After a turbulent 2020, the financial services industry continues to experience drastic, technology-led change. Even before the pandemic, a need for greater security and regulation, along with rising customer expectation, pushed financial institutions to consider a range of new technologies.
The events of the past year, however, have accelerated this demand for innovation and many organizations have been forced to completely reimagine how they operate. It is clear that financial organizations that don’t embrace a digital-first future will get left behind. This impacts every aspect of an organization, including staff and structure of banks.
Whilst there is an urgent need for a more innovative and customer-centric approach, many financial organizations are yet to fully recover from the full impacts of the pandemic. Although the vaccine roll-out signaled fresh hope for businesses, economic recovery will be by no means immediate, especially following reports that the UK economy shrank by 9.9 percent in 2020 (opens in new tab).
With further potential turbulence on the horizon, it is crucial that businesses leverage strategic cost measures to help keep themselves on an even keel amidst industry fluctuations. Financial institutions need to not only mitigate the impact of short-term pandemic fallout, but also, and more importantly, recover and succeed in the long-term.
To do so, they must review current IT costs and spend to see where efficiencies can be made.
The innovation tightrope
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, or the best cloud storage, 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 organizations adopting cloud to promote innovation (opens in new tab). Meanwhile, Standard Chartered Bank announced a three-year partnership with Microsoft (opens in new tab) to help accelerate the bank’s digital transformation through a cloud-first strategy.
This union is set to advance Standard Chartered’s vision for virtual banking, next-generation payments and open banking. This is just one example of how cloud platforms can help unlock new banking experiences for customers.
Cloud-based services can reduce internal costs and optimize 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 organizations, 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 the variety of operating models.
It is therefore essential that financial institutions have the right tools to continually monitor and analyze cloud spend (on average, 23 percent of IT expenses), in real-time, and with accuracy. Those that do will effectively pave the way towards growth.
The key to tightening legacy spend
In today’s current economic landscape, optimizing budgets is an absolute necessity; however, traditional ways of managing IT spend are simply not working. This is where maintaining a complete view across a whole organization is required.
The ability to manage cloud costs will be unlocked by reliable financial management tools, which can empower financial businesses to truly understand and evaluate cloud spend. By gathering real-time operational, project and vendor cost data, firms 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 percent 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 stabilize business – including cloud, on-premise and even shadow IT.
Whilst in theory, all software and IT assets within a business should fall under one centralized 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 percent of IT spend in large organizations.
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.
The pandemic has brought momentous change for businesses across the globe and the next 12 months will be crucial to not only to ensure effective recovery, but also future growth. As we look to the year ahead, and competition within the industry continues to rise, it’s vital that financial institutions free up budget to invest in digital initiatives.
Ultimately, those that maintain an end-to-end view across their entire IT portfolio will be able to reduce and standardize running costs whilst also streamlining their budgets towards future innovation.