Tag: Tech Providers

Core Banking in the Age of Transformation: A Ride from Legacy to Modernity | Blog

For years, core banking systems have been the backbone of financial institutions. But the landscape is shifting, and customers have high expectations. Nimble FinTech startups with cloud-based solutions are challenging traditional banks. In this dynamic environment, core banking systems are under more scrutiny than ever before. Reach out to discuss with us.

Legacy core systems, while reliable, are monolithic and struggle to meet today’s needs for hyper-personalization and real-time experiences. They’re expensive to maintain, slow to adapt, and can’t deliver the seamless, personalized experiences customers now expect. As the volume of transactions increases, the rise of open banking accelerates, and the need for real-time processing picks up, these limitations become clear.

The winds of change: M&A, strategic partnerships, and modernization

The core banking landscape is shifting. Mergers, acquisitions, and partnerships between technology providers and financial institutions are on the rise. This consolidation sends a clear message: modernization is no longer optional, it’s essential for survival. For instance, Visa’s acquisition of Pismo, a cloud-native core banking platform provider. This move strengthens Visa’s ability to offer banks next-generation solutions, while Pismo gains access to Visa’s vast network and expertise.

Banks across various markets are recognizing the need for modernization and are actively partnering with service providers to upgrade their core systems. These collaborations highlight the growing understanding that modernization is key to staying competitive and meeting evolving customer demands.

Progressive banks are adopting next-generation core banking platforms offered by leading technology providers that are:

  • Cloud-native: Built for scalability and agility in the cloud, enabling banks to adapt quickly
  • API-driven: Open APIs make it easy to integrate with fintech solutions, fostering a more personalized banking experience
  • Microservices-based: This modular design allows for faster innovation because components can be swapped out and updated independently

Blog Exhibit Core Banking in the Age of Transformation A Ride from Legacy to Modernity

 

Demystifying modernization: A roadmap for success

Banks are understandably cautious about core modernization due to its critical role in daily operations. Several approaches are available, each with its own pros and cons:

  • Journey-led progressive modernization: This step-by-step approach prioritizes flexibility by building a digital layer around the core. APIs are exposed for better integration, while legacy parts are gradually replaced with modern microservices. Based on our conversations, this is the most preferred choice (5 out of 10 banks) as it minimizes disruption and allows for incremental changes
  • Big bang replacement: A complete switchover to a new platform, a faster but riskier approach that requires careful planning and execution. Smaller banks with less complex systems often choose this route (2 out of 10 banks)
  • Other approaches: Re-platforming, re-factoring, and leveraging a new tech stack for greenfield banking are other options, each suited to specific needs and risk tolerances

However, these approaches are not without their challenges. Change management and the need to decommission legacy systems can be challenging, while progressive change can result in higher costs and the need to adapt to constant technological shifts. Data migration, the availability of a scalable talent pool, vendor lock-in, and cost overruns are additional hurdles that banks must navigate.

Implications and opportunities for service providers

The core banking transformation journey presents a significant opportunity for SPs. Banks will need increased consulting and implementation support as they navigate this complex transition.

The journey-led progressive modernization approach, the most preferred by banks, is a long process that requires extensive guidance. Banks will seek expertise in areas such as modernization and decommissioning strategy, change management, data migration, talent acquisition, and system integration. This translates into a higher demand for consulting services, where providers can leverage their industry knowledge and technical expertise to guide banks through the transformation journey.

The road ahead: A collaborative future

The future of core banking is a collaborative one. Banks and SPs will need to work together to unlock the full potential of next-generation core banking solutions. By embracing innovation and forging strategic partnerships, banks can stay competitive and deliver the exceptional experiences that customers demand. This transformation goes beyond just a modernized core; it paves the way for a future of hyper-personalized financial experiences.

Currently, technology providers can participate in our Core Banking Technology Top 50™ Report assessment. We will rank technology providers based on their scale of core banking business, client geography mix, and significance within the core banking platforms market (retail and commercial). Submit a request to participate.

To learn more about core banking, contact Ronak Doshi, [email protected], Pranati Dave, [email protected], Kriti Gupta, [email protected], and Laqshay Gupta, [email protected].

Sourcing BFSI leaders can also request to join the exclusive virtual roundtable, Banking, Financial Services, and Insurance Leaders Discuss: 2024’s Top Trends in Tech and Ops Sourcing, to learn about the latest trending issues shaping tech and ops sourcing within the BFSI sector.

The Future of the Wealth Management Industry: The S-curve Shift and the Modernization Opportunity | Blog

The wealth management industry has evolved over the years, transitioning from reputation-driven models to technology-led advisory services. Read on to uncover how wealth management firms can develop a digital blueprint to navigate the next digital frontier and better serve their clients in an increasingly hybrid and personalized landscape. Get in touch to discuss further.

