Shaping the Future of Banks and Financial Service Providers with the Right Transformation Management
Established banks and financial service providers have been under strong pressure to change for decades - and this pressure is growing stronger every year.
In order to deal adequately with this pressure for change and to be positioned for the future, a transformation towards a hyper-adaptive organization is required. However, only very few established banks and financial service providers have tackled such a holistic approach so far.
The 5 Hot Topics for European Banks and Financial Service Providers
Regulatory
Expand processes while keeping an eye on regulatory requirements
Uncertain geopolitical environment
The right answers in times of political and economic uncertainty
Technological change
Successfully undergoing the necessary technological change
Competitive pressure
Withstanding competition and making the right decisions in times of change
Skills shortage
Addressing change with the right professionals
Regulatory
- Implementation of DORA, Basel IV & Co.: DORA is intended to increase the resilience of financial companies to IT-related risks, Basel IV is to further tighten capital requirements and introduce stricter rules for the risk assessment of credit portfolios.
- Climate change risk assessment: regulators are expected to increase climate change risk disclosure requirements to ensure that banks understand and respond appropriately to their climate change risks.
- Digital Identity: Regulators could encourage the adoption of Digital Identities to increase security in online transactions and prevent fraud.
- Monitoring BigTech companies: Regulators could increase oversight of BigTech companies that provide financial services to ensure they meet the same regulatory standards as traditional banks.
- Data protection: It is likely that data protection will remain an important regulatory focus in the future as consumer concerns about the protection of their data continue to grow.
Uncertain geopolitical environment
- Political uncertainty: The political changes and instabilities in many countries may jeopardize the stability of the financial system and have a negative impact on the financial markets. This can lead to investor uncertainty and affect confidence in the financial system.
- Terrorism and cybercrime: The increasing threat of terrorist activities and cyberattacks may also have an impact on European banks. Cyberattacks can lead to the theft of data and information, which can undermine customers' trust in banks.
- Sanctions and trade wars: The intensification of sanctions and trade wars may lead to an increase in geopolitical risks, which may have a negative impact on the economy and financial markets. This may lead to a decrease in trade volumes and an increase in credit risks.
- Rapidly rising interest rates: The rapid rise in market interest rates can put institutions in a tight spot. In the past, financial institutions granted long-term loans at low interest rates and now have to pay significantly more for their refinancing.
- Ukraine war: For banks, a loss of customers in particularly affected economic sectors is difficult to assess. Exposures to customers with close business ties to Russia or Ukraine need to be reviewed. However, customers who have already been significantly affected by the pandemic may also pose an increased risk.
Technological change
- Competition from fintech startups: The emerging fintech companies offer innovative and convenient solutions for banking services. This can lead to traditional banks losing customers to these new providers.
- Cyber security: Advancing digitalization increases the risk of cyber attacks on banks and their customers. Banks must ensure that they have sufficient protective mechanisms in place to minimize this threat.
- Changes in customer behavior: Today's customers expect a seamless experience when it comes to banking services. They are willing to switch to mobile solutions and use online banking. Banks need to ensure they can meet these expectations to remain competitive.
- Regulatory requirements: Technological change also has an impact on the regulatory requirements for banks. Banks must ensure that they meet these requirements and adapt their processes accordingly.
- Legacy systems: Many banks have outdated systems that make it difficult to adapt to changing technology. However, updating these systems can be expensive and time-consuming, which can create another challenge for banks.
Competitive pressure
- Rapidly rising interest rates: The rapid rise in market interest rates can put institutions in a tight spot. In the past, financial institutions granted long-term loans at low interest rates and now have to pay significantly more for their refinancing.
- Digital transformation: Digitization has led to new, technology-based competitors such as Fintechs and BigTechs entering the market and putting established banks under pressure. Banks must therefore adapt their business models and processes to remain competitive.
- Regulation: Banking regulation in Europe is very complex and extensive, which is a challenge for smaller banks in particular. They have to allocate additional resources to compliance and risk management, which can affect their competitiveness.
- Geopolitical uncertainties: Geopolitical tensions, trade conflicts and political unrest can affect economic stability and thus impact banks' business.
- Demographic change: The European population is aging, leading to a change in demand for financial products. Banks must adapt their offerings accordingly to meet the needs of the older population.
Skills shortage
- Recruiting skilled workers: One of the biggest challenges facing European banks is finding and recruiting qualified skilled workers. Highly qualified employees are scarce, especially in the areas of technology and digitalization. It is difficult to find applicants with the right skills and experience and to poach them from competitors.
- Competitiveness: The shortage of skilled workers can affect banks' competitiveness. If they are unable to attract the right talent, they may struggle to compete with other banks and FinTech companies that have a talented workforce.
- Cost: Hiring and retaining skilled professionals can be expensive. Banks may need to offer higher salaries and benefits to attract and retain talent. This can increase costs for the bank and affect its profitability.
- Risks: Skilled labor shortages can also increase the risk of errors and fraud. When banks do not have enough skilled employees to adequately perform all tasks and responsibilities, errors and risks can occur that can lead to financial losses.
- Innovation: Hiring talent is critical to banks' ability to innovate. If they do not have the right talent, they may struggle to develop new products and services and innovate business models to keep pace with the rapidly changing needs of customers.
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