Transaction Banking VS Investment Banking

Hello monkeys,

My finance professor just talked about the rise of transaction banking and the decline of investment banking today in class and thought about giving a quick research on the former. This is what I got:

While the Dodd-Frank Act annihilated the proprietary trading function within all major banks, thus diminishing the volatility and potential gains of the sales and trading divisions, all major functions within the transaction banking division gained a stronger footing.

Trade finance and cash management products - once deemed necessary tools for corporations to execute their daily business smoothly, are now even more significant.

I read that after the global financial crisis, transaction banking is slowly working its way up the reputation ladder for its ability to generate revenues and profits (even though they’re quite small) through difficult times.

However, one might be surprised to realize that the transaction banking division still accounts for less than 20 percent of the profits generated from most banks’ sales and trading or investment banking divisions. In an industry where one’s remuneration and key performance index are pegged to the bottom line, the transaction banking division still remains as a less attractive option for fresh graduates.

Likewise, from the bank’s perspective, it can promise stable, but hardly stratospheric returns. Ironically, to accelerate these returns, banks are introducing more complex products into the transaction banking fold, contrary to the plain vanilla nature of its products.

Nevertheless, the steady growth of this division has caught the attention of the finance industry. Transaction banking, often termed as the "bread and butter" of banking, is displaying the resilience the industry expects of it. Slowly, but surely, the tide is shifting. As the banking sector continues to shrink globally, we can expect the business to go back to basics.

While investors choose to hold on to what is certain and banks vying for a larger share of this pie, transaction banking looks certain to be one of the few bright lights of banking soon.

After reading this, what do you monkeys think about the prospects of transaction banking positions on becoming a top-tier banking job? Investment banking may never be replaced, but the industry is simply getting more and more competitive. What do you guys think about transaction banking become the new, coveted "IB" position?

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