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Globalization In The Financial Sector And Personal Reflection

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1. In reference to a particular business sector of your choice discuss four major drivers that may have accelerated the pace of globalization of this sector since the year 2000.

Briefly assess two main impacts of globalization on this sector over this period.

2. Personal reflection. Give a brief account of how the process of globalization might have impacted on you; provide detailed explanations of your response to the process.


1. Globalization in the financial sector

The present time is the age of globalization. And, UK is one of the world’s most globalized economies. The service sector dominates the UK economy. It contributes about 78% to their GDP. And among that financial services sector is in itself quite important. UK’s capital London is the world’s largest financial sector. Therefore when UK was recognizing wave of globalization how its mighty financial sector could have been spared. The financial sector has also been revolutionized through globalization over time.
(Ref: Richard Davies and Peter Richardson, Lazarowicz, Global Financial Centers)

There had been several drivers that have accelerated the pace of globalization of financial sector since the year 2000. Most important of them are-

1. Political Drivers - The Governments all over the world in the drift of globalization allowed the banks to open their units and branches in any part of the region. Apart they could also engage in merger activities internationally. Now, it is well known that hefty international mergers “impact the structure of the entire domestic markets”. And due to this the respective governments keep on devising and implementing foreign trade policies. These policies are specifically targeted at reducing the level of competition among domestic firms and international firms. Usually they confront the multinational firms to protect regional firms. There have been several laws for the same including those made in the early 80s of 19th century. They include among all the Depository Institutions Deregulation and Monetary Control Act of 1980 and the Garn-St. Germaine Depository Act of 1982. These acts used to provide the Federal Reserve a “greater control over the non-member banks”. These acts used to work to allow the banks to “merge and thrift institutions (credit unions, savings and loans and mutual savings banks) to offer checkable deposits”.

Now that was the condition in 80’s, in 1993 the Second Banking Directive was implemented which deregulated the markets of European Union countries. “In 1994, European insurance markets underwent similar changes as a result of the Third Generation Insurance Directive of 1994.” Now these two directives bring about the necessary change for globalization in the financial services sector. It opened the home financial services sector to the fierce challenge from multinational corporations. In addition it created “a vigorous global scramble to secure customers that had been previously unreachable or untouchable”. Now banks and financial services were open to take advantage of the other financially rich economies. In the past, while the institutional and regulatory restrictions on banks’ activities had been preventing banks from fully responding to economic drivers, deregulation of these by the Governments, all across globe, removed these constraints. Now the banks were open to expand into new markets offering higher (albeit more volatile) margins. This prospective profitability sight provided by the diversification and on tune encouraged by the deregulation has been a major thrift in pacing the rate of globalization of financial services.

(Ref: Susan Lund, Toos Daruvala, Richard Dobbs, Philipp Harle, Ju-Hon Kwek, and Ricardo Falcon, Nicolas Pologeorgis)

2. Technological Drivers – US has always been considered as the most technology savvy market in the world. But American minds are not the sole technologically efficient minds in the world. There is talent all over the world. And even the American organizations know that. When, globalization opened ways for organizations how could they stay unperturbed to the tech-efficient people all around? Rather they took to take advantage of the same. So organizations hired the technical minded people in spite of their location on the globe. Now, only technical organization do not require technical people, even they are required in the financial sector. And they same as was revolutionizing around, helped financial organizations hire competent minds to make them more technologically advanced.

Then, on globe there are several countries known for technological advancement in every field. And there, in those countries, the financial entities like banks, NBFCs are also more advanced in comparison to the similar entities present all over the world and globalization was allowing the organizations to form combination structures horizontally and vertically with them and exploit their technical knowledge for their own benefit, so how could the organizations resist. They took to moving in several combination strategies to take benefit of the same.

Now, next the complementary increase in the capabilities of Internet had also been a major pace maker of the globalization of financial services. It has dramatically changed the cost and capabilities for marketing, distributing and servicing financial products. “Recent innovations in communications and information technology have resulted in a reduction in diseconomies of scale associated with business costs faced by financial institutions contemplating geographic expansion”. To add up the ATM networks and banking websites now enabled “efficient long-distance interactions between institutions and their customers”.  Now the customers didn’t even have to move the branches of the banks for various purposes. They could rather get there work done from any place of their choice. This has made customers become too “dependent on their newfound ability to conduct boundary-less financial transactions on a continuous basis”. The situation got intense to the level that businesses which were not technologically connected ultimately lost their entire market share to the competitors.

