white papers
Digitalisation in the financial sector
Modern financial services require a strong digital strategy, and stakeholder demand for digital financial services is rising. Digitalisation has transformed from something which is nice to have, into a must-have.
During the first quarter of 2020, the C-suite of financial institutions were mainly occupied with tough macro-economic conditions (as in low interest rates and decreasing Net Interest Margins), increased regulatory costs and increasing competition from FinTech initiatives, shrinking the profit pie. Whenever digitalisation was discussed with investors, management teams often tried to convince shareholders that investments into their digital strategy would result in cost savings from day one of completion. Those with a practical view on technology implementation know that this should never be the argument to overhaul an IT system, since cost savings are temporary until the next upgrade cycle comes. Investing in digitalisation is investing in business continuity and the costs associated with such an investment have a return component in the form of the future ability to do business. In the second quarter of 2020, all eyes were turned to digital strategy and the question of how to survive in a world which became digital-first overnight.
Digitalisation has transformed from something which is nice to have, into a must-have
All stakeholders of financial institutions require digital tools. Clients want to see their information digitally, employees require digital tools to work remotely and partners/suppliers require digital tools to integrate their services. During the first few months of working-from-home, we saw a lot of patchwork in the front end, which enabled companies to continue their communication to clients. At first sight, the implications for the broader financial industry seemed manageable, although there is anecdotal evidence of banks rushing to the electronics store to buy laptops for their personnel in order for them to work remotely. However, besides relatively simple front-end solutions, the real issues started to appear in the connection to the core-systems and the security related to remote working. In some cases, it was not possible to onboard new clients, or to tailor new services.
Remote maintenance of crucial infrastructure also proved to be a hurdle, let alone deploying new technologies that should lead to higher efficiencies and innovative services. As we will discuss in more detail in our latest white paper, the associated cybersecurity risks have also increased substantially. Part one of this paper provides an overview of IT spending trends per subsector. Part two dives into pre-and post COVID investments related to cybersecurity, cloud and APIs and, in part three, we summarise the implications from an investment perspective.
It is our view that the long term strategic rationale for digital is shifting. 2020 Is a year of cost cutting, 2021 is a year of re-aligning and prioritising IT projects and 2021 and beyond will be the years of transformative digitalisation.
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