In our earlier blog, How Technology Can Help the Wealth Management Industry Navigate Coming Changes in 2023, we discussed how digital disruptions will impact the wealth management industry and the role technology and service providers can play in helping wealth management firms navigate the choppy waters ahead. Continuing with our two-part blog series in the wealth management space, this blog will touch upon how this industry has transitioned through the different eras and how we are now on the cusp of a new digital future. The current question is, what will the digital blueprint be to help wealth management firms be better prepared for this new normal?

Wealth management eras – is the industry undergoing another S-curve shift?

The wealth management industry has witnessed several s-curve shifts in the past and has evolved from being a reputation-driven business to a technology-led advisory model. We are now witnessing the next inflection point, moving from persona- to person-based personalization through the hybrid trust model. The initial journey of the wealth management industry was about family-based offices and reputation-driven businesses. It was all about having the right intimacy with the client, nurturing the exclusivity, and delivering that strong advisory model. It was driven by large systems of records, but experience remained bespoke and in-person.

After this era, the wave of customer expansion hit with the emergence of mass affluent customers. It became less about serving HNIs and UHNIs and more about capturing the mass affluent segment that demanded access to similar asset classes and WM strategies as HNWI and institutional investors, which led to the rise of robo-advisory models to democratize access to these services. Enterprises wanted to serve this new segment better in a cost-effective model that could help them meet their margin targets as well. This led to rapid technological disruption in the wealth management industry and pushed us into the digital advisory model that we are currently in. We saw this in the case of UBS in late 2022 with the launch of WE.UBS, a digital wealth platform for mass affluent clients in China in partnership with technology provider Tencent.

Currently, we can see that enterprises are focusing on developing a hybrid trust model. In this model, they utilize emerging technologies such as AI to transform end-to-end customer journeys and give their clients access to new products such as digital assets, ESG-linked investments, and overall financial wellness services. This could be seen in action a couple of years ago when HSBC introduced HSBC Prism Advisory in Asia, blending face-to-face and digital interactions in private banking. This service leverages BlackRock’s Aladdin Wealth™ technology, combining data analytics with HSBC advisors’ expertise.

Another notable example is when Citi announced its plan last year to utilize AI as a tool to simplify and automate procedures, enabling private bankers to dedicate more time to client service.

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However, the top-of-mind questions are “Are we nearing the end of this era?” and “Is there a new world order coming for the wealth management industry?” This space has already seen a rapid expansion of products to cater to different customer segments, but now enterprises need to provide assistance to customers in navigating the buying experience while creating trust in a model that is now both human and digital. The wealth management industry has multiple siloed channels where the human-assisted channel enables great advice, but as soon as it moves to digital channels, the level of experience starts getting non-uniform and disjointed. Customers often talk about a lack of contextualization as they interact on such channels.

Psychographic segmentation – can it fix what is broken?

Hyperpersonalization has become one of the key focus areas as wealth management firms are trying to drive competitive differentiation in the current macroeconomic landscape. The emerging client segment, comprising of millennials and Gen Z investors, expects tailored services as per their preferences and values seamless experiences across both digital and human advisory channels. In light of these demands, we see the approach towards hyper-personalization shifting from demographic-based to a more psychographic-based segmentation.

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Enterprises are now moving away from utilizing broader aspects such as age, gender, occupation, and location to create different personas and are utilizing individual personality traits such as lifestyle, attitudes, beliefs, interests, and values to create unique experiences for clients. This strategy promises to be especially effective in captivating and retaining young investors, a highly desirable client demographic poised to emerge as a lucrative segment amid the intergenerational transfer of wealth spanning diverse geographic regions. To embark on this journey, HSBC recently partnered with a European consulting firm, Zühlke, to revamp its mobile wealth management services for UK clients. Zühlke’s experts conducted a study on the investment preferences of British customers, providing insights that enabled HSBC to tailor its services to better meet their needs.

To excel in this approach, enterprises must possess the necessary technology to seamlessly monitor, acquire, and leverage customer data in real time, empowering them to dynamically create personalized experiences with agility and scalability. They need to establish trust with their customers so that they feel comfortable in sharing this private personality traits-related data, which can eventually lead to personalization-led value creation and drive customer delight. In late 2023, Morgan Stanley announced plans to roll out a gen AI bot for its HNWI clients that will provide functionalities such as summarizing a meeting, drafting a follow-up email for suggested next steps, updating the bank’s sales database, scheduling a follow-up appointment, and acquiring knowledge to aid advisers in managing clients’ finances, covering aspects like taxes, retirement savings, and inheritances.

