Home Banking Challenges faced by banks with changes in technology and increased regulation.

Challenges faced by banks with changes in technology and increased regulation.

by internationalbanker

Log  309 (3)By Lode Snykers, Vice President, Global Financial Services, CGI


Today’s banks are facing the challenges of tightening budgets and continuous demands to reduce costs while handling the constant stream of new regulations. They are also under immense pressure to meet the increasingly complex demands of the real-time, digital customer. Technology is inevitably playing a core role in helping them address these issues.

Many banks are transitioning from high-cost, in-house systems to more agile and flexible managed services, such as business process outsourcing, application management, and software-as-a-service (SaaS). The world is changing, and new entrants are entering the market.  The very basics of how banks do business are evolving. To stay in the game, banks need to invest in leading-edge technology and innovation while ensuring their core infrastructures offer the right foundation for real organic growth and expanded customer wallet share.

Not surprisingly, regulation has become a much more complex problem, especially in light of year-on-year budget cuts. Banks need to adopt a more proactive and innovative approach to compliance. Fundamentally, this means evaluating core data and structural changes, reducing the number of legacy systems, looking at new ways of outsourcing, and standardizing operations across the enterprise, while also better utilizing collected data for management decision making and innovation.

Banks must change the way they think about things; outsourcing is a great example of this. Traditionally, outsourcing was promoted as a way of reducing costs by transferring projects to an external service provider. The reality has been somewhat different. Application complexity, disparate architectures, poor data management and bad business processes were passed on, negating many of the advantages of outsourcing.

At CGI, we take a different approach offering “Transformational Sourcing” instead. We concentrate on improving the business performance of IT and decreasing the cost on a sustained basis by “running IT as a business.”  Together with our client, we create an agile environment that can be harnessed to drive differentiation and increase responsiveness to new market and service opportunities, as well as new regulations.

The Digital Revolution is another area in which banks should rethink their strategy. Customers now have multiple channels for interacting with their banks. The number of traditional brick and mortar branches is decreasing rapidly. With choice comes competition and with the regulatory push towards price transparency and rapid account switching, customer churn is likely to increase.

The customer experience and, in particular, their digital experience is a critically important facet to consider. Often the consumer is not interested in the provider of the channel but looks for the most accessible option. This behaviour is enabling non-bank providers to draw customers away from banks. Banks must become mobile destinations in their own right and offer not just mobile banking and mobile money but enable full mobile commerce as well.

The real-time revolution is also impacting the way customers pay for goods and services. Many banks are experiencing a significant reduction in profitable business due to the emergence of new entrants such as PayPal. These dynamic companies are utilizing bank infrastructures and taking a slice of the pie while banks must pick up the bill and carry the burden of managing outdated payment infrastructures.

The conundrum for banks is clear. How do you continue to be relevant to your customers and maintain your payments franchise in the face of challengers like PayPal while building new infrastructures that support the very same challengers? Moreover, as a result of becoming estranged from their customers, banks are no longer handling transaction data, which, in the long term, will be essential for building deeper relationships with customers and developing a customer-centric approach.

Infrastructure modernization is the key to unlocking innovation and placing the customer at the heart of a bank’s operations. Many countries now have programs underway that are funded by banks and involve the development of new real-time payment infrastructures that support direct bank-to-customer instruments. These new payment types will lead to value-added payment processes and new technology to meet customer demand for “buy anything, pay anyone, and bank anywhere, anytime.”

The issues are similar in the corporate market; however, the answers are different, meaning no single strategy can apply across banks. Banks are investing millions in improving transaction banking for their corporate customers, but are they spending their money in the right place and in the right way?

We recently surveyed more than 350 corporates on their bank relationships, and the results were interesting. Corporates are looking for a simpler and more consistent way to bank. The research indicates that there is likely to be much more bank consolidation in the corporate market globally.  Banks need to provide easier and seamless access to their products and services.  Corporates are looking for banks to become trusted advisors – those that do will be the winners.

CGI in financial services

Since our founding in 1976, CGI has been at the forefront of change in the banking industry. The acquisition of UK services firm Logica in 2012 has further strengthened and expanded our offerings for the financial services sector. With more than 16,000 financial services professionals, we are generating real success for more than 2,500 financial institutions in more than 40 countries.

With decades of experience, our professionals offer deep industry insight and experience to help clients overcome their challenges, minimize upfront capital outlays, and achieve business results that drive performance and profitability.

CGI focuses on innovation, technology and excellent service delivery to ensure our clients remain ahead of the competition. Our commitment to quality and results underpins our very successful track record within the financial services industry.

For more information, e-mail us at banking.solutions@cgi.com.

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