Tag: banking

Navigating Cloud Portability and Exit Strategies in Banking and Financial Services | Blog

Cloud service providers are vital partners in helping Banking and Financial Services (BFS) institutions build robust systems for cloud migration and exit strategies to maneuver complex regulatory and operational environments. These approaches promise to ignite technological innovation. Discover actions the world’s leading banks are taking and their importance in today’s financial landscape in this blog. Contact us to discuss further.

In the BFS industry, cloud has become synonymous with innovation and agility. Yet, as the space matures in its digital transformation journey, a crucial pivot is taking place. The focus is not solely on cloud migration but on nimbly and cautiously maneuvering within it. This shift brings to the forefront the importance of cloud portability and exit strategies – concepts rapidly gaining traction as BFS enterprises seek to future-proof technology investments. Let’s explore this further.

The strategic imperative of cloud portability

Cloud portability has risen to a strategic imperative within the BFS space. It encapsulates the capability to seamlessly transition applications and workloads between cloud environments, ensuring operational resilience and uninterrupted compliance. This degree of agility is fundamental in mitigating risks associated with vendor lock-in. Additionally, it enables BFS enterprises to adapt rapidly to evolving regulatory requirements and market conditions.

Major banks have spearheaded the charge towards cloud portability by embracing technologies that allow flexibility. Adopting containerization technologies and microservices architecture, notably through Kubernetes, is a case in point. These technologies provide a layer of abstraction, decoupling applications from the underlying cloud infrastructure, which empowers banks to maneuver digital assets across platforms without the burdens of significant downtime or exorbitant costs.

For instance, major financial institutions such as Bank of America and JPMorgan Chase have been at the forefront of embracing cloud-native technologies. Bank of America has utilized Kubernetes to enhance its application deployment processes, enabling faster innovation and improved customer service. Similarly, JPMorgan Chase has invested in containerization to streamline its IT infrastructure, demonstrating the significant efficiency and flexibility benefits these technologies offer to the BFS industry.

Navigating exit strategies in a regulated landscape

While less discussed, cloud exit strategies are vital to a comprehensive cloud governance framework. In an industry where strategic pivots or regulatory mandates can necessitate a change in cloud service providers, BFS enterprises must have clear, actionable plans for such eventualities. Crafting a cloud exit strategy involves thoroughly understanding service agreements and ensuring the transition can be executed with minimal disruption to operations and compliance protocols.

Goldman Sachs’ adoption of a multi-cloud strategy exemplifies a preemptive approach to exit planning. By distributing workloads across AWS, Azure, and Google Cloud, it is poised to maintain continuity of service and positioned to negotiate the transition of services, should strategic or regulatory circumstances change.

The formulation of cloud exit strategies is intricately linked to the BFS industry’s regulatory environment. Institutions must have actionable plans to transition away from cloud providers as strategic, regulatory, or operational landscapes evolve.

Over the last decade, regulations such as the General Data Protection Regulation (GDPR) in Europe and the Federal Financial Institutions Examination Council (FFIEC) guidelines in the United States have necessitated that banks maintain strict data governance and security protocols during such transitions.

These regulatory frameworks compel banks to plan their cloud engagements meticulously. For instance, compliance with GDPR requires that any BFS institution operating in or serving customers in the European Union (EU) must ensure its cloud exit strategy does not compromise data protection standards, even during service provider transitions.

For BFS enterprises, investing in cloud portability and a strategic exit plan is a direct response to the industry’s complex risk profile. These strategies protect them against the uncertainties of the cloud market and the evolving regulatory landscape. The goal is to safeguard investments and ensure that cloud engagements remain agile, compliant, and aligned with the overarching business objectives.

How can service providers become strategic partners in this roadmap?

Cloud service providers are pivotal in facilitating the BFS sector’s cloud transitions, having evolved from mere hosts of workloads to strategic partners. Mid-market providers illustrate this evolution by aiding BFS institutions in cloud migration and strategically planning portability and exit. These service providers ensure that cloud architectures are crafted to be vendor-agnostic and that exit strategies are incorporated into the engagement from the outset, aligning with the BFS industry’s stringent standards.

