Enabling your next wave of growth through adaptive banking

Change is a constant in the banking world, and adaptation is key to maximizing the opportunities it brings while mitigating its risks. As the demand for real-time everything increases, customer expectations are both evolving and increasing, and service delivery is shifting from physical to virtual. Data is the new currency, and advanced technologies like artificial intelligence are using data to drive better insights and innovative offerings. At the same time, financial criminals, understanding the power of data, are becoming data scientists and mathematicians, generating ever-changing threats and risks.

All of these trends are having a profound impact on the traditional banking model. Boundaries and roles are blurring as incumbent banks compete with traditional rivals, as well as new players from outside of banking. At the same time, IT environments made up of disparate legacy systems are falling short, pressuring banks to implement more modern, composable infrastructures that make it far easier to collect, analyze, and use data.

Responding to change

Banks face the challenge of not only remaining competitive in today’s fast-evolving banking market but also positioning their businesses for long-term success. Adaptation is key to addressing this challenge. Banks that can successfully adapt their business models, operations, and customer offerings in response to continuous change will lead the industry—both now and into the future.

CGI’s Voice of Our Clients (VOC) research confirms the importance of adaptation. In 2023, we surveyed nearly 300 business and technology executives across the retail, corporate and transaction, and capital markets sectors to learn more about their top trends, priorities, and challenges. Top macro trends cited included technology and digital acceleration, changing social demographics, climate change, a shifting global economic order, and supply chain evolution. All of these trends are pressuring banks to adapt and evolve their business models and operations to stay competitive.

The question is how to best keep pace with change. Major transformations typically fall short because they are unwieldy, slow-moving, and costly. From our VOC research and decades of experience in working with the top banks worldwide, we’ve learned a more agile approach is needed—one that involves making incremental, nimble, and frequent changes as client, business and regulatory needs evolve. We call this approach adaptive banking.

Defining adaptive banking

Adaptive banking is all about customer-centricity and agility. Using data, banks can better understand customer wants as they evolve and customize their services in response. Technologies such as artificial intelligence (AI), machine learning, and data analytics make this possible. With these technologies, banks can collect and analyze customer data and then use it to deliver—in an agile way—personalized offers, products, and advice as customer expectations change.

Adaptive banking also requires a composable IT infrastructure. Many banks operate within siloed, inflexible environments made up of legacy systems that cannot communicate with each other. In such an environment, pulling data to generate insights that inform customer and business decisions is extraordinarily difficult. However, with a flexible, API- and standards-based infrastructure, banks can quickly develop and launch innovative services, either directly or with third-party partners, to meet changing demands.

A major challenge is selecting and implementing the right technologies and infrastructure. The available options can be overwhelming. For example, while AI is receiving a lot of attention these days, not everything has to involve AI. There are many use cases for just simple automation. A business and technology partner can help banks make the right technology solution and infrastructure choices based on their goals and needs.

It’s also important to note that an adaptive bank is better able to detect threats in real time by leveraging advanced analytics and machine learning, as well as transaction and behavioral data. They also can respond to cyber attacks more swiftly and accurately via automated incident response procedures that take predefined actions to mitigate damage and notify security teams.

Adaptive banking advantages

The benefits of adaptive banking are numerous. Here are just a few:

Personalized customer experience: Banks can differentiate themselves by delivering a data-driven customer experience that evolves in sync with customer preferences. Customers can be sure to receive what they want, when they want, and how they want.

Real-time insights: Adaptive banking further strengthens the customer experience through real-time insights. Banks can provide customers with real-time information on their account balances, investment performance, cash forecasts, and more, enabling them to make more informed decisions in real time.

Agile product development: Through adaptive banking technologies, banks can develop and evolve their products and services in a highly agile manner.

Efficient operations: Both data and automation, key components of adaptive banking, help banks improve their operational efficiency and reduce operational costs.

Enhanced regulatory compliance: Systems used in adaptive banking provide records of transactions and customer interactions that are secure, accurate and auditable, helping banks to comply better with evolving regulations.

Talent upskilling and reskilling: The flexible nature of adaptive banking makes it easier to automate routine tasks, and this automation provides banks the opportunity to focus on talent upskilling and reskilling to adapt to changing technical requirements and market conditions. This flexibility, combined with the scalability of adaptive systems, enables banks to improve retention, reduce reliance on new hires, and increasingly hire on an as-needed basis to obtain critical skills and capabilities.

What’s required for adaptive banking

To become an adaptive bank, four key strategies and initiatives are required:

1. Digitize: Banks need digital solutions that can accelerate the digitization of their processes and systems, making their operations more efficient and supporting an anywhere, anytime digital environment.
2. Modernize: Through modernization, banks can drive efficiencies, cost savings, and agility by simplifying and standardizing their IT environments while introducing new IT delivery models.
3. Connect: New technologies enable banks to extend their businesses into the open economy and build successful partner ecosystems.
4. Protect: With the ever-growing threat of financial crime, advanced security is critical for keeping bank and customer data safe and confidential.

The right business and technology partner can support banks in all four of these areas, helping to ensure the success of their adaptive banking journeys. Look for a partner with deep domain expertise, broad implementation capabilities, and end-to-end advisory services and technology solutions.

CGI is partnering with banks worldwide to help them embrace and execute adaptive banking to enable their next wave of growth and future-proof their businesses. To learn more about our work in this area, please contact me.