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Banking

3 ways the banking sector can overcome the challenge of change and control

3 ways the banking sector can overcome the challenge of change and control 1

By Michael D’Onofrio, CEO, Orbus Software  

3 ways the banking sector can overcome the challenge of change and control 2

Michael D’Onofrio, CEO, Orbus Software

The Greek philosopher, Heraclitus, said that “change is the only constant in life.” This is something we have certainly experienced throughout the pandemic. Ecommerce accelerated, we shifted to a remote/hybrid working model and we’re seeing a whole new focus on digital transformation.

When we look at the banking sector, we witnessed increased regulations (around data protection and cybersecurity), tighter budget controls, as well as rising consumer expectations for digitalised processes over the past 2 years. In turn, we’re seeing three hurdles emerge for financial services CIOs: 

  1. Achieving a first-class customer experience, 
  2. Overcoming disruption from new technologies and emerging business models,
  3. Maintaining business as usual. 

How are these challenges connected? It’s clear there is a balancing act of controlling risk while driving technology-driven transformation. Companies who demonstrated a more proactive approach to managing risk did well throughout the pandemic. Therefore organisations who take a back-seat and follow a reactive approach are unlikely to be the winners of this competitive landscape. 

What is more, “almost half of global financial services organisations are still in a very early or even immature stage of their digital transformation journey” according to Gartner, and rely on traditional business growth as opposed to digital transformation efforts. In the face of this challenge, those with a successful Enterprise Architecture (EA) will be better equipped to respond.

1.Achieving a first-class customer experience

According to McKinsey, 76% of US consumers moved to digital channels for the first time during the pandemic, while a survey by Accenture demonstrated that 58% of customers want to be able to switch between human and digital channels. 

To maximise customer interactions and revenue opportunities, retail banks need to ensure they personalise online interactions for their customers and provide a seamless experience across communications channels. It’s becoming clear that power has permanently transferred from brands to consumers — but equally clear that many companies have not fully realised the extent of this shift. 

To remain competitive, financial institutions need to focus on delivering true omnichannel interaction in order to achieve a first-class customer experience. Empowered by technology, today’s consumers have declared, “it’s no longer you, it’s about me.” Therefore offering equivalent services to customers across all digital and offline channels and synchronising their data for re-use across channels in real-time, will be crucial to winning and obtaining consumers. 

What does this mean for financial institutions? This is driving the need for digital customer experiences, which is leading to the following challenges:

  • Omnichannel technology projects are often impacted by disconnected silos of enterprise information, 
  • Security and compliance risks are not always accounted for nor visible, 
  • Cost and complexity of adopting omnichannel technology can increase rapidly

This is where a strong Enterprise Architecture model can come in handy in delivering integrated channels and seamless end-to-end transactions. Additionally, EA can create a single source of truth for all enterprise information from all areas that are to be integrated, help control investment across IT portfolios, and gain visibility into and reduce cybersecurity threats.

2.Addressing market disruption

70% of business leaders report high disruption to their company, up 11% in the past year. That’s according to a 2022 Alix Partners study, which also found that 94% of executives say their business model must change in the next three years. Leaders can simply no longer ‘wait and see’ what is in store for the years ahead, but prepare themselves for inevitable disruption. Those who will best succeed, will be the companies who adapt themselves on an ongoing basis.

Technology is the foundation of the modern bank. However, many banks now rely on customised and legacy systems and are slowly migrating to cloud-based options. Outdated technology infrastructure reduces organisation resilience and agility – you simply can’t just bounce back from a threat as quickly. 

Navigating disruption requires clarity and alignment on the hurdles being confronted. Despite this, many enterprises don’t have the tools needed to cut through this level of chaos. 

With Enterprise Architecture, companies are equipped with a common language which allows them to understand what aspects of the organisation are impacted, and provides the instruments to respond. Additionally, EA supports application and data integrations, and the automation of organisational processes or workflows while ensuring better control over situations. For Financial CIOs, this speed and clarity is essential when responding both to change and planning for the future.

3.Reinventing Business-As-Usual

As noted in this FT article, banks in the US and Europe were starting to show signs of being back to ‘Business as Usual’, overcoming the negative impacts brought on by the pandemic. The storm is far from over, but this does feel like the beginning to an end. 

The COVID-19 pandemic demonstrated two key things: the importance of planning and the need for cross-departmental collaboration. Companies need to say goodbye to reactive habits and learn to embrace proactive ones to gain market share. Now is the time for the banking sector to re-evaluate the short-term measures that were put in place and look long-term. 

We can all back what Heraclitus declared, that change is indeed constant, but what differentiates the most successful and agile companies is the ability to learn and thrive from this change. With Enterprise Architecture, companies have the agility to align IT assets with risk, resiliency and business processes and programs around an actionable plan. 

Enterprise Architecture is the necessary link between technological resilience and operational resilience. It provides organisational clarity to accelerate business transformation in a strategic and purposeful way.

Overcoming these challenges in the years to come will be crucial for the banking sector in order to be truly resilient and be able to weather the next storm.

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