Integration of the Financial Services Industry: Where are the Efficiencies?

We examine the efficiency effects of the integration of the financial services industry and suggest directions for future research. We also propose a relatively broad working definition of integration and employ U.S. and European data on financial services industry mergers and acquisitions (M&As) to illustrate several types of integration. The analysis suggests that there is a large potential for efficiency gain from integration, but only a relatively small part of this potential may be realized. Integration appears to bring about larger revenue efficiency gains than cost efficiency gains, and most of the gains appear to be linked to benefits from risk diversification.