Financial services firms explore new network technologies and partnerships to address governance, risk and compliance, improve customer service and increase revenue.
6
Volatile Market Conditions Call for New Tech Strategies FINANCIAL SERVICES FIRMS EXPLORE NEW NETWORK TECHNOLOGIES AND PARTNERSHIPS TO ADDRESS GOVERNANCE, RISK AND COMPLIANCE, IMPROVE CUSTOMER SERVICE AND INCREASE REVENUE EXECUTIVE SUMMARY Financial services firms ranked customer satisfaction, regulatory compli- ance and revenue growth as top priorities in a recent study by IDG Research Services. At the same time, those critical goals were reported to be some of the most challenging to achieve, though respondents overwhelmingly pointed to using technology to narrow the gap and achieve business goals more easily. This paper explores how these findings can be put to work— creating a state-of-the-art network infrastructure with the help of a services partner—to propel financial institutions to success in today’s competitive business climate. Banks, credit unions, investment firms, mortgage brokers and insurance companies understand that keeping their eyes on business priorities in a changing, competitive landscape is key to their sustainability and, more important, their success. But what are those priorities, and how close are financial firms to cashing in on them? TECH DOSSIER > VOLATILE MARKET CONDITIONS CALL FOR NEW TECH STRATEGIES 1 of 6
Transcript
Volatile Market Conditions Call for New Tech Strategies FINANCIAL SERVICES FIRMS EXPLORE NEW NETWORK TECHNOLOGIES AND PARTNERSHIPS TO ADDRESS GOVERNANCE, RISK AND COMPLIANCE, IMPROVE CUSTOMER SERVICE AND INCREASE REVENUE
EXECUTIVE SUMMARYFinancial services firms ranked customer satisfaction, regulatory compli-ance and revenue growth as top priorities in a recent study by IDG Research Services. At the same time, those critical goals were reported to be some of the most challenging to achieve, though respondents overwhelmingly pointed to using technology to narrow the gap and achieve business goals more easily. This paper explores how these findings can be put to work—creating a state-of-the-art network infrastructure with the help of a services partner—to propel financial institutions to success in today’s competitive business climate.
Banks, credit unions, investment firms, mortgage brokers and insurance companies understand that keeping their eyes on business priorities in a changing, competitive landscape is key to their sustainability and, more important, their success. But what are those priorities, and how close are financial firms to cashing in on them?
TECH DOSSIER > VOLATILE MARKET CONDITIONS CALL FOR NEW TECH STRATEGIES 1 of 6
TECH DOSSIER > VOLATILE MARKET CONDITIONS CALL FOR NEW TECH STRATEGIES 2 of 6
In late 2011, IDG Research Services surveyed technology leaders in the financial services industry to better understand their goals and challenges. The results mapped closely to three overarching business priorities that define the current state of the industry: increased competitive pressure, improved customer experience across channels, and increased need for governance, risk and compliance (GRC) management solutions.
The state of the industry is one of transition. Firms are recognizing consumer dissatisfac-tion with traditional banking, as the recent economic turmoil has spurred distrust across the financial sector. Banks are working to address the spread of emerging payment methods outside the banking sector, a new source of both competition and opportunity. Additionally, savvy consumers are seeking an unprecedented level of access to financial information through online media and, more recently, mobile devices. A recent study reported that 32.5 million users accessed mobile banking services in June 2011, up 21 percent from Q4 2010.1 At the same time, many executives worry that the regulatory environment has become more complex and burdensome.2
In the end, financial services firms must balance their goal of serving and retaining customers against increasing costs and lower margins—by no means an easy feat given the hurdles before them.
1 Mobile Banking App Usage in the U.S. Increases 45 Percent from Q4 2010 (press release). ComScore. October 2011.
2 2012 Global State of Information Security Survey, PricewaterhouseCoopers, CIO magazine, CSO magazine.
