Why banks now need customer-focused finance

Imagine a last-place football team that needs new talent, yet spends so much on uniforms, balls and other equipment, it can’t afford the salaries top players demand.

That’s essentially the situation facing many banks today. These banks need innovation to keep pace. Yet they spend up to 80 percent of their IT budgets on day-to-day, “keep the lights on” activities. While these run-the-business activities are important, this level of spending is excessive. It leaves banks with insufficient funding for vital change-the-bank innovation.

What’s changed to make bank innovation so important now? Four big areas:

  • Customer Experience: Banks are under pressure to offer a seamless experience for both customers and employees, regardless of the channel, for more choice, collaboration and mobility.
  • Governance, Risk and Compliance (GRC): Government and industry associations present a broad, increasingly costly array of regulations and require banks to manage and report on an assortment of risks.
  • Payment Disruption: New companies, many unregulated, are chipping away at banking’s most profitable sector, namely, payments. These startups can leapfrog traditional banks with innovative technologies and customer experiences.
  • Operational Efficiency: Banks are under pressure to deliver new, dramatically higher scales of efficiency.

All these measures are costly, meaning banks need to allocate more funds for innovation. But how? With two important steps. First, banks should make step-changes that lower the costs of their run-the-business operations. Second, they need to shift some or all of those savings to projects that can change the business and drive innovation.

The net result? Banks that offer customer-focused finance. It’s the new face of banking.

Read more in this position paper, Digital Banking Creates Opportunity for Customer-Focused Finance.

This paper is part of the Journey to the Digital Enterprise paper series.


V BalaV. Balasubramanian is chief technology officer for the Banking & Capital Markets industry at DXC. With experience working in the United States, India, Singapore, Hong Kong, Taiwan and China, Bala helps to define the solution strategy for the industry, leads subject matter expert teams across industry issues, and helps set the technology direction for solutions.




Journey to the Digital Enterprise

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  1. Jose Ward says:

    V, you are so on target. So, what does an analysis of Uber and other disruptive software focused innovators show us about the financial services industry and the opportunity (and need) to innovate? IMHO it says the industry, despite its sheer size and level of entrenchment, is not safe from innovators and disruptive technology.

    Like Uber not owning cars, could a bank exist without a vast physical distribution network? Peer-to-peer lending is growing fast with firms like LendingClub and others. Payment technologies (Apple Pay, Square, etc.) are chipping away at lower-end banking transactions, although many piggy-back on traditional financial services providers.

    While there may not be a single large disruptor yet, traditional banks and financial institutions are being targeted from many sides, and it’s only a matter of time before the next Uber shows up to eat their lunch unless they get more agile.


  2. Jose, you make an excellent point. These days, purely digital is a very viable option without necessarily owning physical assets as we know them. There are interesting shifts happening that even threaten industries where physical assets are needed – – such as the taxi industry. Self-driven cars threaten car ownership significantly!

    So, your observation around innovative companies chipping away at the profitable parts of the value chain can, ultimately, lead to banks being a deposit-taking institution (since you need a banking license for that!) and the higher-value services being provided by others. Of course, inaction by banks is not an option….so, very interesting times ahead as is with all kinds of disruption. The customer will ultimately win — as it should be.

    Thanks for your insight.


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