The global financial crisis has left a significant mark on the banking industry, not least through the collapse of a number of banks throughout the world and a subsequent move towards consolidation within the industry. As a consequence, overall readiness to invest also fell, although there were some exceptions depending on the financial strength of individual banks.
Throughout 2009, the consequences of the financial crisis spread out from North America and Western Europe to affect Central Europe and Asia, a situation that is likely to continue into 2010. This is the view of a survey by the market research firm Datamonitor, looking at the negative impact of the financial crisis on investment in IT (Impact of the Financial Crisis on Technology Spending in Banking, January 2009). According to Datamonitor, this is likely to increase the pressure to reduce capital expenditure on IT in the corporate and retail banking segments, leading to a contraction of 2.0% in the global banking IT market.
In the hardware sector, the general impact of this investment downturn on total spending was particularly noticeable in terms of sales of automated teller machines (ATM). A study carried out by British market researchers Retail Banking Research (RBR) predicts a 14% drop worldwide in the number of ATMs in 2009 (RBR, Banking Automation Bulletin, Issue 266, 2009).
The Predominant IT-related Trends in the Banking Industry,such as continued process optimization and standardization to boost the bank’s productivity and earnings, remained unchanged. In an IT survey conducted by IDC and Capgemini in Germany, for example, 56% of the bankers who responded regarded these targets as important.
Among those surveyed, measures to increase the degree of automation through IT were almost as important (49%), while other priorities included action to intensify sales through cross- and up-selling (40%) and the full or partial outsourcing (Glossary) of business processes (19%). Given this scenario, the survey concludes that planned spending for 2009 was likely to go ahead, although at many banks investment decisions would be looked at more thoroughly than before. What measures are planned to optimize business processes? At present, according to the survey, the banks intend to improve data and information management (48%), introduce business process management (40%) and standard software (37%), redesign existing applications (31%) and introduce a service-oriented architecture (SOA) (Glossary) (26%).
Multichannel (Glossary) Selling as Service and Communications Platform.
More and more banking customers are using a range of channels to perform financial transactions. According to a 2008 survey by Steria Mummert Consulting, in a market such as Germany the branch remains the most frequent point of contact for customers (89%), followed by Internet banking 84%) and self-service systems (Glossary) (68%). Banks are responding to emerging new customer requirements by providing a finely tuned strategic combination of different sales channels.
At the same time, there is an increasing emphasis on communications with customers as a means of strengthening customer retention. In this respect, the role of IT is to prepare appropriate customer data for individual sales channels and to make this data available for general use at branch level, on the Internet or for other channels such as mobile banking. In response to the financial crisis, many banks are striving to enhance communications with their customers as a means of counteracting the widely perceived loss of confidence.
Branch Transformation – Focus on Intensifying Contact with Customers.
In recent months, the branch has reinforced its importance for many banks as a platform for communications with their customers. In the established markets, above all, banks have therefore invested in the modernization of their branches with a particular emphasis on issues such as customer proximity, the intensification of sales and the provision of individually targeted advice. This trend has had a marked impact on layout and the technical equipment to be found at branch level. The banks are aiming to boost customer loyalty by adopting a more forceful and more emotional approach. As a result, the optimization of branch processes through IT continues to enjoy a high priority. Banks are investing, for example, in information and communications technology for their advisers’ workstations. Increasingly, self-service systems installed at branches are being used for the purpose of promoting specific offers and initiating one-to-one communication with banking staff.
Mobile Banking Sees Rapid Global Expansion.
In both Europe and Asia, a growing number of banking transactions are being carried out via cell phone. Indeed, in some developing countries mobile banking is expanding even faster than in the developed markets. The growing popularity of this sales channel is predominantly due to the massive global availability of cell phones. Mobile banking offers customers the convenience of being able to perform a transaction wherever they happen to be and at any time. According to the survey conducted by Steria Mummert Consulting, in Germany alone around half of all banks are planning to invest in mobile banking by 2011.
Fraud Protection Gains Higher Priority.
The number of attempts at fraud and manipulation in areas such as ATM use has increased substantially. In 2008, according to a survey by the European Network and Information Security Agency (ENISA), in the EU there were more reported cases of ATM fraud then ever before. Figures from ENISA relating to 2008, point to a 150% increase in criminal activity on the previous year, with the associated damage totaling nearly €500 million. Banks are reacting to this development by investing in comprehensive security solutions to protect their IT systems and branches, their staff and customers and, ultimately, their reputation.
Automating Standard Processes and
Using Self-service Technology to Generate New Business.
This is the philosophy behind the efforts of the retail banking industry to drive ahead with the automation of a wide range of products. We are seeing an increasing migration to self-service machines, above all with the aim of processing standard transactions such as cash disbursement, receipt printing and, in many countries, the paying in of checks and the automated settlement of invoices. In particular, the automation of these standard processes opens up attractive prospects for rationalization. According to ibi research at the University of Regensburg, however, as self-service systems are a widely used sales channel, the trend is increasingly towards self-service concepts that also aim to increase customer loyalty through a proactive appeal to customers and cross-selling (The Self-service Sales Channel, 2008).
Outsourcing.
Many banks are now transferring the management and operation of their infrastructure to external service providers as a means of reducing their operating costs. Retail banks are predominantly using this approach to outsource tasks such as the operation of their self-service or branch IT systems.
