Digital Levers in Banking & Financial Services
Financial services organizations have made significant strides in adopting automation, but they have a long way to go to maximize the opportunity because they tend to face adoption challenges.
Session held live on Wednesday, April 3, 2019 | 11:00 a.m. EST | Hosted by Genpact with featured speaker, Manu Aggarwal, Practice Director, Everest Group
For many risk and compliance executives in the banking industry, high false positive rates and investigation inefficiencies are still their biggest pain points. Meanwhile, the pressure to fight financial crime, cut costs, and reduce inefficiencies continues to escalate.
Join this webinar discussion on why financial institutions need to look beyond these pain points, which are just the “tip of the iceberg”. Together, we will examine how to solve the much more daunting problem of data management that lurks beneath the surface.
Manu Aggarwal, Practice Director, Everest Group
Blockchain is increasingly viewed as a ground-breaking technology with potential to disrupt industries by enabling process efficiencies, cost optimization, and building new operating and revenue models. Everest Group research suggests that almost 60% of all blockchain use cases are focused on the financial services industry since the genesis of this technology from the cryptocurrency bitcoin. Some of the use cases of blockchain in financial services are FX settlement, real-time payments, OTC derivatives clearing, P2P lending, cross-border lending, compliance reporting/audit, securities Issuance, P2P insurance, trade finance, KYC as a shared service, event-driven insurance, and core banking.
Use cases for CPG, Technology, Automotive, BFS
The global financial services sector faces a series of new challenges, from the rapid adoption of automation, increasing regulation and Brexit to protectionist rhetoric in the US. This changing landscape means that traditional outsourcing models are under scrutiny, some roles may disappear and others are shifting to new parts of the world.
Globally, banking and financial services sector (BFS) companies signed US$4.9bn worth of IT and business process outsourcing (IT-BPO) contracts between Q4 2016 and Q3 2017, according to KPMG’s Global IT BPO outsourcing deals analysis. Figures from Everest Group Research reveal that global revenue from the IT-BPO market in BFS is between US$100bn and US$150bn. And the three key low-cost countries of India, the Philippines and Poland employ a total of between 310,000 and 850,000 people in BFS BPO alone.
At the beginning of 2018, we forecasted a bump in discretionary IT services spending in Financial Services. And we predicted banks would spend heavily on technology. But we didn’t forecast as big a bump as is occurring, and the banks are spending more heavily than we anticipated. Why is it important to understand what’s happening here?
Who would be the beneficiaries of that spend? That’s why this spending trend is important.
At the beginning of the year, we said the beneficiaries would be primarily Fintech companies, in-house services, and non-incumbent service providers. However, given the amount of spending we see coming down through the pipeline, we don’t think the fintechs, in-house services and challenger service providers will be able to absorb the spend.
Deep Dive Equity Research and Everest Group’s July 31 report, “IT Services: Growth Trends in the Financial Services Vertical,” reveals that the BFSI spend – particularly in banking – is poised to increase dramatically. In fact, we see a 15% increase planned for 2018 at just the top four US banks:
Initially, we believed that the incumbent technology service providers would not be the beneficiaries of the increased spend. But we now believe there will be a shortage in supply that the fintechs and new-age service providers will not be able to satisfy. We believe the only way to satisfy this shortage is if the incumbent legacy technology service providers of technology – which have been largely left on the sidelines to date – participate.
Yes, the underlying secular forces that we noted at the beginning of the year as growth obstacles for the legacy service providers (revenue compression, a strong DIY movement or insourcing and suboptimal sales model for digital projects) still hinder legacy providers’ growth. But we believe that the enormity of the spend that is coming through the pipeline will create a rising tide that the fintechs and new-age technology service providers will not be able to absorb.
Consequently, we’re upping our forecast for banking spend in 2018 and strongly believe the legacy service providers will be meaningful beneficiaries of this spend.