The financial services industry has undergone drastic, technology-led change over the past few years. Even before the pandemic, the industry was facing increasing pressure to keep up with rapidly evolving customer expectations, digital-savvy challenger brands, and the need for stricter regulation and security. The events of
recent months, however, have acted as the much-needed rocket fuel to the innovation engine for many organisations.
In fact, findings from the McKinsey Consumer Pulse Survey reveal digital engagement levels among European customers have increased by 20% since the beginning of the pandemic. This has subsequently pushed financial institutions and banks to rapidly digitise current offerings. Digital transformation in the sector has reached a clear and distinct tipping point – and now, it is increasingly apparent that those who do not invest in a digital future will be left behind.
With the race towards a more innovative and customer-centric future already started, many financial organisations are yet to fully recover from the full impacts of the pandemic. And with further economic turbulence on the horizon, it is crucial that financial services businesses leverage strategic cost measures to not only mitigate the impact of short-term pandemic fallout, but most importantly recover and succeed in the long-term. While many businesses have turned to reducing staff numbers as a means of releasing liquidity, this simply isn’t a realistic option. Employees are an organisation’s most valuable asset – and it will ultimately be these workers that are needed to rebuild what has been lost during the pandemic. Instead, financial organisations must explore where efficiencies can be made when it comes to other costs and spend.
Striking the balance between cost and innovation
Cloud is one area of innovation that holds huge potential for the financial sector and that can offer significant cost savings if used effectively. Whilst many financial institutions already use cloud-based software for business processes such as customer relationship management, HR and financial accounting, the opportunity for cloud within core activities such as consumer payments, credit scoring, statements and billing is endless. In fact, from 2016 to 2018, Deloitte Global saw a threefold increase in the number of financial organisations adopting cloud to promote innovation.
"Cloud-based services can reduce internal costs and optimise business growth by offering a much more scalable and reliable IT infrastructure that is specifically designed to streamline performance and support development and expansion."
Cloud technology gives financial institutions the opportunity to continuously refine and improve services, according to changing customer demand and business need, whilst enabling them to assess how much is being used versus how much is being spent. For many organisations, cloud also provides the opportunity to achieve better value for money, as businesses only pay for what is being used.
With cloud now being seen as the digital backbone of many financial businesses, cloud solutions will continue to evolve. However, with this change will come increasing complexities – both in terms of the services available and also the variety of operating models. It is therefore essential that financial institutions have the right tools to continually monitor and analyse cloud spend (on average, 23% of IT expenses), in real-time, and with accuracy. Those who do will effectively pave the way towards growth.
Taking a holistic approach to tightening legacy spend
In today’s current economic landscape, optimising budgets is an absolute necessity; however, traditional ways of managing IT spend are simply not working. This is where maintaining a complete view across the whole organisation is required. The ability to manage cloud costs will be unlocked by reliable financial management tools, which can empower the financial industry to truly understand and evaluate cloud spend. By gathering real-time operational, project and vendor cost data, financial institutions will be well-equipped to make fact-based decisions to drive down costs – both now and in the future. From our experience, we’ve seen our clients easily shrink their running costs by 5% and reallocate these resources to more appealing and business-driving growth initiatives.
In light of these changes, financial companies must now take advantage of the tools that will enable them to evaluate the implementation and operational costs of technology to help stabilise business – including cloud, on-premise and even shadow IT. Whilst in theory, all software and IT assets within a business should fall under one centralised IT department, providing the CIO with ultimate visibility, the reality is often very different. Shadow IT, incurred in part by bring-your-own-device increase and the explosion of remote working, has seen a rapid rise and Gartner predicts it now accounts for 30-40% of IT spend in large organisations. As such, this is causing an ongoing headache for the people that are in charge of technology, security, and compliance, who need transparency across all applications to ensure cost transparency against value, not to mention security.
As we head into 2021, and competition within the industry continues to rise, it’s vital that financial institutions free up budget to reinvest in digital initiatives for growth. To achieve this, it is imperative to gain a transparent view of costs versus business value generated. In some cases, this may mean that cloud services are the best solution, whilst in others, in-house legacy systems may represent better value for money. This is where an integrated, high-performance and, above all, flexible solution is needed – to create a holistic overview of business spend, on which decisions (about cost, process, operations and more) can be based. Financial institutions that do maintain an end-to-end view across their entire IT portfolio will be able to take back control of their running costs and streamline their budgets towards future innovation this year and beyond.
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