- Banks need to incorporate a five-step approach to improving profitability
- Partnerships with technology disruptors crucial to success
LONDON, March 13, 2017 /PRNewswire/ -- While only 11% of banking executives expect their financial performance to improve significantly over the next 12 months, the majority of banks (60%) are investing in new customer facing technologies according to the EY Global Banking Outlook 2017.
Managing reputational risk and meeting regulatory compliance and reporting standards were the two priorities for banks overall, showing the continuing need to balance risk management and building tomorrow's growth engine.
The survey of senior executives at almost 300 banks across Europe, the Americas, Africa and Asia-Pacific identified two priorities for growth in the sector: recruiting and retaining talent and investing in new customer-facing technology.
Dai Bedford, EY Global Banking & Capital Markets Advisory Leader, says:
"Banks realize that they cannot wait for a return to normalcy to achieve meaningful profitability. The industry must innovate to grow or optimize their business so they can be more efficient while also meeting the needs of regulators."
The report encourages banks to do less, streamlining operating models and partnering with Fintech, blockchain firms and other industry disruptors to deliver better services, and to be relentless in driving out costs and managing risks that help protect the organization.
Karl Meekings, Lead Analyst, Ernst & Young LLP, EY Global Banking & Capital Markets, says:
"The key to success will be building a better ecosystem, not a bigger bank. Institutions must look for alternative ways to be organized and to operate; to have a much thinner spine than they have today."
Banks need to focus on improving five specific areas inside their organizations according to the survey:
- Reshape – The banking industry will coalesce around four primary business models: local boutiques, global boutiques, regional champions and universal super banks. Banks must pick one and then restructure operations accordingly.
- Control – Banks need to strengthen their three lines of defense risk management approach by improving efficiency, strengthening focus on vendor management and creating simpler supply chains.
- Protect – Banks need to minimize internal and external threats by putting legacy issues in the past and demonstrating they have systems in place to prevent money laundering and financial crime. They also need to prepare for cyber attacks and future outages.
- Optimize – The operating cost-to-asset ratio for banks has barely moved in the past five years. Banks need to shift to a forward-looking effort to embrace technology and drive "next-generation efficiency" in expense management to make progress.
- Grow – Banks need to invest in staff and technology to support innovation to defend market share and work to ensure that they remain competitive as customers become more willing to use financial products offered by non-traditional partners.
Bill Schlich, EY Global Banking and Capital Markets Leader, says:
"This report sets an ambitious agenda for global banks in the year ahead. Banks will need to move beyond incremental adjustments, effectively implementing and executing company-wide innovation, even in an uncertain global environment."
To read the full report, visit ey.com/bankingstrategy.
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About the EY Global Banking Outlook 2017
For this report, 286 banking professionals across the globe were surveyed in November 2016 to provide a review of banks' reported strategic priorities over the next 12 months. The respondents came from 29 different markets. Of the banking professionals surveyed globally, 59% were from EMEIA, 17% from the Americas and 24% from Asia-Pacific.