As the US economy recovers from its surprise first-quarter blip, the UK economy maintains its robust pace of growth, and China turns into what some have called a ‘two speed’ economy, the one thing that is clear is that the world economy remains a confusing and unpredictable entity.
In this climate, the only thing that banks can be certain of is that things will change, probably change quickly, and not change in a manner easily foreseen or analysed ahead of the event.
The latest recession may be over in the world’s developed economies, but – and I do not wish to be the harbinger of doom – there will almost certainly be another one. We can hope that lessons have been learned, and we can do our best to heed those lessons in our own work, but we cannot assume the bad old days are over for good.
The perils that laid low some of the greatest names in financial services were so systemic, and so powerful that there is very little short of wholesale industry change that could make a difference. On the other hand, there is much that could have been done, and still can be done, to aid recovery from such a systemic shock, and to increase resilience to the next one.
Agility in a business – the ability to adapt quickly to new business conditions, to rally against new threats and to exploit new opportunities – is always most useful in times of extreme volatility. However, it has not been a quality greatly in evidence at many of the larger and more venerable financial institutions over the last few years.
Capital requirements aside, many banks find themselves in a broadly similar position in that they were when they were blind-sided by the Credit Crunch, and have yet to demonstrate the ability to respond to the permanent changes in the global, regional and domestic economy which have resulted.
A bank that is able to respond quickly and effectively to the demands of its market as the economy changes is one that could potentially thrive on volatility, particularly in countries where financial services make up a large part of the economy.
The problem is that the rapid change in product offering and business priorities needed to do this require rapid re-modelling of risk assessments, as well as an appropriate re-evaluation of revenue projection and assurance structures.
This is something most banks simply cannot achieve, encumbered as they are with highly inflexible legacy IT infrastructures, which do not allow the rapid changes in product offering, and the accompanying protocols needed, to respond to changes in customer requirements as markets change.
However, modern business assurance software can provide an agile layer between the infrastructure and customer-facing applications. This allows dynamically optimisation of critical business processes based on customer, channel, regulatory or transaction parameters, allowing banks to rapidly design and roll out innovative offers and products matching the expectations of each individual customer.
Current customer demands have most rapidly evolved around mobile technology and how it enables customers to complete daily banking actions in an easier way. If executed well and within the regulatory demands of the financial services industry, banks can stretch themselves to provide services which customer want today and tomorrow.
One recent example is the UK-based mobile payments service Paym, which allows customers of HSBC, Lloyds, Barclays amongst others to send and receive payments through their smartphones. Within three months Paym had over one millions subscribers and handled over £6.5 million worth of transactions.
If more banks were to adopt such a strategy, they would be much better placed to withstand whatever shocks the global economy has in store for them next. For those who do not, more market turmoil could bring tougher times ahead.
By Nanda Kumar, CEO, SunTec