Setting Sights on SuccessThe IDG Research Services study substantiates these concerns. Respondents in the financial sector reported that the following are key busi-ness goals for the next one to three years:
Improving customer satisfaction (cited by 67 percent). Credit unions and other small institutions continue to capture consumer deposit and loan business from large retail institutions in the wake of recent upheaval in the financial sector. To stem this shift, finan-cial institutions are studying ways to improve customer relationships through new services.
Maintaining regulatory compliance (cited by 67 percent). Financial services firms must comply with standards and laws that affect all organizations, such as Sarbanes-Oxley, Graham-Leach-Bliley, PCI Security Standards and the Patriot Act. The Dodd-Frank Act, the latest in a string of new regulations, focuses on consumer protection in the wake of the mortgage meltdown. Internationally, firms must deal with the EU’s Solvency II and Basel II/III regulations. This myriad of requirements can be difficult to manage.
Growing revenue (cited by 65 percent). A majority of respondents placed consider-able importance on growing revenue as well as business process improvements, product/service innovation and adapting to change. All of these goals are symptomatic of increased competitive pressure in the industry as the traditional consumer relationship erodes.
Survey respondents also indicated that lowering operational and capital costs remains a concern.
Overcoming Business ChallengesWhen asked which goals would be most chal-lenging to achieve, the survey respondents identified nearly the same issues as their top concerns—addressing revenue growth, regula-tory compliance and customer demands—revealing a disturbing gap between what’s important and what’s truly feasible given the current state of the industry.
Why is achieving these goals so difficult? Limited staff resources, growing compliance costs and reduced IT budgets hinder firms’ ability to invest in or deploy new solutions. There is an emotional component, as well, as respondents cited cultural resistance to change
Must-See Resources
Check out these resources, geared directly to IT and business leaders in the financial services industry. You’ll find informative videos, case studies, product and service information, and more to help you make the most of your network investment.
TECH DOSSIER > VOLATILE MARKET CONDITIONS CALL FOR NEW TECH STRATEGIES 3 of 6
inside the organization as another hindrance (see chart #2). In fact, survey respondents indicated that some IT projects do not meet expectations due to problems in defining, implementing or supporting them—suggesting that the right technology, processes and/or staff may not be in place to overcome some hurdles and successfully launch projects in a timely manner.
Putting Technology to the TaskThe good news: These IT leaders agreed on the answer. At least three-quarters of respon-dents in the finance services industry said that technology is a key or important enabler when it comes to achieving their most important and most challenging goals (see chart #3).
Technology—and specifically a secure, flexible network infrastructure—is essential for enhancing operations. Overall, a robust network infrastructure can provide efficiency for employees and convenience for customers. That’s why these technology leaders nearly
unanimously agreed that effective unified voice, data and network management solutions are critical to their firms’ success.
These results provide clear insight. First, financial services firms’ highest-priority goals are also the hardest to achieve. Second, tech-nology is the path toward solving those issues.
Focusing on Core Operational ConceptsSo what can financial services firms take away from these findings? Achieving competitive advantage can be a simple matter of focus—specifically, zeroing in on the areas that address not only the most important goals but also the biggest challenges. These areas translate precisely to three core operational concepts: serving current business and continuity needs (primarily through governance, risk and compli-ance [GRC] measures), staying within cost structures (by focusing on both operating and capital expenses), and addressing change (by thinking about agility and future innovation)—all of which have technological implications at the underlying network level.
CONTINUITY: Simplifying compliance management and minimizing risk.
In financial services, GRC is a fact of life and tantamount to continuity. Technology must be in place to ensure that sensitive data is transmitted securely, accessible only to autho-rized parties, and protected both at rest and in transit. Precautions must be taken to guard against data loss—for example, encrypting data on mobile devices to reduce the risk of being hijacked, or requiring remote access
Business Goals Most Challenging to Achieve
Business Goals in the Financial Services Industry
Improving customer satisfaction
Maintaining regulatory compliance
Growing revenue
Improving business processes
Product/service innovation
Growing revenue
Maintaining regulatory compliance
Improving business processes
Product/service innovation
Improving customer satisfaction
CHART 1:
Source: IDG Research Services, September 2011
Hear it from the Customer Sun National Bank
Find out how Sun National Bank benefited by choosing Century-Link. This information-packed video details valuable features and measurable benefits.
through VPNs to ensure secure data transmis-sion. Technology is available to help financial services companies not only adhere to internal rules (as with partnership agreements) and external regulations (as with industry or government dictates), but also prove that they have done so.
