Banking For The Future

By M. Isi Eromosele

For almost four years, financial services firms have navigated a truly turbulent global economic environment. And it’s not over yet: slow growth and the sovereign debt crises in major markets are slowing demand for financial services; regulators are ushering in a new era of government oversight; and the rise of non-banking firms as competitors are remaking the industry landscape.

In the midst of these challenging times, the needs and nature of the financial services customer base are also shifting dramatically. Banks continue to struggle to regain the trust of customers, counter-parties, regulators and governments after the real and perceived failings of the financial system since 2008.

Customers expect more than just trustworthiness, however. They are also demanding transparency, varied offerings and multiple channels through which to do business.

For those financial banking institutions that meet these challenges with action, the global financial services market offers unprecedented growth potential. The projected value of global financial assets in 2020 is expected to be $371 trillion, an 87 percent increase over the value of 2010 assets.

Through this period, emerging economies’ share is expected to grow from 21 percent to 30 percent. And 2.5 billion people, half the world’s adults, do not currently use formal financial services to save or borrow.

There is no doubt that financial services companies will have the opportunity to manage this enormous global growth in wealth.

A crucial question is whether financial firms today are in a position to take advantage of this opportunity. While they do understand they must innovate in product design, engender fast time to market and provide excellent customer service, they are still struggling to control operating costs.

While they aspire to develop new markets and segments, they are constrained by siloed operations and overlapping or duplicate processes and technology systems. Additionally, uncoordinated evolution of their technologies has created an inflexible web of technologies that cannot easily respond to the pace of change required in today’s fast paced and highly competitive markets.

Information Led Transformation

In a financial services industry that is heavily data intensive, it is imperative that the right information get to the right people at the right time. There is only one path to achieving this. That path is through information-led transformation.

In a competitive landscape that favors the fastest and the smartest, financial services firms that invest in building highly sophisticated insight and predictive analytics will be better positioned to emerge as market leaders.

These firms will turn insight into a strategic driver to attract and retain customers, develop new sources of revenue, streamline operations, proactively address risk and regulatory requirements.

There are four imperatives financial institutions must focus on to achieve an information-led transformation:

Create A Customer Focused Enterprise

Leading banks must develop and use deep insight in order to attract and retain profitable customers with compelling product offerings and multi-channel experiences across all touch points.

Channel strategies that offer personalized service based on what, when and how customers choose to interact must be implemented to offer value for both the bank and its customers.

Banks must also use the power of social media to build constituency and confidence in their brands among clients and prospects. In doing so, they create a superior customer experience that differentiates them from competitors and attracts and retains customers.

Increase Flexibility And Streamline Operations

To become a market leader, banks must have adaptable core banking systems that create a flexible and agile banking environment. These agile core systems will help the banks adapt to ongoing structural shifts, continuously realign to new business needs, proactively manage customers and deliver products faster and more consistently than the competition.

The results would be that these banking firms will see better customer acquisition rates, increased revenue per customer and lower operating costs.

Firms need to start with the alignment of business, operations and technology, using a common architecture and infrastructure platform that eliminates complexity, reduces cost while increasing flexibility.

Business processes need to be standardized through the introduction of modular business services comprised of common data, business rules and processes that can be configured to quickly get new products and services to market.

Drive Innovation While Managing Costs

Information-led banks must create a transaction banking operating model that embraces constant change across the financial supply chain and product lifecycles. This will enable them to deliver global, regional and local transaction and payment services efficiently.

To do this, banks will need to centralize operational data and processes across consumer, commercial banking and payment channels. This will allow both client and bank personnel to access up-to-the-minute information on the status of each transaction as it is processed.

With better information, banks can use behavior pattern recognition to address regulatory requirements and risk while improving services and satisfaction. This agile transaction banking operating model allows for rapid product and service innovation and improves quality of service and client relationships while lowering cost of operations.

Optimize Enterprise Risk Management

A well-run financial services firm must have superior information, allowing them to identify and manage all types of risks (financial, operational, reputation and technologies) holistically across the enterprise.

New, more actionable risk-based insights must be implemented, benefiting every aspect of the banking environment from customer acquisition and product pricing to regulatory compliance and business strategy execution.

They will advance risk adjusted value management by aggregating cross-enterprise views of risk and finance data to improve operational effectiveness and financial performance.

Overall, banks need to move beyond achieving regulatory compliance and instead focus on optimizing capital allocation and creating value that delivers competitive advantage.

To accomplish this, financial services firms need a platform with integrated and reliable real-time information for finance, risk and compliance teams across the bank.

Their teams must be able to utilize sophisticated analytics and scenario analysis tools to model portfolio risk exposures, stress testing, risk return, capital allocation and reporting to improve overall risk management.

These tools will facilitate their ability to gather timely, accurate, consistent insight into customer, supplier and counter-party data and risk indicators across finance, trading, sales and geographies to improve risk intelligence.

They will be able to fully integrate the output of risk analysis into management information for consistent and timely decision-making. These solutions will allow the firm to implement board-level governance, business processes and systems that define and enforce the balance between risks and expected profits.

M. Isi Eromosele is the President | Chief Executive Officer | Executive Creative Director of Oseme Group - Oseme Creative | Oseme Consulting | Oseme Finance

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