This exhibit shows the average net interest margin (NIM) and cost-to-income ratio (CIR) in banking sectors around the world. Together, these two factors provide a rough approximation of banks’ capacity to drive growth through innovation. This picture highlights a stark contrast between banks in developed and developing markets.
Most of the banking sectors in the top-left quadrant are in developed markets. Saddled with relatively low NIMs and high CIRs, banks in these markets have limited flexibility to pursue bold innovation. Their main priorities are to reduce costs and improve operational efficiency rather than strike out in new directions. Conversely, most of the banking sectors in the lower quadrants are in developing markets. With relatively low CIRs and average to above-average NIMs, banks in these markets can afford to invest for growth.
Innovation in financial services will be the key to driving broad, sustainable economic growth in emerging markets, according to a report by the World Economic Forum and BCG. The report features a range of innovative approaches that financial institutions from around the world have successfully implemented. Case studies include new models in distribution, product development, and risk assessment, as well as solutions for overcoming institutional barriers.