Increasingly, companies are seeing how governance, risk and compliance, along with the data access and control facets of security, are linked. A 2011 study by Hypatia Research noted, “GRC is complex. It represents three inter-related activities for companies. … The three categories, along with security, create a continuum that can encompass not only the way a company presents itself to the outside world, but also the way it conducts itself internally. … [C]ompanies are required to apply
it to both horizontal facets of their work—as with finance and accounting, hiring and human resources, safety regulations, and environ-mental compliance—and vertical facets of their work, depending on their industry.”
COST: Increasing operational efficiency and creating new revenue opportunities.
Budget constraints are one of the top reasons business goals aren’t achieved, so cost is a crucial concern. The goal is to reduce the percentage of total costs while still main-taining operational capabilities and increasing efficiency. At the same time, IT must work to identify how innovative technology can create new revenue opportunities that contribute to the bottom line.
As one respondent to the IDG Research Services survey, working at a midsize bank, noted, “In terms of technology and business goals, we’re really trying to make it easier for our clients to do business with us. We are looking at a number of technologies to help optimize and improve workflow process that may be very manual today, [looking for] opportunities to improve those processes.” Toward that end, a robust network translates into a variety of new cost-effective customer-service capabilities for financial services firms. For instance, firms can use videoconferencing capabilities to provide on-site customers with access to personalized service, instead of employing experts at individual branches or offices. They can even upgrade their call centers with state-of-the-art IVR and call-routing technology.
TECH DOSSIER > VOLATILE MARKET CONDITIONS CALL FOR NEW TECH STRATEGIES 4 of 6
Hear it from the Customer University Federal Credit Union
Discover why University Federal Credit Union chose CenturyLink. This engaging video explores the need for network redundancy and reliability, ultimately achieved through Century-Link’s nationwide presence.
CHANGE: Improving customer acquisi-tion/retention and managing evolving regulations.
Change is constant in the financial services industry. That’s been evident in the past decade, and the next ten years may prove equally disruptive. Financial services firms must maintain the technological agility not only to deal with any new regulation, but also to adapt to increasing customer demands. This is especially difficult because the segment deals not only with accessing data but also the time-sensitive ability to transfer funds and complete transactions.
Based on the IDG Research Services survey
results, the ability to track change through business analytics is a big issue. Firms must be able to transmit data across the network and aggregate it quickly, whether it’s to improve flexibility and scalability or to conduct rapid risk assessment on loans. As one survey respondent said, “We’re looking internally to make sure that we’re making good decisions. Are we loaning to the right folks? Are we not denying loans to credit-quality clients?” It’s about differentiation. What products, solutions and/or services are available that would make it worthwhile for clients to actually go through the trouble of switching financial institutions? “The pain associated with moving financial institutions is something we’re looking at reducing,” he added. “There has to be a compelling value-add. For most folks, it can be really painful to switch.”
Managing AlternativesStill, the ideal network doesn’t evolve over-night. Small and medium-sized firms are unlikely—especially given their reported lack of resources—to have staff resources with exper-tise in networking and security technologies necessary to create a state-of-the-art network.
What’s the alternative? A vast majority of respondents noted the potential opportunity of managed services in attaining business goals (see chart #4). Interestingly, these opportuni-ties map closely to financial services firms’ business goals and, more telling, the issues that make them difficult to achieve. By working with a network service provider that both understands the state-of-the-art capabilities of networks, as well as specific industry needs, financial services firms have a new option for staying competitive. Together, they can lay a foundation upon which business processes can be run reliably, quickly and affordably.
