Newsletter
IT innovation needed to combat 3Cs of banking
The turbulent year, or two, in the European banking sector has prompted many companies to adopt a batten down the hatches and ride out the storm approach to doing business in 2009. Whilst we all hope that the storm will ease and the skies start to clear towards the end of the year, this must be the moment to resolve some of the issues which have bedevilled the sector, by unlocking the potential of IT and using it to shape the future of banking. Technologists will be tasked with finding areas for rationalisation this year and yet, for too long the IT side of financial institutions has been a backroom process, focusing only on tactical cost-efficiencies. IT is seen as an enabler but its additional potential, full IT utilisation, has not yet been exploited. It’s time for a strategic, innovative response from the IT side of the bank.
GFT’s recent banking trends research, conducted by Pierre Audoin Consultants (1), shows that the business side of large, retail banks across Europe is already demanding more innovation from its IT counterparts. The research asked the same questions of both the business and IT sides of the banks. Both sides seem to recognise that they don’t always understand what the other does, but they do recognise three key issues which the European banking sector is facing; competition, consolidation and cost-efficiencies. In the UK the issue of compliance could probably be added to this list. Still often seen primarily as a regulatory obligation rather than a value driver, nevertheless compliance does provide significant benefits with respect to financial performance, operational excellence and business relationships with partners.
Across Europe there are some variations in the perceived significance of each issue. German respondents (54%) listed globalisation/internationalisation (competition) as an important issue, whilst the French named competition and 38% cited mergers & acquisitions (consolidation). In Spain, consolidation in the form of M&A featured highly (46%), but the banks seemed much less troubled by the need for efficiency improvements or cost-reductions. Perhaps because, according to a recent article in El Pais (2), they are already among the most efficient banks in the world?
In the UK, possibly the European country most affected by the banking crisis, consolidation (35%) and cost-efficiencies (21%) were seen as having most impact on the sector, conceivably as a result of the tremendous write-downs we’ve seen in the City.
All over Europe banks are feeling the impact of the internationalisation coupled with the economic crisis. But, if financial institutions are going to position themselves for a more benign environment, IT must begin to offer innovation
and not just operational solutions.
This may mean considering a cross-European approach, to take advantage of Spanish efficiencies, German innovation and British understanding of a competitive market. It will mean identifying neutral external partners to work with internal IT departments and give strategic input into consolidation projects, such as banking platform integration for example. Banks are going to need to redefine ownership and risk management dependencies. Successful financial institutions will need to be far more fluid than before, as technology moves towards cloud computing, and learn how to deliver the right information from a single-source, thus breaking down the traditional silo mentality. Most of all, offering innovative solutions will mean understanding the challenge of the 3Cs.
The Pierre Audoin research shows that it’s time for IT to come out of the shadows. Rather than merely being a service provider, IT needs to reposition itself as a consulting partner, offering different strategic solutions at differing levels of budget and scope.
Even in this demanding period, banks must seize the opportunity to unlock the strategic potential of IT; to get the bank at full, innovative strength, ready for the end of the storm...when it comes.
(1) Banking Trends 2009 – Impact of IT in shaping business success in times of crisis. GFT & PAC research. June 2009
(2) Calculated as cost/income ratio. Information from Esto es obsession con los costes, El Pais. 22 March 2009
GFT’s recent banking trends research, conducted by Pierre Audoin Consultants (1), shows that the business side of large, retail banks across Europe is already demanding more innovation from its IT counterparts. The research asked the same questions of both the business and IT sides of the banks. Both sides seem to recognise that they don’t always understand what the other does, but they do recognise three key issues which the European banking sector is facing; competition, consolidation and cost-efficiencies. In the UK the issue of compliance could probably be added to this list. Still often seen primarily as a regulatory obligation rather than a value driver, nevertheless compliance does provide significant benefits with respect to financial performance, operational excellence and business relationships with partners.
Across Europe there are some variations in the perceived significance of each issue. German respondents (54%) listed globalisation/internationalisation (competition) as an important issue, whilst the French named competition and 38% cited mergers & acquisitions (consolidation). In Spain, consolidation in the form of M&A featured highly (46%), but the banks seemed much less troubled by the need for efficiency improvements or cost-reductions. Perhaps because, according to a recent article in El Pais (2), they are already among the most efficient banks in the world?
In the UK, possibly the European country most affected by the banking crisis, consolidation (35%) and cost-efficiencies (21%) were seen as having most impact on the sector, conceivably as a result of the tremendous write-downs we’ve seen in the City.
All over Europe banks are feeling the impact of the internationalisation coupled with the economic crisis. But, if financial institutions are going to position themselves for a more benign environment, IT must begin to offer innovation
and not just operational solutions.
This may mean considering a cross-European approach, to take advantage of Spanish efficiencies, German innovation and British understanding of a competitive market. It will mean identifying neutral external partners to work with internal IT departments and give strategic input into consolidation projects, such as banking platform integration for example. Banks are going to need to redefine ownership and risk management dependencies. Successful financial institutions will need to be far more fluid than before, as technology moves towards cloud computing, and learn how to deliver the right information from a single-source, thus breaking down the traditional silo mentality. Most of all, offering innovative solutions will mean understanding the challenge of the 3Cs.
The Pierre Audoin research shows that it’s time for IT to come out of the shadows. Rather than merely being a service provider, IT needs to reposition itself as a consulting partner, offering different strategic solutions at differing levels of budget and scope.
Even in this demanding period, banks must seize the opportunity to unlock the strategic potential of IT; to get the bank at full, innovative strength, ready for the end of the storm...when it comes.
(1) Banking Trends 2009 – Impact of IT in shaping business success in times of crisis. GFT & PAC research. June 2009
(2) Calculated as cost/income ratio. Information from Esto es obsession con los costes, El Pais. 22 March 2009
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