Every industry needs to evolve with time to keep up with the changing trends and business landscape. Challenges in the Banking industry is no exception. With time, bankers are encountering more risks and regulations, in light of growing concerns about third party relationships, workforce management and many other issues. Keeping in view all the concerns, banks and financial institutions are focusing more towards better strategies and modern technologies to deal with multiple challenges. Let’s have a look at the major challenges that the banking industry is facing and what should be the focus to overcome those challenges.
- Customer Centric Approach
Since the 2008 financial crisis, several banks have changed their strategies regarding customer and market but their decisions still revolve around the regulatory requirements. Unlike other industries, not many banks have considered the costumer centric approach and have put enough efforts in understanding customers and markets. But fortunately there are certain banks that have realized the importance of fintech ecosystem for serving the customer in a better way. Fintech has a sharp customer focus and can be effective in meeting customer expectations. However, in addition to fintech, banks also need to adopt innovation and strategies to manage talents in a different manner for developing more customer centric solutions.
2. Managing Technologies
One of the major challenges that banks are facing is managing the technology resources. With the plethora of software, platforms, systems and tools, banks and financial institutions need to upgrade their infrastructure and resources for smoother operations. To modernize the core operating structure, which is a priority, the banking industry needs to spend substantially. With the technology proliferation and advancement in cloud solutions, banks require a significant modernization of applications and ramp up in technology externalization. However, compliance and risk management activities have to be managed internally, with the support of technology.
3. Strengthening Cyber Security
As the banking ecosystem is become more and more interconnected, the risk of cyber-attacks is also increasing. Adding to it is the adoption of new technologies. However, the current management of cyber-risks in the banks does reflect the concerns and the urge to improve cyber-security. Banks and regulators are showing greater cooperation that includes sharing best practices as well as information. Funding for cyber security is also increasing and many banks are recruiting special talents for their cyber security units. To further strengthen the security, banks need to develop and communicate a strong culture of due care throughout the organization. Cyber security needs to be considered as an integral component while designing business strategies, processes and innovations.
4. Workforce Reorientation
Banking workforce needs to be more diverse for formulating novel solutions. This is not only required for the permanent and contractual employees, but also for freelancers that work with multiple banks and robots that work alongside humans. Automation is bringing huge transformations in work and banks need to reorient their workforces to make them more collaborative. Financial institutions also need to provide more integrated experiences to their workforce, starting from recruitment to retirement, and this would, in turn, lead to better customer experience enabled by the workforce. The workforce experience must support the work-life balance and an objective driven career.
5. Compliance Considerations
Banking regulations are now encountering some stabilization, after a period of intense scrutiny by regulators all around the globe. Many global firms are now focusing on varying local regulatory requirements and market needs. Some of the U.S. regulations are under review and might be amended. However, compliance mandates related to executive accountability and fair treatment of customers are expected to stay strong and elevated. For testing operational integrity, regulators are also expected to demand more data from banks and enforce strong vigilance programs. Banks need to integrate their regulatory compliance goals with strategies that include operational simplification, growth, cost efficiency and risk management, to maintain high performance.