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Europe-wide research reveals demand for innovation to combat 3Cs

New European-wide research from GFT Technologies AG (GFT), provider of services to the financial sector, reveals that large retail banks expect more innovation from IT in this time of crisis. The research, carried out by Pierre Audoin Consultants (PAC) into the impact of IT in shaping business success in the financial industry, calls for IT to move from an operational to an innovative role within the bank.

The research reveals that financial institutions across Europe are facing three main issues; the 3Cs of competition, consolidation and cost-efficiencies. Many European countries have been seeing an increase in competition in the financial services sector, as a result of globalisation, and the banking crisis has forced consolidation and M&A throughout Europe. All of this has increased the need for operational cost-efficiencies, often seen as the responsibility IT.

The UK, possibly the European country most affected by the banking crisis, nevertheless has a mature financial services sector and long experience of a competitive market place. Thus the main issue preoccupying respondents were the second two Cs; the impact of consolidation in the sector (35%) and cost-efficiencies (21%), where the tremendous write-downs are probably behind an above average percentage.

In other countries similar themes prevailed[1]:
 54% of German respondents cited globalisation/internationalisation as an important or very important issue.
 33% of French banks named increased competition as a major challenge and had an above average response in citing mergers and acquisitions as having a significant impact (38% against an average response across Europe of 33%)
 Spanish banks also cited mergers and acquisitions as a challenge to the sector (46%) but seemed much less troubled by the need for efficiency increases or cost-reductions, perhaps because they are amongst the most efficient banks in the world?[2]

Graham Underwood, Managing Director, GFT UK commented, “across Europe banks are feeling the impact of the internationalisation coupled with the economic crisis. But, if financial institutions are going to position themselves for the upturn, IT must begin to offer innovation and not just operational solutions”. He continued, “This may mean considering a cross-European approach, to take advantage of Spanish efficiencies and British understanding of a competitive market within a project. Our research shows that it’s time for IT to move out of the back room. Rather than merely being a service provider, IT needs to reposition itself as a consulting partner, offering different strategic solutions at differing levels of budget and scope”.

IT and the business side of banking have also become misaligned according to GFT’s research. The IT sector itself recognises it is guilty of not engaging in strategic decisions and projecting an image of only being able to respond to tactical business issues. IT believes it could offer more to the business; business recognises that it does not fully understand what IT can offer. It sees some limitations in IT, but also realises it could benefit from better use of IT and believes that technology still has great potential to impact the business.
 91% of business respondents believe there is still potential for IT to have an impact on increasing efficiency
 89% forsee an impact for IT on new business models and technologies
 78% see IT as having an effect on the increase in competition.[3]

Graham Underwood explained “financial institutions clearly realise that IT still has huge potential to shape the business and can help fight the challenge of the 3Cs of competition, consolidation and cost-efficiencies as a strategic partner to the business side of the bank. It’s time to unlock the strategic potential of IT; to get the bank at full, innovative strength, ready for the recovery when it comes.”