Partnering for a Better NetworkIn an increasingly busy and complex world, business executives have to be smart and efficient with their budgets and resources. Business continuity, cost management and constant change make choosing a service provider that understands key issues and busi-ness drivers a prudent decision that can help maintain the balance of stability and innovation at a viable cost.
Network service providers drive continuity
TECH DOSSIER > VOLATILE MARKET CONDITIONS CALL FOR NEW TECH STRATEGIES 5 of 6
Where Managed Services Impact Business Goals
CHART 4:
Source: IDG Research Services, September 2011
Maintaining regulatory compliance
Quickly adapting to changing needs
Product/service innovation
Improving customer satisfaction
Improving business processes
Think Big with ThinkGig
Looking for an engaging discussion about the latest tech-nology trends? Visit ThinkGig, CenturyLink’s business blog, specifically designed to serve IT leaders with thoughtful insights into the issues that keep you up at night.
For financial services trending, visit:
Banking in Bed
We’ve Been Compromised!
Weathering the Storm: Can Banks Regain Customer Trust?
And for general discussion regarding technology trends, visit: www.thinkgig.com
TECH DOSSIER > VOLATILE MARKET CONDITIONS CALL FOR NEW TECH STRATEGIES 6 of 6
through a reliable network that keeps employees productive whenever and wherever they need to work, and contributes to speed of responsiveness, whether to customers, part-ners or suppliers. They also offer expertise and focus on network infrastructure and services—technical issues that many companies don’t have the staff resources to master. They can evaluate the company’s specific networking and communications needs—whether accommodating e-commerce transactions or improving collaboration with branch offices—and efficiently design a network that will best solve specific business problems.
They can also manage and monitor the network once it is deployed, and help ease the burden of time-consuming activities such as security audits and compliance reporting, allowing internal staff to focus on more stra-tegic projects. Proactive network management is the key, providing greater efficiency, higher reliability and more productivity.
Network service providers provide cost advantages in two distinct ways. First, they reduce the need for capital investments in network infrastructure. Instead, companies
pay a monthly or annual fee for which they can easily budget. Second, providers can introduce state-of-the-art services, whether relating to security, compliance or bandwidth, that many companies cannot afford on their own.
Finally, network service providers can help companies innovate by always watching the horizon for technological shifts. They can seamlessly upgrade technology and services so companies stay on the cutting edge of network technology. Then, combining wide experience in new networking technologies with an understanding of the company’s business, they can demonstrate how such technologies bring competitive advantage. And when the need arises, network service providers can leverage their experience to deploy new applications within days or weeks, rather than months.
Building a Better BusinessStrong network expertise benefits any industry. However, industry knowledge is key—under-standing specific challenges and how those map to a company’s networking needs.
In financial services, that means addressing highly reliable transaction systems, secu-rity and ATM networks. In retail, that means offering PCI compliance, point-of-sale systems and widely dispersed sales outlets. In manu-facturing, it means accommodating data transmitted from assembly lines, procurement systems and wireless RFID codes.
With its recent acquisition of Savvis, CenturyLink offers a full portfolio of products, services and solutions that help companies make the most of their network investment. That means companies enjoy quick time to market with services that address their unique business requirements—no matter the industry.
Bottom LineBy focusing on key business drivers—control-ling costs, maintaining business continuity and managing change in demanding, dynamic busi-ness environments—the right network service provider, like CenturyLink, helps clients get the most from their network dollars and focus on their core competencies.
For more on what CenturyLink has to offer, please visit: centurylink.com/banking.
Can Your Network Service Provider Meet Your Needs? Key Questions to Ask
What are your specific business goals?
Can your current network accommodate those goals?
Are the capital expenses for supporting your network creating a budget strain?
Does your current staff have the expertise to deploy a state-of-the-art network?
How quickly could you marshal the resources necessary to create a state-of-the-art network?
How quickly can you accommodate requests for new customer-facing applications?
How quickly can you address demands for increased compliance and security issues?
How quickly can you handle requests for revenue- generating applications?
If your answers to these questions raise concerns about your future competitiveness, contact CenturyLink. www.centurylink.com/banking
