So many people have commented now on the Barclays-ABN thing. All are focusing on the synergies that the group will gain from being in the top four banks in the world. And I’d be lying if I said that all of us in the financial services industry (both on the customer and vendor side) aren’t sitting here wondering what this might mean for our own businesses.
The new Barclays is so large that it will have scale advantages that no-one else based in Europe can match. They’ll be a fearsome competitor.
But synergies come at a price.In this case, there are some fairly substantial things that have to happen before any of them begin to show up.
Firstly, there is the somewhat surprising news that the new corporate headquarters of the group will be in Amsterdam. Given that this is a merger, that suggests to me that there’s going to be quite a bit of argy-bargy between the various corporate staffs involved. Over at Canary Wharf in London, there must be rather a lot of soul searching going on: presumably, "synergies" will mean that there are "redundancies". More here than in Amsterdam, I’d expect, since the corporate head office is migrating. That will be very, very distracting to the group in the UK, and I can’t help but think that the ABNers across the Channel must also be wondering, and worrying.
It is also inevitable that there’ll be consolidation of processes and systems. When Santander took over Abbey, there was ever-so-much pain involved with their rip-and-replace approach. Admittedly, that integration was a successful one in the end. The ABN-Barclays merger is quite a bit bigger, however, and I can’t imagine that rip-and-replace can possibly work without derailing one, or both businesses. So there will have to be an organic integration process, one that will take time, and be painful for all involved.
Lastly, although consensus is that these two businesses are highly complementary, they have, nonetheless been pursuing strategic agendas which will now have to be integrated in some fashion. That is hardly going to be a simple task, and the fact that the two sides are so evenly matched in present-day scale will make the task of reconciling them even more difficult.
So my prognostication is that Barclays and ABN will be fairly self-absorbed for a while. It’s inevitable that their attention is going to be internally focused while they work this out, and that will result in an innovation gap some time down the line. That’s because their current and under-development initiatives will go out the door, but nothing new will be started for a while. It’ll take a while for the revamped entity to get up to speed with itself.
That gap is a competitive opportunity into which clever players – both vendors and other banks – will be able to slot themselves.