Technology investment rated critical to future of banking

Technology investment rated critical to future of banking

Bankers worldwide see investment in IT as critical to maintaining competitive advantage as the industry restructures to meet new business challenges over the next five years.

Nearly 600 global senior level banking and insurance executives agree that technology-led innovation and changing customer needs will lead them to rethink the way they do business between now and 2010, according to a SAP-sponsored study by the Economist Intelligence Unit (EIU).

More than 60% of executives say new business models are increasingly critical to competitive advantage, while approximately 84% believe that technology will be crucial to their firms’ ability to adapt and implement new strategies.

Thomas Balgheim, senior vice president, Financial Services, SAP, comments: "After many years of being resistant to change, banks and insurers are rethinking their business models and will be looking to technology in the next five years to stay competitive."

While in the past financial services companies have focused on creating new products and services, he says, they are now rethinking this strategy due to the important role that technology will play in adapting their business models for managing customer and regulatory demands.

Compliance will be key, says Balgheim. Regulatory compliance and corporate governance, including Basel II and the Sarbanes-Oxley Act, are changing the way firms report financial results, manage capital and measure risk. The impact is expected to be heaviest in the more developed financial markets.

Customer service will be the area most impacted by technology. More than 70% of respondents say that customer-related activities and product development are areas in which IT will be most critical in 2010. The study suggests that banks and insurers will seek data management and analytical tools to help them improve customer relationships by predicting customer behavior and identifying news sales.

Fiercer competition from mergers and acquisitions is also expected. Three-quarters of all participants say that industry consolidation will constitute a larger competitive threat in 2010 than new competitive entrants into the market.

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