The Banking World Just Got a Bit More Crowded

As if banks didn't have enough to worry about with new competitors, now it turns out the once hallowed investment banks Goldman Sachs and Morgan Stanley are metamorphosing into depository institutions to keep out of the trouble that's plaguing the industry.The implications of such a conversion are significant, to say the least. Now they'll be subject to the same kinds of regulations as the likes of a Citi or Fifth Third. What happens with branding? Consumers who have for so long thought of them only as investment banks will really need some re-educating if Goldman and Morgan hope to gain their deposits.

And technology, of course, comes into play. Now these former investment banks will need to bring in all the IT associated with a typical commercial banking institution. I'm sure the IBMs and Fiservs of the world are licking their chops!

Oh! And what about branches? What kind of model are "Goldman Sachs Bank" and "Morgan Stanley Bank" going to use? Will they be direct banks only and just reside on the Internet? Will there be an ATM network? I'm sure Diebold, NCR and Wincor will have their eyes open.

TowerGroup recently held a telephone briefing on the upheaval (before we learned of the Goldman/Morgan news). To echo Kathleen Khirallah, managing director at TowerGroup, the world is in a state of flux when it comes to banking. So it's difficult to determine how things will change. What she said would be a certainty was that we would be seeing more consolidation. And it happened a lot sooner and in probably a far different manner than any of us could have guessed.

I don't know if we can take any more surprises. What's next? Are we going to wake up tomorrow morning and learn that modern currency is being replaced by pretty pebbles?