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Banks are beginning to look to the future after a decade focused on recovery and regulatory compliance, with IT playing a central role.
Since the global financial crisis in 2008, banks have been focused on activity that has not increased business, but merely helped them regain reputation, adhere to stricter regulation and remain contenders.
But according to an Ernst & Young (EY) study of more than 200 of the world’s biggest banks, they are beginning to look to the future.
The research found that 85% of banks put the implementation of digital transformation as the second-highest priority, while improving cyber and data security ranked first (89%).
Improving data and cyber security was listed as the sixth highest priority in 2017’s report, while implementing digital transformation did not even feature on the list.
Another climber was the priority of gaining efficiencies through technology, which moved from thirteenth to fourth. Last year’s top priority of managing reputational, conduct and culture risks is now listed as only the sixth most pressing issue.
Jan Bellens, deputy sector leader of global banking and capital markets at EY, said banks must prepare for a future led by innovation and technology. “The pace of innovation continues to accelerate, and banks must have a strategy in place to ensure their implementation of new technology is effective,” he said.
Banks appear to be getting the message, according to the study, with 59% of them expecting technology investment budgets will rise by more than 10% in 2018.
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Banks realise they need to recruit more IT experts to achieve these priorities. Recruiting, developing and retaining key staff is the third-highest priority, with 83% of banks listing it.
Despite their huge internal IT teams, banks are increasingly looking outside for technology, with 44% planning to buy from third parties. Many of these companies are part of the financial technology (fintech) revolution, with consumer-friendly app-based products and services harnessing the latest technologies such as artificial intelligence (AI), automation and biometric authentication.
EY found only 19% of banks believe they are either digitally maturing or a digital leader, but 62% aspire to be one of the two by 2020. EY said banks realise they must act now if they are to prosper.
“Ten years after the global financial crisis, banks continue to experience increased competition from a range of new market entrants and evolving risks that challenge their ability to deliver sustainable profitability,” said EY.
“To perform at the highest level, institutions must emerge from an era of regulatory-driven transformation, and develop strategies to tackle the new evolving risks that are preoccupying the C-suite.”