Generalist vs Specialist Banking
The argument around the differences between general (generalist) banking and specialist banking can be analyzed from several viewpoints. A customer’s view of these terms would differ from that of an industrial analyst and so on.
However, HNWI and businesses are usually faced with deciding between a generalist banker (or general investment banks) and a specialist banker when choosing a banking service provider or partner.
The offerings of each banking model differ according to the time, conditions, and current operating parameters of the bank. It all comes down to organizational preferences, sector knowledge, relationships, and what model fits the needs of a bank at any point.
In this article, we try to spell out some of the differences between generalist banks and specialist banking services.
Definition and Scope
Generalist investment banks offer broader banking services to clients including loan grants, processing cheques and payments, maintaining balances, managing accounts, consultations and multiple investment instruments in multiple markets.
Usually, generalist banks serve wider markets due to their retail nature, wide knowledge scope across multiple industries, and openness to clients’ businesses. n nMost generalist banks are multifaceted, focusing on multiple industries at a time. Because generalist banks tend to have larger teams, they are better able to handle several larger and more complex financial transactions simultaneously — clearly a market advantage.
While they can absorb and execute multiple projects at a time irrespective of industry, generalist banks might be unable to offer in-depth services tailored to one industry. This is because they operate as a net and not a sword. They often lack the deep-level technical know-how required to offer clients niche-based banking services. Businesses such as these are often outsourced to specialist banks.
Experts have argued that general investment banks are not truly ‘general’ in the sense as they are composed of multiple teams of specialists in different fields, or limit their business to a number of sectors.
Specialist investment banks on the other hand exist to either provide all niche-based banking and investment services to a particular client or a handful of special clientele.
In another definition, specialist banks are banks focused on one or a few collectives of specific economic sectors like agriculture, technology, real estate, etc. They often possess deep-level industrial knowledge required to assist clients within selected industries.
Unlike generalist banks, specialist banks rarely provide all normal banking services and serve a relatively tighter market. As a plus, however, specialist banks are more flexible and are quicker to tweak banking models or services to fit the needs of special clients.
Services offered by specialist banks include specialized lending, personalized services, niche-based consultancy, in-depth advisory, portfolio management, and banking tools tailored to the needs of their clients.
In the past, only high net worth businesses could afford the services of a specialist bank. Nowadays, digital banking software for specialist banks such as Spotbanc has made it possible for businesses of all sizes to launch specialized financial products and offer affordable banking services to clients all over the world.
License and Operators
The license of general banks differs from that of specialist banks mainly in their respective scope of operation.
While general banks can modify some of their operations to provide specialized banking services to clients at any time, specialist banks don’t have that power. They cannot switch their operations to general banking.
Only large financial institutions with the required capital base – which is usually sky-high – can operate a generalist investment bank due to the large volume of businesses they are required to process at any time and the operating costs of maintaining a large banking team.
On the other hand, it costs less to open a specialist bank. Any financial institution with deep technical banking or investment knowledge in a specific industry can set up shop for specialist banking. Today with advanced digital banking platforms such as Spotbanc, electronic money institutions (EMI) and small-and-medium scale financial institutions (FIs) around the world are finding it easier to set up and offer specialist banking services to their clients.
Perhaps the most distinctive line drawn when discussing generalist vs specialist banks comes to investing.
Generalists are literally a jack of all trades, operating from their broad knowledge across several industries. They tend to handle larger projects due to their sheer size, the spread of knowledge, and manpower capacity.
Generalist investment banks typically focus on the geography or the size of their clients. They are more concerned with achieving wider reach and market coverage than becoming an industrial authority in certain niches.
Specialist investment banks only invest in relatively small and defined businesses within the sector they operate in. They may enlist a network of industry specialist managing directors who only service deals for their firm that fall within their specific target industry. Relying on deep understandings of their respective sectors and special networks built for niche-based investment purposes, Specialist banks help position their clients better especially during challenging economic periods.
Unlike generalists, specialist investment banks invest a lot of resources into understanding their defined sectors. As such, they usually provide better deeper analysis invaluable to clients and can better predict market moves.
As banking keeps moving digital, financial enterprises would continually feel the need to provide specialized banking experiences for their clients. However, breaking into specific financial markets is always a hustle. Spotbanc provides small-and-medium EMIs and FIs easy access to providing bespoke financial solutions leveraging on an agile banking system.
Contact us to learn more about how Spotbanc transforms your business into a financial powerhouse through scalable technology and top-notch services.