The Banking crisis 2008 onwards has led Financial Services organisations to approach their businesses with renewed focus on risk and compliance. At the same time, the whole industry is undergoing transformation as new competitors emerge with new digital business models without the complex legacy infrastructure of the past. In this landscape, organisations in the sector need to ensure IT can support back-office functions effectively, as well as transforming the way they do business with customers.
In our experience of the sector, there are some key challenges for IT leadership teams in ensuring that financial businesses are trusted and valued by consumers.
Regulation. Banks and insurance companies are heavily regulated following the challenges of the financial crisis. Failures in IT services can lead to significant fines (in excess of $50 million in some cases from the regulator), in addition to loss of customer confidence. The need to focus on risk regulation can stifle innovation and companies need to find new ways to address this.
Data security. Online services represent a major security threat. Banks and insurers host significant volumes of highly sensitive customer data, which can lead to substantial reputational risk if not managed correctly. Increasingly companies are looking to chief information security officers (CISOs) to focus less on technology and more on representing the board in assessing risk.
Innovation. High-street banks have moved to a retailer model with customer service at the heart. The bank has become the outlet for a variety of retail products such as mortgages and pensions advice over video links. Technology has a significant role to play in keeping organisations at the leading edge, as customers demand continued innovation in return for continued loyalty.
Multi channel. Banks also share the retail challenge of delivering consistent products and customer experience across a wide range of channels, including contact centers, websites or mobile devices. Consistency of experience and reliability of service are critical differentiators in acquiring new customers and maintaining existing ones.
Analytics. Across the financial services industry companies are increasingly using analytics to mine their information base. This data, if managed well, can be used to support improved decision making, ranging from credit rating to underwriting of insurance risk. New partnerships are being explored to bring IT analytics skills together with in-depth industry expertise.
Simplification of IT estate. Established banks and insurers maintain large IT estates leading to significant spend on long-term IT solutions. Cloud services are an important part of the rationalisation and simplification of IT assets. Increasingly cloud deployment is a critical enabler in building new applications quickly and cost effectively to exploit new business opportunities, while new entrants can set up without physical real estate, allowing them to operate with a much lower cost base. Established players need to consider leaner operating models to stay competitive.
Cost management. The nature of traditional retail banking is that IT is often deployed across thousands of branches and back-office processing centers. These estates undergo constant change, incurring significant costs and leading to continued programmes of activity.
IT sourcing strategy. IT sourcing is a specialist capability, which can make a major difference to overall costs. In addition high service uptime is critical in a 24-hour retail society, so negotiation of appropriate service levels is a critical part of the mix.
Operating model. All of the above issues are leading to unprecedented levels of change. Increasingly organisations are adopting DevOps and Agile delivery to build flexible operating models with strong in-house development capability.
Delphi Infosolutions offers a full suite of IT advisory services to support financial services clients throughout the IT life cycle.