But since then, there has been a revival figure The most obvious is that banks, globally, need to counter the strong headwinds to achieve profitability, given compressed NIM from lower rates and lower demand for loans. In Europe, similar challenges exist, and overcapacity, fragmentation, and the lack of a banking union, could further confound recovery prospects.
To bolster revenues, many banks try to leverage fee income as the primary driver of growth, but such prospects may be limited, given the somber macroeconomic climate and surge in industry competition. Scale could become an even more dominant consideration: Banks will likely need economies of scale to survive, rationalize costs, and thrive. And while digital lenders may want to diversify their funding sources, banks may look to acquire fintechs for their digital capabilities and to target new segments.
This may also result in bid-ask spreads becoming too wide, which could worsen if there is further economic deterioration. Other factors, such as political and regulatory uncertainty and changes to tax regimes, may loom large. For instance, regulators in Europe have reiterated the need for banks to consolidate across borders and drive diversification.
Similarly, the US Department of Justice is contemplating an overhaul of its outdated bank merger competitive review guidelines to reflect the current realities of a digitized world. The adage that fortune favors the brave may be quite apt in the current context.
This expanded discipline should also include the role of new standards such as CECL. Banking industry consolidation could kick into high gear. In this report, we highlighted what banks should focus on in and beyond across various business functions.
But how do these considerations translate to the individual business segments? In the table below, we highlight some key strategic and operational priorities for businesses to consider. The Deloitte US Center for Financial Services conducted a global survey among senior banking and capital markets executives in finance, operations, talent, and technology. Survey respondents were asked to share their opinions on how their organizations have adapted to the varied impacts of the pandemic on their workforce, operations, technology, and culture.
We also asked about their investment priorities and anticipated structural changes in the year ahead, as they pivot from recovery to the future. View in article. North America includes the United States and Canada only. Jonathan Walter, Measuring stakeholder capitalism: Towards common metrics and consistent reporting of sustainable value creation , World Economic Forum, September Power, September 25, Bank of America, Q3 financial results , October 14, Alaina Sparks et al.
Erica Volini et al. Khalid Kark et al. Rhoda H. Woo et al. Damian Walch et. Andrea Willemse et al. Tim Adams et al. Realizing the digital promise: Key enablers for digital transformation in financial services , Deloitte and Institute of International Finance, June 4, Includes respondents who significantly agree, agree, and somewhat agree. Ajit Kambil et al. John Celi et al.
For more details on the methodology see: Shilling, Shaw, and Berry, The path ahead. Deloitte brings together professionals with diverse experience to provide customized solutions for clients across all segments of the banking and capital markets industries.
In this role, she leads strategic client portfolio, go-to-market strategy, and the coordination of Deloitte's global network to help banking clients address their strategic priorities and respond to regulatory, technology, and growth challenges. Anna is also responsible for managing the global relationships of the Swiss firm, bringing the power of Deloitte's global expertise and insights to Swiss clients.
She is a Vice Chairman of Deloitte UK and the global lead client service partner for a major financial services organisation. She has been a member of the Swiss Executive team since and has over 25 years of experience serving financial services institutions in Europe and the US. See something interesting?
Simply select text and choose how to share it:. An Article Titled banking and capital markets outlook already exists in Saved items. Social login not available on Microsoft Edge browser at this time. Viewing offline content Limited functionality available. Welcome back. Still not a member? Join My Deloitte. Article 32 minute read 03 December Mark Shilling United States.
Anna Celner Switzerland. Banks will need to enhance resilience across capital, technology, and talent, as they confront potential new challenges in the short term. Longer term, banks should accelerate and amplify their transformation efforts across the enterprise. Banks can institutionalize the lessons learned during the pandemic. These may include operating with agility, flattening hierarchies, speeding up decision-making, empowering employees, and introducing flexible workplaces and workforces.
Future success may very well hinge on how well these lessons have been internalized and implemented. Institutions that made strategic investments in technology came out stronger, but laggards may still be able to leapfrog if they take swift action to accelerate tech modernization.
Across the board, digital inertia has faded, and more banks are pursuing technology-driven transformation, especially to core systems. To fully realize the digital promise in the front office, banks can elevate customer engagement by deploying an optimal mix of digital and human interactions, intelligent use of data, novel partnerships, and compelling service delivery models.
As banks adapt to the economic realities of , they may need to make some hard decisions on the optimal talent models. But at the same time, they should maintain a focus on employee well-being and productivity as the pandemic-induced stress on the workforce continues.
Banks have an opportunity to become purpose-driven global leaders. Given their unique and vital role in the global economy, banks should be at the forefront of leading social change and mitigating climate risk by reallocating capital, enhancing risk frameworks, providing greater transparency, and improving data and reporting standards.
Learn more Financial services industry outlooks Read the banking regulatory outlook Explore all of the regulatory outlooks Visit the Within reach? Women in the financial services industry collection Explore the Financial services collection Learn about Deloitte's services Go straight to smart. Sustainable finance: A unique opportunity for inspiring leadership The world is beset with unprecedented challenges.
So, what should banks do? Talent: Boosting well-being and productivity through resilient leadership Banking leaders around the world have faced an array of challenges on the talent front, from shifting to a remote, distributed workforce to finding ways to keep employees engaged and productivity high.
Sustaining resilience and accelerating transformation of the talent function Looking ahead, as banks adapt to the economic realities of , bank leaders will likely need to make some hard decisions on optimal talent models. Strengthening resilience and accelerating transformation in operations Going forward, strengthening operational resilience will likely be a main challenge many banks face.
