Adapting to the new global financial ecosystem: Insights and opportunities

Traditionally, banks have served as the central hub of financial activity and relevant services for their target markets. However, as customer needs change and new revenue opportunities emerge, banks have been drifting away from the center of their customers’ financial universes (and that’s a good thing). Now, a broader financial ecosystem is emerging with new financial service providers, technology platforms, and other partners working together to support the existing and emerging financial needs of customers.

Within this expanding global ecosystem, banks can serve as a valuable partner for their customers. While they already possess the expertise and infrastructure to help customers navigate their financial needs, the challenge now is for banks to seamlessly integrate into this new ecosystem and keep pace as these needs change.

Adaptability is the key to seamless integration, and successful banks are adapting to this new ecosystem reality through new business models, strategies, and technologies.

More specifically, our annual CGI Voice of Our Clients research reveals three key success factors:

• Overcoming legacy challenges
• Increasing business agility
• Investing in a digital, customer-centric future

In terms of the latter, a significant gap still exists between the perceived impact of digitization and a bank’s ability to act upon it. What will it take to close this gap and firmly establish the bank’s new role in today’s financial ecosystem? How can the other success factors be achieved? And, will other institutions close the gap faster and have a competitive advantage?

Here are a few insights and opportunities for banks seeking to become valuable ecosystem partners and leaders for their customers and other stakeholders, delivering expected outcomes and maintaining a competitive edge.

Expanding the information supply chain

Banking has always been the source of monetary liquidity, enabling individuals, businesses, and economies to function, if not flourish. Now, with improvements in digitization, automation, and AI, banks are positioned to be the source of information liquidity, enabling their customers and partners to function better by placing information at the fingertips of end users in an instant.

Within the larger financial ecosystem, modern banks play a vital role in facilitating the flow of data between ecosystem participants. This “information supply chain” includes key data and operations like:

• Collecting, processing, and distributing financial data and transaction information
• Providing access to payment rails, as well as liquidity management and cash flow forecasting services
• Managing regulatory compliance and preventing financial crime
• Integrating banking services with the digital workflows and enterprise systems of corporate clients

A well managed information supply chain enables the banking industry to handle complex ecosystem shifts and global volatility. For example, banks, as global institutions that manage data, can quickly adapt to volatile geopolitical situations and keep the information supply chain moving with limited physical resources.

Attracting and retaining finance talent

Experienced talent provides a competitive edge in maintaining this supply chain. However, recruiting and retaining high-quality finance and accounting talent has become increasingly difficult. Experienced talent is retiring from finance, taking with them their market knowledge and historical context. To replace them, banks have turned to alternative sources of human capital—specifically, financial talent from the technology sector. While these hires bring much needed technical expertise, they can fall short of the business and market experience required to navigate banking’s nuanced environment. Investment in talent strategies that address these challenges has become imperative.

Keeping pace with evolving customer expectations

Simultaneously, banks are trying to meet ever-rising customer expectations. Leaders recognize the importance of the customer experience. In our proprietary research, banks cite improving the customer experience as a key business priority. Customers expect digitally driven, real time service, with personalized experiences and a seamless process from start to finish. This is no small feat given the amount of information involved. Paper processes still create too much friction with customers, preventing banks from creating greater customer value. Digitization, including AI and automation, is critical to delivering the personalized experience customers want and demand.

Aligning business and IT

While business operations and IT are tightly aligned at a majority of banks, there remains a balancing act between faster, more responsive, deeply integrated digital customer experiences and maintaining network resilience to protect banks and customers from negative experiences. Whether driven by malicious actors or third party vendor miscues, failures within critical operations along the information supply chain’s infrastructure are extremely difficult to fully anticipate and mitigate. Maintaining tight business and IT alignment, and efforts to increase it even further, can help banks achieve the right balance.

Embracing adaptive banking

The shift from central financial hubs to a global financial ecosystem and the challenges that come with it require banks to adopt a forward-thinking strategy and enhance their ability to adapt quickly to new circumstances. An “adaptive banking” approach hinges on four major pillars:

• Modernization: Updating legacy systems and infrastructure to improve efficiency and enable new capabilities
• Digitization: Accelerating digital transformation to enhance the customer experience, automate processes, and improve the use of data and data analytics
• Connection: Seeking to better integrate services and workflows with partners across the ecosystem
• Protection: Strengthening cybersecurity and resilience to protect against threats and ensure business continuity

These pillars enable adaptive banks to operate with greater agility and deliver customer-centric services, while contributing to higher growth and profitability.

Accelerating technology adoption fuels successful adaptive approaches. In this regard, the banking industry has made significant strides: 78% of banking executives in our research cite digital transformation as a top priority. Further, banks have invested more in AI, with traditional AI use rising and new generative AI use cases being explored and implemented, particularly in software development, research and development, and other core processes.

Today, banks are implementing technology solutions like AI to solve known challenges first, as a training ground, before moving on to address new opportunities. As we move forward, banking leaders are asking “Where should we be?” to guide future use case selection and technology investment targets. Specifically, banks should investigate where digitization can support functions like customer personalization, automation, and operational efficiency.

For instance, banks already gather historical payment data and have expertise on customer behavior patterns. AI can use this information to generate personalized insights to help customers with functions such as liquidity management. Banks can offer valuable services like this that enhance the customer experience, strengthen customer relationships, and provide a profitable opportunity for growth.

Taking the next steps

While banks understand digitization’s expected impact, they also realize their need to better implement it. The demands of customers and the larger financial ecosystem are pushing banks toward developing efficient digital processes and leveraging ecosystem data to stay agile, improve operational efficiency, and explore new, profitable financial services.

How can banking leaders embrace this adaptive approach to better meet future customer and ecosystem demands? Here are a few recommendations:

• Revolutionize agility and reduce costs by overhauling legacy infrastructure.
• Accelerate revenue growth and dominate the market by forging powerful new partner ecosystems.
• Harness the power of data and AI-driven insights to supercharge decision-making both for customers and the business.
• Champion a culture of relentless innovation and agility to seize new opportunities.
• Maximize customer acquisition and retention with cutting-edge, personalized digital services.

Through strategic effort, the banking industry can finally shed the burden of legacy systems. Modernized infrastructure and digitized processes can help banks and the information supply chain they support fuel success within the greater financial ecosystem.

Want to learn more about our insights and recommendations? Contact me for a conversation on these ideas and CGI’s banking work.