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Illustration: Annelise Capossela/Axios

Big banks are pulling back from the heights of their global ambitions for retail banking.

Why it matters: The globalization dogma says bigger is better, and that more markets offer more opportunities for making money. But increasingly, the international mega-bank model is getting clunky, more expensive — and less popular.

Tech disruption is driving competition — and costs — to new levels, especially in payments and lending.

  • Digital competitors like Dave, Monzo and Venmo litter the web and have no costly branches.
  • Investors are paying attention. Banking app Dave, launched in 2017, said on Monday it would merge into a SPAC at an expected equity value of $4 billion.

Meanwhile, traditional banks are unwinding retail banking purchases made in the pre-cloud era.

  • HSBC is the latest, selling its unprofitable U.S. business to Citizens Bank and Cathay Bank.
  • BBVA also recently sold its underperforming U.S. retail business to PNC. And Citi announced in April it's selling its Asia retail business.

What they're saying: "What we’re seeing today would have been a surprise 10-15 years ago," says Greg McBride, chief financial analyst at Bankrate.

  • "There are limited synergies in running a global consumer business. It's all about local scale," says Jan Bellens, EY's global banking sector leader.
  • That's because many products don't translate across national boundaries. Mortgages, for one.

The intrigue: International banks are increasingly looking for cost savings, like shedding underperforming assets, and using that to invest in digital banking platforms, says Wedbush analyst Peter Winter.

  • To adapt, legacy banks have also gotten into bed with fintechs.

Case in point: Signature Bank and Customers Bank both struck deals for their customers to use blockchain-powered real-time B2B payments platform TassatPay.

What to watch: The re-globalization of banking — driven by cloud-based fintechs unburdened by old technology or brick-and-mortar infrastructure. They'll be best positioned for expansion, Bellens says.

The bottom line: Consolidation in traditional retail banking is expected to continue.

  • A former Santander executive told the FT in December that the Spanish bank had been "outmaneuvered" by BBVA’s U.S. asset sale, and that Santander "should have lined up such a favorable exit itself."

Go deeper

Exclusive: Quartz, NYT vets launch new media company about work

Photo credit: Emma Howells for Charter

Quartz co-founders Kevin Delaney and Jay Lauf, along with New York Times veteran Erin Grau, are launching a new media and services company called "Charter" that is centered around the future of work, the founders told Axios.

Why it matters: "There are other media companies that write about this topic — some occasionally and some more frequently, but it's one topic among many things that they do," Delaney said. "This is a driving focus for us."

Biden endorses bill to end sentencing disparity for crack and powder cocaine

Photo: Drew Angerer/Getty Images

The Biden administration endorsed a bill Tuesday that would end sentencing disparities for crack versus powder cocaine offenses.

The big picture: Supporting the legislation follows through on one of Biden's campaign promises. But it's a shift from decades ago, when Biden spearheaded efforts to pass the legislation that implemented the disparities in the first place.

White House to acknowledge U.S. will miss July 4 vaccination goal

Fireworks in New York City to celebrate the state reaching a 70% vaccination rate. Photo: Liao Pan/China News Service via Getty Images

The Biden administration plans to acknowledge on Tuesday it will likely miss its goal of vaccinating 70% of U.S. adults with at least one dose by July 4, NBC News first reported and Axios has confirmed.

Why it matters: Despite falling short of the goal, the White House still believes most Americans will be safe to fully celebrate Independence Day, as COVID-19 cases and deaths remain at low levels throughout much of the country.

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