CCR Magazine

Mikael Krohn, VP at EDB Business Partner, discusses how the use of IT services can aid the financial sector on its path to economic recovery.

Although the banking industry is now truly global and the basic business roles are quite homogenous, banks’ readiness to adopt modern IT solutions differs a lot between individual countries and regions. This is mainly due to differences in their history, culture and government initiatives. 

The UK is a global financial centre and as such, it was no secret that the country was most severely affected by the recent financial crisis. The crisis in the banking industry was preceded by a decade of strong expansion without a parallel focus on building scalability and control into businesses and banks. While risk profiles gradually increased, profit margins shrank and as a consequence the financial bubble built up steadily. That was in 2008 – these days, banks are on the slow road to recovery after the financial collapse. As a result, several measures have been put into place in the past months. 

First of all, the focus swiftly shifted to crisis management and securing liquidity by stopping lending and exiting non-core business lines and with an extensive liquidity injection from the UK government. Secondly, banks began to cut costs by slimming down on staff and other expenditure including IT investments.  Where previously, investments were mainly allocated to arrear management and documenting risk profiles, we are now in a phase were we see banks beginning to look forward again and prepare for the economic recovery that will come.

However, at this stage, many banks have still not solved the underlying challenge to improve efficiency, quality and control of processes. This is due to the fact that the bank’s core solution platforms could have a history up to 30-40 years. For the banks to catch up and adapt to IT changes in the market often requires a transformation of their platforms that involve great risk, large investments and new competence.

It seems that this should be a good time for considering alternative delivery models with proven solutions, fast time to market and shared cost. However, buying services from a third party is not inherent in the culture of the UK banking industry and is not something this sector has experience with. As such, banking industry buying services and cost sharing is something that mainly new banks and other payment institutions such as supermarkets can take advantage from.

Those banks that use this low activity period to invest in building scalability into their processes in advance of the anticipated economic upturn, whenever it arrives, will be best placed to gain significant competitive advantage and profitable growth.

(Source - EDB Press Release)