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Priming retail banking for future.pdf

Priming retail banking for future.pdf

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Published by: ramponnet on Dec 14, 2012
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01/03/2013

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Priming Retail Banking for the Future© Ovum (Published 04/2012) Page 1This report is a licensed product and is not to be photocopied
SUMMARY
Catalyst
With a tough market and tightening regulatory framework, the outlook for banks in terms of profitgeneration looks both uncertain and challenging, and executives are being forced to re-evaluatewhether their organizations are prepared to meet the road ahead. Based on interviews with morethan 250 banks, this paper examines the critical business imperatives for retail banks now in thepost-financial crisis world, and explores the key technology enablers that executives shouldconsider to prepare for both current and future requirements.
Ovum view
The financial crisis has resulted in a structural change in the retail banking operating environment,driving permanent shifts in regulator, customer, and shareholder expectations. This requires acomparable structural response by bank executives to adjust the operating cost base, prepare for a continually interventionist regulatory policy, and complete the evolution from product- tocustomer-centric organizations. For most banks this will require executives to shift to atransformative mindset across channels, IT, and operations. However, the path to transformationneed not be a 'big-bang' one. Indeed, an evolutionary path that allows banks to focus on short-term requirements while moving towards an end-state goal will be a better approach for most.
ANALYST INSIGHT
Priming Retail Banking for theFuture
Key technology enablers to meet the road ahead
Publication Date: April 2012Author: Daniel Mayo
 
 
Priming Retail Banking for the Future© Ovum (Published 04/2012) Page 2This report is a licensed product and is not to be photocopied
Key messages
Operational efficiency and agility have become top business imperatives in theaftermath of the financial crisis.
Banks need to meet current regulatory demands, but must assume that the post-financial crisis regulatory wave will continue for a number of years.
Future revenue growth will require higher customer satisfaction. This necessitatesbanks truly becoming customer- rather than product-centric.
Banks need to re-evaluate customer relationship management from a multi-channeland customer experience perspective.
Mobile banking has become a competitive requirement in most regions, meaning itmust be viewed in a wider light than its direct revenue benefit and costs businesscase.
Business intelligence and analytics needs to become embedded into processes anddecision-making, in addition to reporting.
This means that analytics needs to be provided in real-time, with mobile as well asonline distribution.
Banks should plan a path for banking platform transformation to enable the businessto meet the broader structural change required in the post-financial crisis environment.
BANKS NEED TO ENACT A STRUCTURAL CHANGE TOPREPARE FOR RETAIL BANKING BUSINESS IMPERATIVES
Rather than just a temporary slump in the banking industry, the repercussions of the financial crisisare driving permanent change in the retail banking landscape. The shift in regulatory strategy andapproach will be a lasting one, the loss of key pre-financial crisis revenue and profit growth driverswill be long-lived, and the bank-to-consumer relationship has seen ongoing change, affected byreputational damage and growing influence of digital social networks. As a result, one of the industry key performance metrics, return on equity (ROE), has plummetedfrom an average mid-20s ratio in the pre-financial crisis world, to a single-digit one for most banks.Even when the overall market environment starts to pick up, market changes mean that mostbanks will struggle to hit the mid-teen levels. Successful banks are going need to move beyond astrategy premised on delivering the status quo a little bit better, and move to enact structuralchanges to their operational base, culture, and orientation to meet this new environment. At a business objective level, the impact of this can been seen in Figure 1. This shows aggregatedexecutive opinion on the relative importance of various business objectives on IT investment from
 
 
Priming Retail Banking for the Future© Ovum (Published 04/2012) Page 3This report is a licensed product and is not to be photocopied
an Ovum Business Trends study. This was a primary research conducted with senior IT executivesof more than 250 banks across Asia-Pacific, Europe, and North America, carried out at the end of 2011. The top priorities identified for most banks in 2012 were increasing efficiency, achieving andmaintaining regulation compliance, and increase customer satisfaction.
Figure 1: Efficiency, regulation, and customer satisfaction are top ITobjectives for retail banks in 2012
Source: Ovum
O V U M
 At a tactical level, these changes assemble around three key areas: creating an operating costbase that is both agile and scalable, effectively managing and leveraging new regulatory demands,and truly moving from product- to customer-centric organizations to drive customer satisfaction.
The operating cost base needs to provide leverage and agility
For most banks the financial crisis drove an immediate cost reduction drive. Concerns about short-term survival eroded pretensions around long-term investment, and banks generally embarked onsignificant cost abatement programs
 –
in particular, seeking savings that could result in immediate
1.01.52.02.53.03.54.0Raise efficiencyAchieve or maintainregulatorycomplianceIncreasecustomer satisfactionCut costsIncreaserevenuesImprove supplier relationships
   A  v  e  r  a  g  e  p  r   i  o  r   i   t  y  r  a   t   i  n  g
Please rate the importance of the following objectives to your IT investment strategy in 2012
Please rate 1 to 4, where 1 is not an objective and 4 is top priority objective

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