Research from IDC finds that only 29% of banks claim to have a long-term, strategic digital transformation plan in place, despite results showing firms that had invested in transformation saw improvements of 27% in reducing risk, 27% in innovation and 26% in improved customer satisfaction. The days when banks’ IT teams operated in isolation of business goals should be very old news. Effective CEOs build digital transformation into their strategies from the start, and the most successful CTOs understand how to apply technology to achieve business success.
In many ways, CTOs have become more like orchestrators or conductors than individual instrumentalists. They need everybody on their team to work in concert to deliver value according to desired business outcomes. It’s less about building IT from scratch and more about assembling components and making sure that they operate smoothly and cost-effectively.
One of the most striking findings is that 40% of financial institutions said that the pandemic meant they had to accelerate and increase all of their digital-first initiatives. They had to innovate to remain viable and competitive. It’s also clear that there is no longer just one, singular path of IT delivery. Instead, CTOs are facing multi-threaded challenges. It means CTOs must consider many different deliverables and leverage all the resources at their disposal, including internal and external partners.
Changing customer expectations
The financial services sector was facing a range of external challenges even before the pandemic arrived. For example, from a consumer’s perspective, the exponential advancement of a smartphone’s technological capabilities in recent years has increased their expectations for new updates and improvements. This behavioural change has impacted customer decision-making and they now expect a high level of service and responsiveness, whether they are customers of a retail or a corporate bank.
The banking industry also faces regulatory, compliance, resilience, and sustainability issues. As ESG agendas become an increasingly important priority for financial institutions, pushed by the rise of net-zero targets, CTOs must respond to these demands, and that’s why they see innovation as such a key focus.
But how can financial institutions that are late to the digital transformation party use technology to capture competitiveness and improve responsiveness for their clients?
One approach that has proved successful is managed services, which is a term used to capture the blending of services, product, and functional capabilities. When CTOs consider this option, they need to start by thinking about the business outcomes with the associated technical and functional expertise they need.
This includes the business uptime that is required, scalability and deployment speed. Does the bank need to roll out capabilities across the globe, and does it need to serve only the main financial markets, or emerging markets too?
Another question CTOs must consider is choosing what service partner to work with. Large system integrators have been providing these services for a long time, but a software partner like Finastra has advantages in terms of product proximity.
Service providers must offer tailored products focusing on the needs of its clients. Offering quality software allows banks to achieve their long-term strategic outcomes.
It’s important to look at all areas of a banks’ business, For example, what does the payments team need?
What does the head of lending need? What does the head of treasury need in order to grow their business over the next five years?
With that in mind, I offer three tips to banks when considering managed services.
1. Be very clear about what your business outcomes need to be. Really drill down into KPIs and metrics that we can look at to ensure we provide the service your bank demands. This can range from resiliency, compliance, regulation or even functionality and capabilities – such as how often you require upgrades.
2. Measure and assess your own resources, skills and capabilities. Understand where you want to draw the line between the responsibilities you would want a service partner to take on and what you want to retain. There shouldn’t be any grey areas. You want a clearly-defined line where responsibilities lie, so that everyone is very clear about who’s doing what and how KPIs and service levels will be met.
3. Be prepared to develop a long-term strategic partnership, over five or 10 years. We expect hard questions, and you should be expecting them back – ultimately that’s how good relationships and partnerships work.
As IDC writes in its report ‘New service models to accelerate innovation in banking’ these holistic and software-led models require banks to master a set of new skills, including governance and partner management. Service partners should be industry-savvy, should supply end-to-end expertise, and should be aligned to support the financial institution’s business goals, not just technical KPIs.
Digital transformation infrastructure management requires CTOs to act as a conductor, rather than a solo performer.
To learn more about how financial services organizations around the world are leveraging software-led managed services to accelerate innovation in banking, download IDC’s latest report here.
Get in touch
We are here to help your business reach its goals