New York, November 7, 2018 - A new piece of research, sponsored by Finastra and executed by Mercator Advisory Group, shows that small and midsized financial institutions can derive significant benefits to operational efficiency by pursuing three distinct cost-saving strategies: vendor consolidation, cloud delivery, and artificial intelligence. Based on in-depth interviews with C-level representatives of community banks and credit unions with asset size between $200 million and $5 billion, the research gauges attitudes toward and levels of adoption for each strategy.
Given the total investment that banks and credit unions make in IT and business process execution, improvements in three areas can yield tremendous cost savings:
Consolidation of vendors ultimately eliminates the need to maintain and manage multiple systems, and can improve operational efficiency by 20-30%.i
Cloud delivery brings numerous benefits including the ability to easily scale system capacity to meet demand.
Artificial intelligence (AI), which is the least adopted of the three strategies to date, promises to make processes smarter, faster and more personalized to the consumer. However, in order to reap these rewards, banks must prioritize their vendor consolidation and cloud delivery road maps.
“Mercator Advisory Group strongly believes that institutions need to develop a road map to implement these recommendations in order to save money but, more important, to become agile and ready to navigate the changes fast approaching due to AI-based intermediation,” said Tim Sloane, Vice President, Payments Innovation, and Director of Emerging Technologies Advisory Service, Mercator Advisory Group. “We urge financial institutions, and particularly the small and midsized institutions, not to be complacent. Although the first wave of change isn’t expected to have an impact for five years, advance planning is vital.”
“Banks can realize considerable benefits when support is consolidated, key operational applications are moved to the cloud, and artificial intelligence is utilized to make processes smarter, faster, and more personalized,” said Finastra’s Mike Dionne, Senior Vice President, Community Markets, “Finastra is helping clients deliver on these goals by making our core banking platform, and all of our major solutions, available in the cloud and by developing a platform to enable banks of all sizes to access the latest technologies available and integrate them seamlessly into their bank offerings.”
The white paper, titled Landmark Decisioning: Using Vendor Consolidation, Cloud Computing, and Artificial Intelligence to Improve Operational Efficiency, is available here.
(i) McKinsey & Company, “An efficient operating model for US regional banks,” Retail Banking Insights, Number 11, December 2017, accessed 8/2/2018
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