Since the financial crisis, the banking industry has been under tremendous pressure. Economic uncertainty, rising customer expectations, increased regulatory focus, intensified competition and new FinTech entrants are putting an increased pressure on bank’s revenue margins. These trends are creating an urgent need for innovation and cost reduction.
Is industrialisation the way forward for the banking sector to unlock innovation and agility?
Well, in principle, yes.
Industrialisation has been successfully applied in a variety of industries in the past. It has often been driven by the emergence of new and disruptive technologies, structural change (such as the end of banking secrecy in Switzerland), difficult market situations or new entrants (such as the rise of challenger banks and FinTech companies), challenging the status quo.
Industrialisation is not simply about automation. It’s about redesigning processes so that automation can be done in a smarter, more efficient way. History has shown that applying industrialisation principles can create a more competitive cost base and lead to more innovation. Resources otherwise trapped in activities with limited value can be freed up and used to bolster innovation.
Deloitte, in collaboration with the Hochschule Luzern, Institut für Finanzdienstleistungen (IFZ), has produced a report suggesting how an industrialisation strategy can be used by banks to increase efficiency and agility.
Some of the key findings reveal that:
- 88% of banks say that industrialisation will reduce their cost
- 69% believe that industrialisation will speed up innovation
- 100% of banks see resistance to change as a major challenge
- 88% see data confidentiality as a major risk of outsourcing
The report focuses on Swiss banks but in my opinion can certainly be applied to other countries as well.
We’ve been talking a long time about industrialisation in financial services, probably since SOA was first coined by Gartner last century.
Do we now have the right combination of enabling technology, structural change and market competition to finally make it happen?
Will 2017 be the year of industrialisation in banking?