Page 13 - Banking Outlook 2014 - An Industry at a Pivot Point

Banking Outlook 2014: An Industry at a Pivot Point | 11

It is a common business mistake: fixate on yesterday’s crisis at the expense of
preparing for the next. For the banking industry, the last crisis was one of capital and
liquidity. It has consumed management’s attention for four years now, and most banks
have met its challenges—if only because regulators have forced them to do so.

Information Technology

(IT) Transformation

In our view, the next crisis could revolve around IT, given the value and volume of data that banks generate,
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the attraction of that data to cyber thieves and vandals, the complexity of banks’ IT systems, and banks’ utter
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reliance on those systems, some of which are highly coordinated while others are dispiritingly disjointed.
All this will put a heightened burden on IT in the years ahead, when it must play a central role in allowing
banks to pivot from defense to offense. IT must provide the information needed to determine which
services and products will actually boost ROE. It must enable efforts to connect with customers, both retail
and commercial. It will form the backbone of new products and services. It must help drive the efficiencies
that still elude many banks. And, of course, it must continue to meet regulatory demands and defend
against cyber security breaches.
None of this will happen if banks don’t approach IT the right way, and don’t move past the notion that using
technology to attract and retain customers is an IT job. It is, unquestionably, a top-of-the-house strategic
imperative, and everything about these changes in technology must be driven by the customer and the
business imperatives.

Historically, banks’ IT strategies have been driven by internal demands (what business units and executive
leadership needed to run the business) and by regulatory imperatives (what banks had to do to comply with
state, federal, and global regulations). Banks must continue responding to these needs. But as they shift
their focus to revenue generation, they also must embrace IT strategies driven by customer needs, relying
heavily on social media and other vast sources of data to find out what those needs are. Banks may want to
take their cue from retailers, who have a history of mining customer data profitably.
Banks that are able to find the right information from the oceans of data available to them, that leverage the
required hardware and software to deliver the right products and services without breaking their budgets,
and that put in place the right people and processes to construct their control environment, will realize the
most value from their IT systems.