RSS Feed
By M. Isi Eromosele
Financial institutions of every shape and size are likely to
face a continuing challenge to grow their top line – even after large acquisitions.
Financial markets reward financial institutions achieving the best revenue
growth and superior risk adjusted returns on invested capital.
For instance, an Oseme Finance analysis shows that on a
worldwide basis, the five banks with the fastest revenue growth saw their stock
price soar by an average of 91 percent over a four year period - over four
times better than the industry average.
Going forward, there may be reduced headroom for growth in
most mature western economies; the strategy would be to solidify existing customer
relationships, steal market share and increase share of wallet by relearning
the growth habit through innovative practices.
Financial institutions should rethink their growth
strategies, eschewing product innovation in favor of process and service
improvements. The latter are much harder for competitors to replicate, thus
providing a more enduring advantage, both in terms of better customer
relationships and revenue growth.
Process and service innovations also tend to reduce
complexity and cost, creating a ‘virtuous circle’ of top-line growth and
bottom-line profitability.
Successful financial institutions are likely to embed
innovation into the very fabric of the organization – from strategy and
processes, to people, systems and business partners – actively developing good
ideas into enduring commercial success.
Transparency and compliance as a performance
springboard
Regulators and capital markets are demanding greater
transparency in all aspects of governance. But top-performing firms by 2015 are
likely to go beyond the minimum requirements, using transparency and compliance
as a way to win the hearts and minds of investors, and leveraging their efforts
to improve decision-making, cost efficiency, and service quality.
This is a significant mindset shift for most financial
institutions. Since behavioral shifts
are often the most challenging to attain – expect many financial institutions
not to develop this capability for a performance springboard.
Strategic Technology Underpinning
By 2015 leading financial institutions are likely to be some
of the most sophisticated users of technology on the planet. Today the top 25
financial institutions in the world spend in excess of $50 billion on technology in a single
year.
Financial institutions should get improved productivity,
enhanced revenue growth, and better profitability from this level of spend in
the future. The challenge going forward for financial institutions should be
two fold – digitization of business and effective IT governance.
Firstly, the differentiator between success and failure is
likely not to be the absolute amount spent, but rather on the governance of
technology within the business. Recent decades have seen large gaps open up
between the board and technology departments within financial firms.
Secondly, financial institutions are incredibly complex
businesses. Over the next five years, technology should be applied to reducing
this degree of complexity by the eradication of paper-based processes.
For instance, trading of many asset classes is now done on
electronic exchanges. By contrast, back-office clearing and settlement is often
stuck in a paper-based world driving up complexity, risk and reducing the
efficiency of markets.
By 2015, technology is likely to be almost invisible yet
pervasive throughout leading financial institutions. This simplicity should
drive new business models and be integral to forging each of the hallmarks of success
within the global financial services industry.
M. Isi Eromosele is the President |
Chief Executive Officer | Executive Creative Director of Oseme Group - Oseme Creative | Oseme Consulting | Oseme Finance
Copyright Control © 2012 Oseme Group
0 comments:
Post a Comment