Banks help companies, investors and governments to function, change and realise their ambitions. At times of extreme disruption, they have an opportunity to play their part in rebuilding the economy and collaborate for the betterment of society.
The banking sector needs to grasp opportunities as they arise. Digital adoption and adaptation, and building better customer experiences through data and sustainability initiatives are all essential.
At the same time, banks must improve their business models, mitigate cyber-risks, manage business risks and ensure regulatory compliance.
While the banking and capital markets landscape is continually evolving, there are certain challenges that span the entire industry from digital transformation and cybersecurity to regulation, ESG, and risk and data.
The digital transformation trend has been accelerated by recent disruptions, not least the COVID-19 pandemic. Customers and organisations rapidly adopted and adapted to digital solutions, and the banking and capital markets sector must leverage this change to reinvent its future.
It's an opportunity to do what organisations have long discussed, but often delayed: cutting costs by finding new and better ways to do things. It can improve customer offerings and deliver online banking optimisation, opening options for growth and expansion into new markets.
However, supporting the demands of digital-savvy customers presents a huge challenge for established organisations. Legacy infrastructure needs to evolve and migrating to something new can be complex. To solve this problem, organisations must have a progressive plan for modernisation.
As banks embrace new technology and technology partners, they open themselves to cybersecurity issues. As they deliver more services, meet more reporting requirements and support more operations with digital solutions, they must protect their investments and mitigate the risks.
There is clear concern in the banking sector when it comes to cybersecurity. Cyberthreats remain pervasive, and will likely become increasingly common as the world embraces hyperconnectivity and businesses intensify their digital transformation activity. It is therefore vital that organisations have a cyber-strategy to protect their most valuable assets.
Regulatory oversight is a constant in banking and capital markets. As stakeholders and regulators demand more transparency and accountability, businesses need more complete and accurate reporting mechanisms. They are subject to more complex regulation than ever before, including the Senior Executive Accountability Regime and AML banking regulations, among others. Compliance, and the ability to demonstrate compliance, is imperative. Being able to identify, and take, the steps needed for regulatory compliance is a skill all organisations must embed.
There are opportunities for digital transformation to support regulatory compliance and deliver operational risk management in this sector. Banks have the opportunity to design infrastructure that supports innovation and builds consumer and regulatory trust in the process – but they need to be innovative and meticulous, and future-proofing for new regulations is now a core component in banking transformation.
Environmental, social and governance (ESG) aspects of banking have moved centre-stage and are no longer a nice-to-have. Organisations are under pressure from customers, investors and society to deliver change. This presents an opportunity to bring sustainable finance into the mainstream, and the industry can be a positive force in this regard.
Those that commit to tackling ESG issues while fostering economic growth are likely to gain a competitive advantage. Aligning strategy and purpose with the expectations of stakeholders and society is a winning combination. The emergence of several EU and other global reporting requirements will assist organisations in focusing on ESG issues and considering their relevance and potential impact. Organisations should actively consider these requirements and plan their response strategically.
Financial services firms face threats that are increasingly difficult to adapt to. Banks are under pressure to identify, evaluate and mitigate risks, which include market, credit, operational and reputational risks. They can also be unrelated to their business, as COVID-19 has illustrated.
Becoming resilient requires more than performing existing risk management framework practices. Businesses need to assess their existing processes and protect against future risks. Using digital technology, they can use data to map, measure and visualise risk in real time. They must also deal with risk compliance and regulatory requirements in a cost-effective way.
Data, and the ability to derive meaningful business insights from it, is imperative in the banking and capital markets sector. Customers' data is the lifeline of the banking industry, and it must be protected.