Technology: Capitalizing on the multiplicative value of different technologies Banks were making rapid strides in their digital transformation journey, but the pandemic accelerated the pace. Strengthening resilience and accelerating transformation in technology In the near term, bank technology departments should bolster their technology infrastructures to offset stresses in the market today. Finance: Driving strategic value through data When the pandemic brought the world to a halt, bank chief financial officers CFOs and treasurers faced a barrage of priorities.
Strengthening resilience and accelerating transformation in finance Until the current economic disruption subsides, CFOs and treasurers should continue to focus on preserving liquidity and boosting capital.
Risk: Creating a new risk control architecture The COVID pandemic dramatically altered the risk landscape for the banking industry on a number of fronts. Strengthening resilience and accelerating transformation in the risk management function To start, maintaining focus on operational risks is critical.
Cyber risk: Investing for greater resilience Cybersecurity remains a persistent challenge for the banking industry. Strengthening resilience and accelerating transformation In strengthening cyber resilience, banks should both adopt more effective preventative controls as well as prepare for rapid recovery from adverse events caused by malware, ransomware, and other pernicious attacks.
Key actions to consider in the business segments In this report, we highlighted what banks should focus on in and beyond across various business functions. Survey methodology The Deloitte US Center for Financial Services conducted a global survey among senior banking and capital markets executives in finance, operations, talent, and technology.
The survey was fielded in July and August Cover image by: Neil Webb. View in article Ibid. View in article Jonathan Walter, Measuring stakeholder capitalism: Towards common metrics and consistent reporting of sustainable value creation , World Economic Forum, September View in article Congress. View in article Bank of America, Q3 financial results , October 14, View in article J. View in article Alaina Sparks et al. View in article M. View in article Erica Volini et al.
View in article Khalid Kark et al. Online banking can be offered by both traditional banking institutions as well as tech-savvy startups, and refers to the most basic banking operations—like bill payment and account transfers.
Mobile banking refers to offering users the ability to execute routine banking tasks through mobile channels, and digital banking includes every banking feature digitally available through the internet. While most legacy banks now offer online services, digital-only banks are developed entirely electronically. In the Evolution of the US Neobank Market Report, Insider Intelligence highlights how digital-only banks—also known as neobanks—are positioned to transcend traditional US banking due to their ability to meet the demands of tech-savvy consumers.
The rise of banking-as-a-service BaaS also accounts for an increase in digital services, as more legacy banks are opening up their application programming interfaces APIs for fintech and third-party app development. Though BaaS is still in its early days, the UK has already passed BaaS and open banking regulation, and countries around the world will soon follow suit.
The most innovative banks are already taking advantage of this technology, and other incumbent players are realizing they need to adopt more digital services and offerings to stay competitive in the industry—or risk getting left behind.
Its mobile app offers some of the most sought-after features: the ability to converse with a human agent in-app and authenticate via the app when calling customer service. The link has been copied to your clipboard. Lorem ipsum dolor sit amet, consectetur adipiscing elit. Etiam neque massa, bibendum eu feugiat at, finibus eu nisl. Phasellus magna nibh, aliquam nec convallis id, varius vel nibh.
Maecenas venenatis orci non pharetra ornare. Pellentesque porta enim in scelerisque efficitur. Banks shifting their fintech focus. Start your free trial. Big tech meets finance. As new regulatory requirements and data protection laws put additional strains on already-stretched resources, emerging technologies such as AI and robotics are helping banks address these constraints efficiently.
In fact, many pioneering companies in the BFS industry are already experimenting with multiple use cases of AI in their operations. From using AI to power chatbots and provide round-the-clock, agile customer services, to utilizing the technology for critical functions such as anti-fraud and regulatory compliance, banks are realizing the double benefits of optimizing costs while improving operations.
Additionally, technologies such as Robotic Process Automation and machine-learning are helping banks replace labor-intensive, manual workflows with highly reliable, cost-efficient and fast robotic operations. These technologies are also triggering innovations in the industry, such as biometric-based authentications, voice commerce — and Nao, Pepper and Lakshmi, the robo advisors introduced earlier.
While banks will need an increasing number of people with techno-functional skillsets, they may see redundancy in many of their existing roles. Technologies such as blockchain are already heralding a quiet revolution, questioning the conventional economic value offered by the BFS industry.
Blockchain is shaking up the very foundations of traditional business models with peer-to-peer lending, smart contracts and digital payments, eliminating intermediaries and speeding up underlying processes. Blockchain is expected to save as much as USD 20 Billion 6 in annual operating costs for the BFS industry, prompting an increasing number of banks 7 to deploy the technology in commercial production.
In addition to blockchain, cryptocurrencies such as Bitcoin, Ethereum and Ripple are slowly gaining traction, questioning the need for physical cash itself. In this scenario, where assets that were once considered core are no more so, and controls that once served to protect are themselves giving rise to new regulations — such as Open APIs and PSD II — the industry appears headed toward a rebirth.
While it is clear that increased use of technology is the way forward for banks, several uncertainties about execution remain. To be most effective, banks and financial institutions should re-define themselves as agile technology companies in the financial services industry — not the other way around. This implies that BFS companies should shed their non-core operations, retaining only those businesses that provide true differentiation for customers.
Banks will also need to examine the fundamentals underpinning their core operations as customer preferences, demographics and lifestyles change.
As banks continue to cope with the developments that have already made an impact, their ability to transform themselves with speed and agility, and their future strategies to survive the next revolution, will determine the winners and losers in this technologically advanced future.
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