The ones that took most advantage of this internet wave were the multinationals. Because when there were no boundaries, the financial sector could easily sweep to countries that were not developed as their native countries. These were particularly Asian and Middle East Countries. There internet had not reached or if had reached, wasn’t been used that effectively in European Countries. And when the European Union Financial Sectors targeted these economies they knew well, there was no back turn. These nations had funds, resources which were not effectively mobilized. Globalization gave them that spirit. And the multinational financial services keen to exploit opportunities proved additional lit to the flame. Now the multinational group used internet to reach the customers of these countries. It was when their native financial services providers were not providing any such services. This made the financial services users to start choosing multinational brand financial service providers over their home service providers. Thus, adding up to their advantage and profitability. This way the internet also provided a drive to the globalization of financial services.

Now, this thrift of internet making globalization opportunities more attractive, and then the baits of hiring techno-efficient people, getting to ride on technologies of advanced similar finance service providers added to the drive towards globalization.

(Ref: Nicolas Pologeorgis, TF Dapp, Eric K. Clemons and Lorin M. Hitt)

3. Competitive Drivers - Nicolas in his article says “An additional driving force for financial service firms' geographic diversification has been the proliferation of corporate combination strategies such as mergers, acquisitions, strategic alliances and outsourcing”. While these combination strategies allowed the organization to improve the level of their efficiency within the industry. It also provided them an opportunity to enter the financial markets of other countries. They could even make a voluntary exit through the back door of divesting their share in these combined organizations. Apart it gave them a look of native, for those service users who preferred their own national services over others. Then these “Consolidation strategies further empowered the firms to capitalize on economies of scale and focus on lowering their unit production costs”.

Then when your competitor is joining the wave of globalization, how could other organizations leave the flow. Many financial sector businesses jumped into the globalization drive just because their competitors had and they in no way could accept lacking behind. Apart, due to globalization, when the financial sector of UK visualized that several cross country organizations were trying hard to enter their nations and exploit the advantages of the United Kingdom’s Financial Sector, they also could cite several benefits available to financial service providers across the world. And then this view and those others explained above competitive drivers add up to the drive of globalization.
(Ref: F. Braggion, M.Haynes, J. Ashton, M.Jayadev)

4. Market Drivers - apart from the above defined, there were market drivers that paced the level of globalization in the financial sector of UK. The financial organizations of UK had already explored every nook of financial services that could be provided in the country. Now they could expand to other countries and exploit the financial markets of those places. And with their efficiency they were unperturbed that they could take the advantage. This foresight act as a market driver for the financial sector going global

5. Cost Drivers- Then there had also been cost drivers. When the financial sector organization move to other nations they get the resources there as gifts. Many times the native industries cannot take that level advantage of the resources and opportunities in their own country. And that’s because they are naïve in the field while the multinational firms own experience. Also in the other Asian and African countries the cost for almost everything is less than the cost of the same product in Britain. This cost drivers also allowed to the charm of globalization for the financial sector.

(Ref: Martin Wolf, Dr. Madsen Pirie, Robyn Meredith and Suzanne Hoppough)

Thus the above factors have been the reason which the financial sector paced up so fast in the ride of globalization.


Impacts of Globalization on Financial Sector-

1. Introduction of New Technologies- Globalization has brought with itself new technologies. Before globalization there were certain efficient technocrat countries which excelled in technology and then there were other countries that were backward in terms of technology. Then there were some technologies that hadn’t even been utilized. Globalization revolutionized both. Now no country is left without efficient technology. And particularly the financial sector of now almost every country utilizes technology.

Then there are also several new technologies like those involving ATM, truncated cards and cheques which got evolved just because of globalization. When the techno-efficient minds from all over the world came together, then only they could device so many new technologies and systems. And they could come together only because of globalization. And now the new technologies defined and designed by them are shaping the financial sector not only in UK but throughout the world.

2. Increased Competition, resulting in better services -It is a well known fact that anytime when the economy has multiple producers contending for a clutch of the wealth, that’s a good sign for consumers. It is because when there are numerous sellers of the same service, they know they have to compete with each other for each and every consumer. It ultimately increases the quality of goods and services they provide, which is definitely quite beneficial for customers. Because they find several people ready to provide services each better than the other, each providing some additional quality, each trying for their penny and that too at the lowest cost possible, since the lowering of cost is also one of the measure they use to gain customers.

So when the financial service providers started to venture across international borders, they knew well that already there were established service providers. To take their market share, they had no other option then to present top notch facilities and new technologies. And therefore they incorporated them in their services. Now due to that their financial services demand rose. It ultimately made the native companies too to raise the standard level of services they were providing. Thus now a consumer had a competitive market that could provide him the best services in the world. That way the globalization leads to increase in the level of competition and in turn better services to the customers.