Elements of a comprehensive cloud strategy

The evolving cloud landscape necessitates a proactive and all-encompassing approach to strategy development. A holistic cloud strategy should incorporate the following:

  • Prioritizing open standards and application programming interfaces (APIs) to facilitate easy transition between cloud environments
  • Evaluating technology stacks in detail to uncover and mitigate potential lock-in risks
  • Negotiating transparent and favorable contractual terms with cloud providers that account for the potential need to exit
  • Developing robust business continuity plans that include cloud service transitions

The road ahead

As the BFS sector looks to the future, the trajectory of cloud computing strategies points toward greater flexibility, regulatory compliance, and strategic agility. The increasing importance of cloud portability and exit strategies is set to catalyze a new wave of technological innovation and strategic foresight. The pioneering steps some of the world’s leading banks are already taking demonstrate this evolution.

Large banks have been front-runners in leveraging cloud technology to enhance their financial services. Collaboration with hyperscalers, such as AWS, Azure, and Google Cloud, is part of the broader strategy to adopt a cloud-first approach by distributing workloads across different cloud providers.

Goldman Sachs has been using AWS’s capabilities to innovate in financial data management, leveraging cloud technology for scalability and efficiency and ensuring its architecture supports portability and compliance. This move indicates a broader trend among BFS institutions to harness the power of cloud computing while emphasizing the importance of cloud portability and the ability to adapt and exit in line with strategic and regulatory needs.

Moving forward, collaboration between BFS institutions and cloud service providers is expected to deepen, focusing on creating more robust frameworks for cloud portability and exit strategies. This partnership will be crucial in navigating the modern financial world’s regulatory complexities and operational demands, setting new standards for innovation, security, and customer-centric services in the banking sector.

BFS enterprises that diligently incorporate cloud portability and strategic exit planning into their operational frameworks are setting themselves up for enduring success. They will safeguard current investments and position themselves to leverage future technological advances and adapt to an ever-evolving regulatory landscape. We foresee that these proactive enterprises and service providers will spearhead the next wave of innovation and resilience in the BFS sector’s cloud journey.

To explore how to achieve cloud-first transformation in tandem with safeguarding the existing technology estate, contact Ayan Pandey, [email protected], and Pranati Dave, [email protected].

Don’t miss the webinar, Global Services Lessons Learned in 2023 and Top Trends to Know for 2024, to learn about the successes, challenges, and transformative trends that defined the global services industry in 2023 and discuss the opportunities that lie ahead for business leaders in 2024.

The Capital One Merger with Discover Potentially Signals a Shift in the US Banking Landscape | Blog

Capital One’s planned US$35.3 billion acquisition of Discover Financial Services would combine two of the largest credit card companies, creating the most dominant US credit card firm. This deal holds the potential to significantly impact the banking and financial services (BFS) IT services market and providers. Read on to learn the looming risks and what to pay attention to.

Contact us to discuss the topic further.

Acquiring Discover would give Capital One access to a credit card network of more than 300 million cardholders. If the Capital One merger clears antitrust regulations, the combined entity would become the sixth-largest US bank by assets and a leading card issuer and network provider for the US payments market.

Let’s explore the following four implications of the Capital One merger on the BFS technology and IT services sectors.

  1. Increased deal activity will help banks sharpen their focus on core operations

Macroeconomic uncertainty and rising interest rates slowed financial services dealmaking in 2023. However, S&P predicts regional and community banks will be interested in mergers of equals this year. In these challenging times, banks want to understand the potential synergies of the merged entities clearly. They also require deeper due diligence than in the past, as exemplified by the failed merger of TD Bank Group and First Horizon.

Traditionally, acquisitions were an opportunity to enter new product lines and geographies, gain new capabilities, and achieve cost savings and operational efficiencies through technology modernization and streamlining processes and systems.

Recent banking sector acquisitions underscore a clear strategic focus on directing resources to targeted areas. Banks are divesting or seeking partners for non-core or insufficiently scaled units that lack a distinct competitive edge and demand substantial investment.

  1. Investments in data and Artificial Intelligence (AI)/Machine Learning (ML) will rise

Our analysis indicates that merger and acquisition (M&A) activity among regional and community banks will increase, driven by the need to achieve greater scale. This strategic move is essential for these financial institutions to compete effectively with larger players, particularly as customer engagement transitions from physical to digital platforms.

By joining forces, these banks will be better positioned to develop new competencies in data management, AI/ML, open application programming interfaces (APIs), and advanced analytics, aligning with the growing digitalization of banking services. The merged entities will benefit from larger resource pools, facilitating improved alignment between skills and talent.

