Transforming the financial ecosystem

Globally, 2018 is going be a transformational year for banks. With more technological advancements, coupled with regulatory changes, there are significant opportunities for banks to modernise and become considerably more digitally agile. Briony Richter reports

The ‘2018 Banking Outlook: Accelerating the transformation,’ study, conducted by Deloitte centre for financial services notes six key areas that will be instrumental in 2018 for banks and financial institutions.


Traditional banks have been going through constant changes in the face of emerging technologies and new players. The study highlights six broad challenges that will be crucial for banks and financial institutions to address in order to achieve sustainable growth in the long run.

Putting the customer first 

The study highlights that long-term sustainable growth in the banking industry will rely on a continuing focus on the customer, rather than the product. It will be essential for banks to let go of strategies that solely focus on the sale of products.


Banks are constantly becoming out of touch with consumers that are moving towards more convenient and seamless digital solutions. 


The expectations of customers are evolving at a rapid pace. The study notes that banks are not responding quickly enough to customers. Being agile and innovative in delivering a personalised experience is as important as targeting the right markets and selling products.


The growing presence of fintechs in the financial sector has forced banks to look past their out dated legacy systems. However, most banks seem to have realised that a growing fintech ecosystem, can actually help them design and develop more tailored services.


This will be of great benefit to everyone: consumers, retailers and banks. It will make the purchase much smoother, and instead of having to remember passwords to authenticate, shoppers will have the chance to use a fingerprint or a picture of themselves.


Compliance 

2018 presents an opportunity to modernise regulatory compliance. The study states that banks across the US are witnessing some stabilisation in regulation. In an ever-changing sector, banks much align regulatory compliance with business strategy. Not doing so could put banks at risk of unmet regulatory expectations and a decrease in operational capabilities.


Coming away from the US, the study highlights how the uncertainty of Brexit is having an effect on British and European banks. 


Banks have to prepare for maximum change contingencies that have the potential to be operationally disruptive, legally challenging, and financially demanding.


The study states: 


“Institutions are taking on the tough task of setting up new operational entities in Europe following the potential loss of “passporting” arrangements for UK-regulated entities. After which they will have to determine the size and scope of these new entities, relocate or hire new personnel, commit fresh capital to meet local regulatory demands, and revamp recovery and resolution plans to address these new challenges to their operational integrity.” 


Technology management 

According to the study, modernising technology is a task that chief information officers (CIO) must manage productively. 


Modernising core operating infrastructure is essential for banks. It may not be possible for some to get rid of the legacy systems that dominate many banks but the cost and inflexibility is making it difficult for financial institutions to meet the needs of its customers.


Research conducted by technology research firm, Gartner reveals that technology budgets at banks will likely continue to expand; the global banking industry will spend $519bn on IT in 2018, up 4.1 percent year-over-year (YoY) from $499bn in 2017.


Deloitte research study expects a “modest step to a big leap” in the way technology is harnessed within banks.


This will be of great benefit to everyone: consumers, retailers and banks. It will make the purchase much smoother, and instead of having to remember passwords to authenticate, shoppers will have the chance to use a fingerprint or a picture of themselves.


Cyber security risks

Cyber security has become a major focus for banks and financial institutions around the world. The risk if cyber-attacks occurring have only been increasing within the banking ecosystem. 


Deloitte argues that the problem with cyber risk is that banks often respond after the attack, rather than implementing cyber security objectives into technological decisions.


This will be of great benefit to everyone: consumers, retailers and banks. It will make the purchase much smoother, and instead of having to remember passwords to authenticate, shoppers will have the chance to use a fingerprint or a picture of themselves.


Fintechs and big techs

“Fintechs continue to lead innovation in the banking industry by sharpening their focus on customer experience,” says Deloitte.


It is clear that when it comes to fintechs, incumbent banks have two options: 


1.    Work with fintechs and combine resources to develop more innovative products and solutions.


2.    Compete and develop technological solutions alone.
Combine resources and working together makes more sense, especially since most fintechs are eager to start partnering with banks and financial institutions.


This will be of great benefit to everyone: consumers, retailers and banks. It will make the purchase much smoother, and instead of having to remember passwords to authenticate, shoppers will have the chance to use a fingerprint or a picture of themselves.


Reimagining the workforce

The study notes automation within the workplace is rapidly increasing. While the technological advances have started integrating more commonly in the workplace, the study notes that this won’t necessarily have a negative impact on employees. In fact, with the correct workplace strategy, banks can harness automation effectively, focus on new ways to attract employees with technical expertise and teach existing employees the relevant skills needed to work in a digital organisation.


Overall, 2018 is going to be an existing year for the financial sector. These six emerging opportunities noted in the study can offer banks with the best tools to successfully balance long-term strategy and short-term performance goals.


This will be of great benefit to everyone: consumers, retailers and banks. It will make the purchase much smoother, and instead of having to remember passwords to authenticate, shoppers will have the chance to use a fingerprint or a picture of themselves.


Share this article