Banks move towards shared processing

Global banks are gearing up to share systems and processes across multiple business units after traditional cost-cutting strategies failed to reap the expected benefits, research reveals.

Global banks are gearing up to share systems and processes across multiple business units after traditional cost-cutting strategies failed to reap the expected benefits, research reveals.

A survey of 499 US financial services firms by the Economist Intelligence Unit (EIU) and consultancy Booz Allen Hamilton, shows banks plan to share systems across their businesses, ranging from customer applications to financial products.

"Consolidation in the financial services sector has given many banks the chance to achieve extraordinary economies of scale in back-office processes," said the report. "Such improvements can cut costs dramatically, reduce risk, increase processing speed and minimise errors, as well as enhance customer service."

In the survey, the banks said IT infrastructure and application development were among the most important areas to be shared across a business.

Peter Redshaw, research director at Gartner, said any processes banks carried out, such as mortgage or loan applications, involved a high level of technology.

"Technology is at the core of almost everything banks do, so sharing any process will include technology integration," he said.

Banks across the world were developing services that crossed many business units in different locations and involving different products, known as shared service layers, said Redshaw. This involved linking individual "islands" that had traditionally build their own systems.

Banks traditionally cut costs associated with support functions, such as human resources, procurement, finance and accounting, but the EIU research showed that 35% of 334 banks that tried to achieve savings of 5% or more failed to do so.




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