  1. Service provider portfolios will likely reshuffle

Discover and Capital One have traditionally relied heavily on outsourcing to two or three major service providers. In mergers, providers with significant contracts with both entities typically stand to lose revenue because spending by the merged entity will not be as large as it was under the separate relationships unless they gain wallet share from competitors.

Capital 1 Discover 1

 

Suppliers that solely provide services to Discover are at risk of having their portfolio consolidated and moved to Capital One. However, providers who bring intellectual property or a niche capability may maintain the business through the consolidation.

Discussions about increased regulatory scrutiny are emerging, as even the regional banking market is at the cusp of such transactions. Moreover, this transaction can potentially increase competition for giants Mastercard and Visa.

  1. Banks will require substantial consulting and system integration support

M&As spur increased short-term spending on post-merger integration and consulting services. By rationalizing vendor portfolios and IT infrastructures, merged entities can substantially cut costs by eliminating redundant applications and platforms. BFS firms will need partners to devise modernization roadmaps to create long-term value.

Merged entities must swiftly adapt their operational models, delivery strategies, and sourcing decisions to excel in the evolving landscape. Investing in specific technologies and tools is essential to foster growth and ensure operational continuity. Emphasizing core operations becomes a prerequisite as firms assess the appropriate valuation before crafting their integration strategy.

The road ahead for the Capital One merger

Richard Fairbank, founder, chairman, and CEO of Capital One, has emphasized that the merger with Discover presents a unique opportunity to unite two highly successful companies with complementary strengths and franchises.

The Capital One merger aims to establish a payments network capable of rivaling the industry’s most extensive networks and companies. However, the potential impact of increased market concentration from this combination will face regulatory scrutiny.

Providers should closely monitor system integration opportunities, as Capital One plans to expand its 11-year technology transformation initiative to encompass all of Discover’s operations and network.

The new entity will invest in growth initiatives, including faster time-to-market, innovative products and experiences, and personalized real-time marketing efforts. Operationally, underwriting, efficiency, risk management, and compliance enhancements will drive data and technology investments.

We are closely watching the market and regulatory actions. To discuss the Capital One merger and its impact on the US banking landscape, reach out to Ronak Doshi, [email protected], Kriti Gupta, [email protected], or Pranati Dave, [email protected].

Join this webinar to hear our analysts discuss Global Services Lessons Learned in 2023 and Top Trends to Know for 2024.

Financial Crime and Compliance (FCC) Operations Services PEAK Matrix® Assessment 2024

Financial Crime and Compliance (FCC) Operations Services

The Financial Crime and Compliance (FCC) operations landscape is rapidly expanding within the Banking and Financial Services (BFS) industry. Amid challenges such as rising fraud, evolving regulatory norms, economic pressures, and unique geopolitical circumstances, financial institutions and next-generation participants are striving to meet compliance standards. They are working to safeguard themselves from financial crimes while managing operational costs and enhancing delivery capabilities. The introduction of new regulations in the financial sector necessitates a dynamic regulatory compliance framework, posing a global management challenge for these institutions.

In response to these challenges, the demand for digital-led FCC offerings is rising. Providers are seizing opportunities to leverage technology in their capabilities, provide platform-led solutions, and co-innovative advisory services to meet the industry’s growing demands. Stakeholders prioritize efficiency and productivity, aiming to reduce false positives and mitigate potential losses from regulatory fines.

Financial Crime and Compliance (FCC) Operations Services

What is in this PEAK Matrix® Report

In this report, we analyze the vision, delivery capabilities, and market successes of 30 FCC operations service providers and their relative position on Everest Group’s PEAK Matrix® for FCC operations. The study will assist key stakeholders, such as banks, financial institutions, FinTechs, RegTechs, service providers, and technology providers, to understand the current FCC operations landscape and make informed sourcing and partnership decisions.
 

This report features 30 FCC operations service provider profiles and includes:

  • Each provider’s relative positioning on Everest Group’s PEAK Matrix® for FCC operations
  • Providers’ market impact
  • Providers’ vision and capability assessment across key dimensions
  • Enterprise sourcing considerations

Scope

  • Industry: BFS
  • Geography: global
  • The assessment is based on Everest Group’s annual RFI process and an ongoing analysis of the FCC operations market

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What is the PEAK Matrix®?

The PEAK Matrix® provides an objective, data-driven assessment of service and technology providers based on their overall capability and market impact across different global services markets, classifying them into three categories: Leaders, Major Contenders, and Aspirants.

