In nonstandard prime lending, these can include complex circumstances such as multiple sources of income or volatile earnings, unusual assets acting as security, and a range of other causes for the underwriting process to become more onerous than it is in standard situations.

These needs are served by a range of nonstandard or specialist lenders with relevant skills and expertise to address them profitably over the cycle, including bespoke processes and data sources to bring the additional depth and detail required to assess risk in these circumstances. In common with other financial services businesses, specialist lenders are facing a range of tactical and strategic issues, including changing customer behavior; the emergence of new technology and data sources, including some early instances of big data; and increasingly interventionist customer-focused regulatory approaches. The industry has also attracted substantial new investment and capital in the past few years, leading to in the intensification of competition and pressures on margins.

More customer-centric approaches, including multiproduct offerings, are also emerging. Banks are expanding their risk appetite and entering or re-entering areas that were previously the preserve of specialist lenders. The potential impact of a future economic downturn is now coming into sharper focus following a relatively long period of positive macroeconomic circumstances in many jurisdictions, especially for those businesses that were established after the global financial crisis and lack a through-the-cycle track record. These circumstances create a range of challenges and opportunities for industry participants and investors alike.

How we support

We provide specialist lenders and investors in the industry with a comprehensive range of strategic and transaction advisory services, including:

• Classic strategy review and development: We help our clients review, refine or develop their overarching corporate or business unit strategies. This starts from the highest-level goal setting, definition of vision and mission, setting of risk appetite, and other constraints, and proceeds to support “where to play” choices in terms of industry sectors or product categories, geographies, stages in the value chain (e.g., broking vs. underwriting), customer segments, and channels.
• New market entry strategy, and new product and service development: We help our clients expand into new geographies and market segments. This includes mature and emerging geographical markets, consumer and business/commercial markets, mainstream and niche product areas, direct and intermediated markets, and new, innovative markets enabled by the rapid changes that are ongoing in financial services. Our customer-centric approach to developing market-ready solutions is based on detailed customer segmentation analysis and assessment of optimal price points to support the product/service proposition. Our market entry strategies for clients open the door to growth and long-term value creation, with a proven track record of success.
• Identification and execution of value-creating transactions: We support our clients at every stage of the deal lifecycle, from evaluation to execution to integration, acting in both buy-side and sell-side roles. In a rapidly changing market landscape, we work with our clients to create and deliver on innovative investment theses based on an in-depth understanding of the underlying markets and their competitive dynamics, customers’ preferences and behaviors, and the specific differentiating characteristics of the asset or assets under consideration.
• Optimization of operations and configuration choices: We work closely with our clients to optimize processes, operations, and organizational structures across the specialist lending value chain. Frequent topics include commercial effectiveness, incentives, and operating model design, including a detailed assessment of the capabilities required to turn a “paper strategy” into practical success. Our work for clients has increased productivity and contributed to top-and-bottom-line growth across a wide range of specialist lending subsegments.

The property and casualty insurance industry continues to navigate dramatic changes through the forces of technology, regulation, structural overcapacity, and challenged investment returns. Across mass market and niche areas, and across personal, commercial, and specialist lines, organizations throughout the insurance value chain are grappling with the implications of these changes ― from existential considerations to digital transformation, changing consumer behaviors, the evolution of distribution models and industry consolidation, an increasing regulatory squeeze, participation choices in various stages of a changing value chain, and a renewed focus on customer-centered thinking. In this challenging environment, our clients turn to us to provide clarity and strategic support in their search for both growth and business resilience.

How we support

Our experience spans the insurance value chain. We work with brokers/agents, MGAs, insurers, reinsurers, claims management companies, and technology and distribution platforms. Clients range in size from small insurance players to the largest global P&C insurers.

Our experienced team offers a profound, holistic, and deep understanding of the key business challenges and value levers in insurance and works with senior leadership teams, boards and investors to:

• Provide certainty about their participation strategies: Clients turn to us to navigate uncertainty and for a bespoke assessment of where they should play and grow ― geographically, in a value chain, across customer segments, or across product categories. The questions we answer are often unique for our clients and their circumstances and include everything from “What should our product portfolio be and should we continue to operate in the personal lines motor space?,” “Where do we need to be located to protect our origination and grow our business?” and “Should we be a multiniche player or a mass market player?” through to “Who could be the winners and losers as the industry evolves, and what does this mean for the value chain and for the strategy of our business?”
   
• Help them win: Clients appreciate our distinctive and value-driven analytical approach, which complements our deep sector knowledge. We bring these to bear in helping our clients win and grow in their respective markets through optimizing their distribution strategy, helping them improve their pricing or customer origination or retention capabilities, creating or enhancing their products and propositions, and improving their competitive positioning to gain share in low-growth insurance markets. Investors, in particular, look to us to help identify the growth levers and uncover the potential that lies within insurance businesses in which they seek to invest, and help realize the potential in their portfolio companies.
   
• Bring their strategies to life: Clients look to TNG to help provide pragmatic support in aligning their business and people toward a common goal. Our work in this space involves the definition and implementation of target operating models, guidance on the role of technology within insurance businesses, development and alignment of incentive mechanisms for front-line staff (brokers/sales teams) and unlocking of opportunities for performance improvement as business models evolve.

The payments landscape continues to evolve as the world moves from cash to electronic payments and constant innovation leads to more seamless ways for consumers and businesses to pay each other. In this environment, businesses that are overexposed to cash continue to explore scale and efficiency improvements in a market that is still resilient in developed economies and buoyant in many developing economies. At the same time, participants in the electronic payments value chain continue to assess and pursue growth opportunities and devise ways of enhancing their profitability in an increasingly competitive market.

TNG has helped payments players of all sizes navigate this environment and achieve tangible results in terms of growth and shareholder returns. We have also helped investors understand a space that is technically and commercially complex and often difficult to grasp.

How we support

We cover a client base across the entire payments landscape:

• Transaction types (consumer remittances, consumer retail payments in point-of-sale and eCommerce, B2B payments
• Means of payment (cash, card, alternative payment methods)
• Value chain participation (e.g., acquirers, payment gateways, value-add service providers in electronic payments)

Our experienced team offers clients an in-depth understanding of the key challenges and value levers to:

• Provide certainty about participation strategies: Clients turn to us to navigate uncertainty and for a bespoke assessment of where they should play ― geographically, in a value chain, across customer segments, or across product categories. The questions we answer are often unique for our clients and their circumstances and include everything from “What new areas of payments should we explore given the available market opportunities and our capabilities?” and “How can we differentiate our international payments proposition?” through to “What is the future of cash and what does it mean for our business?”
   
• Help them win: Clients appreciate our distinctive and value-driven analytical approach that complements our deep sector knowledge. We bring these to bear in helping our clients win and grow in their respective markets through optimizing their routes to market, helping them improve their pricing or customer origination or retention capabilities, creating or enhancing their product propositions, and improving their competitive positioning to gain share.
  Investors in particular look to us to help identify the growth levers and uncover the potential that lies within payments businesses that they seek to invest in, and to help deliver this potential in their portfolio companies.
   
• Bring their strategies to life: Clients look to TNG to help provide pragmatic support in aligning their business and people toward a common goal. Our work in this space involves the definition and implementation of target operating models, the development and alignment of incentive mechanisms for front-line sales staff, and the unlocking of opportunities for performance improvement as business models evolve.