Mark Sullivan, North America managing director of banking IT strategy Accenture
The top challenge in 2013 in banking IT will be speed. The key question is whether traditional banks can bring new technologies to market fast enough to retain and grow customers. Banking IT leaders must help drive growth agendas, in addition to providing cost effective IT services.
Continued shifts in consumer behavior, as well as emerging technologies, are changing what customers expect from banks and non-banks that provide financial services. This environment is creating challenges and game changing opportunities for institutions that can get new growth-enabling technologies to market quickly.
Bank CIOs must provide the technology to win the heated competition over who can provide an experience that is relevant to customers’ needs. That superior experience is often lacking today. The customer experience must be fueled by data. The value of this data hinges largely on its speed - the amount of time it takes from collection to insight, and from insight to action.
The technology capabilities now exist but banks must quickly implement them. If they don’t, new entrants, without the burden of legacy systems, may prove to be more nimble and offer more differentiated services to customers.
Regulation the Biggest Challenge
Judd Caplain, advisory principal, Banking and Capital Markets, KPMG
Banks are dealing with profound changes as a result of the financial crisis in 2007-08 and many are reinventing themselves as a result. Banks are grappling with how to replace lost revenue resulting from changes in customer behavior, how to adjust the cost base given lower revenues, and how channels for consumer interaction and delivery are being thought about and used, all of which create challenges for, and demands on, IT organizations. However, the biggest challenge bank IT departments face is ensuring their institutions are meeting, and complying with, various new regulatory requirements coming out of the Dodd-Frank Act, Consumer Financial Protection Bureau, Basel III, etc.
Although some of the new regulatory mandates change the business model and profitability for banks (e.g., reduction of ATM debit fees due to the Durbin Amendment, elimination of proprietary trading due to the Volcker rule, increased capital requirements due to Basel III, etc.), many new requirements exist that are very data, operational and IT driven.
Some examples include:
- Sourcing, ensuring accuracy, and automating the reporting of data for new liquidity requirements (e.g., Fed’s “4G” requirements), Basel III capital, and private fund (Form PF) reporting requirements
- “Operationalizing” and automating the new annual Resolution and Recovery Planning (RRP) and stress testing (CCAR) requirements
- Improving AML systems as the Fed and OCC require banks to bring more rigor to transaction monitoring
- Creating new functionality and interfaces in order to meet the requirement that derivatives are centrally cleared.
Banks need to meet these new non-discretionary regulatory requirements, many of which have a large impact on their operations and IT infrastructure. Banks can better manage this endeavor by inventorying requirements and needs and prioritizing where automation can improve the reconciliation, accuracy and reporting of the data.