Over the past decade, the banking industry has experienced significant changes that have affected the way banks strategically approach their business. Changes with compliance and new regulations, an evolving customer base that’s more demanding than previous generations, online security threats and competition from not only inside the industry, but outside as well, has increased the challenges that banking organizations face today.
In the 7th Annual Survey of Challenges, Priorities and Trends in the Financial Services Sector by Temenos, of the 198 senior bankers that were surveyed, it was found that 30% of the respondents see customer loyalty as a challenge, 30% view outside competition as a threat, 24% cited product innovation as a top priority and 53% believe that regulators will force banks to update their legacy systems. While the survey respondents showed concern across a number of challenges they seemed to all have one common factor, IT.
Customer Loyalty and Product Innovation
At the forefront, it doesn’t appear that IT would have a significant factor in combating the senior banker’s concerns. Taking a more thorough look at how banking organizations can strategize and plan for success reveals that new technology and IT infrastructure plays a major role. For example, customer loyalty and product innovation are viewed as a prominent concern for senior bankers. As a new and younger generation of customers continues to evolve in the banking industry, banks are constantly looking for strategies to recognize the needs and behaviors of their new customers. Ease of access, mobile applications and text and email updates are a few of the demands at the top of the list for these new customers. Having the IT infrastructure in place to support the development of applications and mobile banking is critical. Without scalable and reliable IT resources, banking organizations can fall behind competitors when it comes to product releases or new features. Time to market is of the essence in any industry and failing to have the infrastructure readily available will prove to be disastrous.
While just a few years ago the financial industry was most concerned with newly formed banks and larger institutions taking over market share, the tides have now shifted. Outside entrants to the industry have now become the major threat to competitive market share for the financial industry. Companies such as Amazon or Google have large competitive advantages when it comes to collecting and analyzing data that is critical to discovering customer insight and industry trends. While IT is a highly regarded and critical in the banking industry, collecting mass amounts of data and knowing how to analyze internally is not the banks strongest attribute. In order to stay abreast banks must look to their IT technology as the gateway to success.
It is heavily believed by senior bankers that current mission-critical IT systems will be required by regulators to be updated in order to comply with stricter regulations and minimize security threats and glitches. It should come as no surprise to anyone that there has been an influx of cyber security threats and vulnerabilities surrounding not only the financial industry but many others as well. For example, companies such as Target, Home Depot and Neiman Marcus have been exposed to cyber security attacks where customer’s credit cards and personal information was stolen. Not only does this have an effect on customers, but it hurts businesses as well. Customer loyalty and loss of profits are two major areas that can spell disaster for the business. Business leaders and IT executives need to collaborate in the work place in order to strategize their business initiatives as well as staying abreast of the most recent trends in security and compliance. Financial institutions should place high priority on data security as well as increasing security budgets.
The one sure thing that we can all agree on is that technology is a constantly evolving creature. Every day there are new advances and product releases that will change the way we go about our daily lives, and as humans, we love it. The financial industry as most industries are currently experiencing how technology can change the way their business formulates strategies and functions as a whole. Ensuring that IT infrastructure and technology is at the forefront of business strategy is a critical factor to the success of any organization today. Having the abilities to scale resources, develop applications, launch new products, secure and minimize vulnerabilities and collect and analyze data will prove to be the determining factor in staying competitive in any industry. Your industry and customers are changing; will you be prepared for the unknown?