(Ref: Impact of Globalization, Definition of Comparative advantage, Effects of globalization on the UK economy, Why globalization matters, Don McCubbrey, Andy Rao, K.Ellis, N Bloom)


2. Personal Reflection

It is never like that if something is shaping the world, it won’t shape the life of a common individual. Similarly when the globalization has turned the world upside down, it also affects people like me. Due to globalization in the financial sector, consumers like us have the advantage to choose from numerous competitive organizations that are providing top notch facilities. Then the efficiency of the products and services has also risen. While earlier I had to call a customer executive cell at least thrice to get connected to the person, now I can get my query or complaint, whatever it is, registered in one call. Then, earlier I had to go to the bank branch to secure payment from my account now I can collect it anywhere, since the ATMs are now scattered all over. Apart earlier whenever I had to move out, I had to carry hard currency. But now just a debit or credit card is sufficient. That’s just because globalization had made almost every service techno-efficient.

Apart due to globalization, now a commoner like me can take education or grade from any university in the world. Even I am not required to go there I can rather take the classes at my home through online class schedule. Now that’s not the limit, even I can join any organization worldwide, irrespective of where it is situated. Even I need not care whether the entity I am joining is of UK or any other country.

Besides I may choose to be an entrepreneur. And then, can enter any market worldwide. I am independent to choose my workplace where my goods would be manufactured. Then I have the advantage to choose from thousands of financial service providers, all over the world to take necessary funding for my firm. Then if ever I could turn my entrepreneurial business to a company, the organization can now due to globalization issue GDRs throughout the world. Then I am again free to choose where I want to sell my product. I won’t have the restriction to sell it ultimately only in my own country.

Then if now I want a product that’s not available in UK, I can get it exported from the place where they are available. Even if that’s a service, unless it requires personal presence it can be delivered at my door step. And when, it’s a service involving personal presence, I can move to the best place wherever there is the best service provider or wherever the service is provided at the most cheap rate, without any restriction on my movement. The best example of it is people moving to Ecuador for cheap health services and also to US for receiving best health services. Now that’s the way globalization has impacted me as an individual.



1. RICHARD DAVIES and PETER RICHARDSON, 2010, Evolution of the UK banking system, Quarterly bulletin 2010 Q4

2. LAZAROWICZ, 2003, Financial Services Industry, United Kingdom Parliament

3. Global Financial Centers , 2010, Zyen, Pp-30

4. SUSAN LUND, TOOS DARUVALA, RICHARD DOOBS, PHILIPP HARLE, JU-HON KWEK and RICARDO FALCON, 2013, Financial Globalization; Retreat or reset?, Insights & Publications. viewed on 31 March 2015, <>

5. NICOLAS POLOGEORGIS, The Globalization  of financial services, viewed on 31 March 2015, <>

6. TF DAPP, 2014, The digital revolution in the financial sector

7. ERIC K. CLEMONS and LORIN M. HITT, 2000, The internet and the future of financial services: Transparency, Differential Pricing and Disintermediation, viewed on 31 March 2015, <>

8. F. BRAGGION, 2010, Mergers and acquisitions in financial baking, aea web

9. M.HAYNES, Mergers and Market share: evidence from the UK Financial Market

10. J. ASHTON, 2007, Efficiency and Price Effects of Horizontal Bank Mergers

11. M.JAYADEV, Mergers in Indian Banking, University of Birmingham

12. MARTIN WOLF, 2004, Why Globalization Works, New Haven, Yale University Press

13. Dr. MADSEN PIRIE, 2012, Ten very good things, 9:Globalization, viewed on 31 March 2015, <>

14. ROBYN MEREDITH and SUZANNE HOPPOUGH, 2007, Why globalization is good, viewed on 31 March 2015, <>

15. Impact of Globalization,, viewed on 31 March 2015, <>

16. Definition of Comparative advantage, Economics Help, viewed on 31 March 2015, <>

17. Effects of globalization on the UK economy, Economics Help, viewed on 31 March 2015, <>

18. Why globalization matters, BRI, viewed on 31 March 2015, <>

19. DON MC CUBBREY, 2014, Negative and positive effects of globalization for developing country business, viewed on 31 March 2015, <>

20. ANDY RAO, 2013, 4 positive impacts of globalization on world economy, viewed on 31 March 2015, <>

21. K.ELLIS, The Economic Impact of Globalization

22. N BLOOM, 2010, The impact of globalization on management quality

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