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Lending IT Services PEAK Matrix® Assessment 2023

Lending IT Services 

The lending industry is currently undergoing a significant transformation, propelled by the increasing demand for technological integration to enhance operational efficiency, user experience, and cost-effectiveness. This shift is largely driven by the widespread adoption of advanced cognitive tools, such as AI and predictive analytics, enabling lenders to improve automated approval rates and gain deeper insights into customer behavior. Additionally, the rise in delinquencies, stemming from a growing disparity between wage growth and expenses, is prompting lenders to embrace more user-friendly online tools for flexible payments.

In response to these challenges, lenders are leveraging cloud computing and alternative data to revolutionize underwriting and data management processes. The introduction of innovative products, such as green mortgages and Buy Now Pay Later (BNPL) options, addresses modern consumer demands within a framework aimed at consolidating products for improved efficiency. Moreover, the lending ecosystem is increasingly becoming API-driven, facilitating real-time integrations with third parties and offering flexible customer experiences without the need for costly in-house functionalities. This trend is evident across various sectors, with mortgage lending investing in technology and alternative products and auto financing transitioning toward subscription and shared ownership models. Particularly in commercial and SME lending, there is a noticeable shift toward streamlined online financing experiences and platform modernization.

Lending IT Services

What is in this PEAK Matrix® Report

In this report, we analyze 28 lending IT service providers and position them on Everest Group’s proprietary PEAK Matrix® framework as Leaders, Major Contenders, and Aspirants.
 

In this report, we: 

  • Examine key trends in the lending IT services industry
  • Classify 28 lending IT service providers as Leaders, Major Contenders, and Aspirants on Everest Group’s proprietary PEAK Matrix® framework
  • Discuss the IT service providers’ competitive landscape for lending IT services in BFS
  • Assess providers’ key strengths and limitations

Scope

  • Industry: Banking and Financial Services (BFS)
  • Geography: global
  • The assessment is based on Everest Group’s annual RFI process for the calendar year 2023, interactions with leading technology and IT services providers, client reference checks, and an ongoing analysis of the lending IT services market

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IT Midcaps Witness BFSI-led Growth as Larger Peers Take a Hit | In the News

At a time when large IT companies are seeing BFSI (banking, financial services, and insurance) vertical-led softness, the same is aiding the growth of some midcap companies. The reason is that smaller IT firms cannibalize larger companies’ BFSI revenue.

Peter Bendor-Samuel, CEO of Everest Group, said, “Midcaps are going after a different part of the market — the regional banks. In general, the large firms have huge estates in the large banks and BFSI clients.”

Read more in Financial Express.

Remaining the Employer of Choice in a Dynamic Talent Market for Banking and Financial Services GBS | Virtual Roundtable

VIRTUAL ROUNDTABLE

Remaining the Employer of Choice in a Dynamic Talent Market for Banking and Financial Services GBS

November 9, 2023 |
8:30 am EST | 7:00 pm IST

In our recently released report, “The Top GBS Employers™ in India, the Philippines, and Poland – 2023,” we discovered a noticeable decline in employer brand perception among Banking and Financial Services (BFS) GBS organizations in all three countries.

Join this virtual roundtable as we explore the reasons behind the decline, whether there are specific segments these organizations are losing their talent to, and the current and potential strategies for becoming a BFS GBS employer of choice.

This interactive discussion offers a unique opportunity to engage in conversations with our expert analysts and your peers. Together, we will discuss strategies to maintain a positive brand image, what’s working and what’s not in other organizations, and ways to enhance your own organization’s employee value proposition.

Participants will explore: 

  • What factors impact GBS brand perception as an employer in key markets?
  • What are the top employee grievances, and what are your peers doing to alleviate them?
  • What initiatives do best-in-class GBS organizations deploy to enhance overall brand perception?
  • What is the impact of work model (remote/hybrid/in-office) on talent management practices and brand perception?

Who should attend? 

  • GBS site leaders
  • GBS strategy leaders
  • Heads of human resources
  • Heads of talent acquisition

Virtual Roundtable Guidelines 

The only price of admission is participation. Attendees should be prepared to share their experiences and be willing to engage in discourse. 

Participation is limited to enterprise leaders (no service providers). Everest Group will approve each attendance request to ensure an appropriate group size and mix of participants. The sessions are 90 minutes in duration and include introductions, a short presentation, and a facilitated discussion. 

Partner
Practice Director
Executive Advisor

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