Financial services are the economic services provided by the finance industry, which encompasses a broad range of businesses that manage money, including credit unions, banks, credit-card companies, insurance companies, accountancy companies, consumer-finance companies, stock brokerages, investment funds and some government-sponsored enterprises. The financial services industry has always been faced with a challenging global business environment. Although regulators needed to be careful not to be too overbearing in response to digital engagement, technology has caused financial institutions of all shapes and sizes to undergo a period of strategic transformation. Despite the fact that challenges facing the industry perennially appear year after year cannot be denied, each will affect each institution to different tenors and timeframes. Therefore, if financial institutions adopt an organisation-wide approach, it is difficult to imagine the financial services industry falling behind the challenges ahead.
Some of the key issues financial institutions face today:
- Promoting growth and sustaining profitability in an environment with low interest rates
- Rebuilding asset quality and strengthening capital positions
- Developing new and reliable sources of revenue
- Increasing the business value of customer relationships, especially when customers have become more demanding
- Restoring public confidence in the industry
- Competing with aggressive, innovative non-traditional competitors
- Incorporating a risk management culture into daily operations
On top of these challenges, financial institutions must deal with regulatory issues, such as the Dodd-Frank Wall Street Reform and Consumer Protection Act. In the aftermath of the financial crisis, regulators continue to implement risk management reforms, like Dodd-Frank, that are designed to create greater transparency and stability in the global banking system. This new environment changes how financial institutions run their businesses and especially how they measure and manage risk.
Technology can help banks and other financial institutions address these industry issues. However, keeping up with technological innovation presents a challenge by itself. According to a PwC CEO Survey, nearly 60% of industry leaders view the speed of technological change as a threat to their growth prospects.
The rapid shift in technology and customer expectations require financial institutions to address projects such as:
- Mobile Banking – Financial institutions have to develop and implement new digital delivery strategies to remain competitive. At a minimum, they must incorporate mobile banking as a regular delivery channel.
- Next-Generation Platforms – Many financial institutions rely on legacy systems to conduct operations. To address the issues facing the industry, financial institutions need to quickly migrate their old technology architectures to next-generation capabilities. Viewing new technology as a strategic growth investment rather than an operational expense will demonstrate the value of IT systems throughout an organization.
- Cyber Security – The PwC CEO Survey found more than 70% of industry leaders believe cyber insecurity is a threat to growth. The ongoing news reports of data breaches at retailers highlight the danger all businesses face.
CPI Consulting Associates; specializes in SAP Analytics solutions which can help to transform and simplify business processes and reduce costs to a sustainable level to improve return on investment while mitigating risk and complying with new regulations.