Future of wealth – can the roots of a modular core system power the tree of wealth?

As enterprises embark on this experience innovation journey, it is important for them to have the underlying technology stack to support the industrialized delivery of these data-driven experiences at scale. Currently, they are facing challenges in establishing digital workflows as most of them still have the legacy architecture consisting of Excel spreadsheets and siloed data systems, which makes streamlined data management and analysis difficult.

They are increasingly looking at leveraging cloud-based data management systems that can help them optimize their IT infrastructure costs and improve their ability to process structured and unstructured customer data in real time and at scale. We also saw that a few months ago, Northern Trust collaborated with Finbourne Technology, a UK-based data solutions provider, to adopt its cloud-native data management solution. This partnership aims to modernize Northern Trust’s technology by offering cost-effective and scalable data calculation and processing, enabling near real-time delivery of valuations and other crucial data to clients.

Integrating the cloud into their business and technology operations will also help them roll out new features quickly and keep up with the constantly changing customer demands. In this process of driving data and intelligence in their operations, one of the key focus areas for enterprises is prioritizing and sequencing this migration of workloads to the cloud across the various elements in the wealth management value chain. They want to identify the quick wins that would have the maximum impact while having lesser complexity associated with the transition.

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The wealth tree, as seen in the graphic, is what we believe the future of wealth would look like. The fruits and leaves represent wealth for end customers by creating customer delight through innovative products and personalized experiences. This was seen in action in early 2024 when Kinecta Federal Credit Union announced a strategic partnership with cloud-based wealth management solutions provider FusionIQ to enhance its digital investing services by leveraging the platform’s features, such as digital advice, self-directed investing, and other financial well-being solutions. Also, in 2023, J.P. Morgan partnered with TIFIN to launch TIFIN.AI, aiming to accelerate AI-powered fintech innovation in wealth management. This initiative includes using AI for client portfolio insights for advisors, alternative investing, workplace wealth management, and insurance, among other applications.

In this world of personalized experiences, customers want to feel trusted and safe with wealth enterprises as they enable these multi-channel experiences. They want customers to be able to invest in alternative assets and grow their wealth as wealth management enterprises orchestrate all of it.

As enterprises think about this, they want to be compliant and provide a secure and protected environment. There is a need to have a core system that is modular, composable, and automated. There needs to be a lot more API enablement, which can be continuously optimized in terms of the infrastructure and the applications that are running on top of it. To industrialize the data-driven personalization engine, the core system needs to enable it in a trusted, safe, and secured manner so the security aspect becomes paramount. The two big enablers to this journey will be running operations and having data on the cloud.

In the journey to build out this wealth tree, all ecosystem players, from wealth managers and technology providers to service providers, will have a role to play and a different journey to traverse.

We would be interested to hear about your journey in this evolution. Please feel free to reach out to Ronak Doshi, [email protected], Kriti Gupta, [email protected], or Pooja Mantri, [email protected] to discuss further.

Watch the webinar, Transforming to Thrive: Building Winning Operating Models Amid Disruption Across Industries, to learn how enterprises should think about disruptive changes as they go about their transformation agenda.

Five Tactics for Technology Service Providers to Guard Profit Margins Against Generative AI Impact | Blog

Technology service providers are committing to gen AI-related benefits to clients without a clear path to realization, which will negatively impact their deal margins. Uncover five strategies providers can use to optimize the productivity benefits of gen AI without denting profit margins in this blog.

The notion that generative AI (gen AI) can negatively impact technology service providers’ profit margins is counterintuitive. Service providers have assumed leveraging gen AI would improve margins by amplifying productivity and efficiency. Unfortunately, this has not been the case.

Most technology service providers commit to delivering gen AI-driven productive gains to clients. However, they will struggle to achieve these benefits in the short term due to the highly contextual and probabilistic nature of gen AI tools and their niche impact on specific tasks. This is hard to guarantee in solutioning.

Consequently, service providers must adopt other methods to realize these productivity benefits. This often involves a combination of people and intellectual property (IP) assets that cannot be charged to clients, hurting near to mid-term profitability.

Let’s look at the following five options that CEOs and CFOs of technology service providers have to address this issue:

  1. Monetize generative AI assets: Service providers have struggled to monetize their IP and assets because they are mostly used as service enablers and differentiators. Clients do not perceive additional value and are not incentivized to pay for these assets. However, gen AI assets could change this trend. Investing in gen AI assets can significantly vary from weeks to months of effort. Monetizing these assets should go beyond implementation and support fees and focus on IP value. If service providers can demonstrate genuine value, clients will be willing to pay the cost through better service pricing, an innovation fund, or direct monetization
  2. Educate sales teams and clients about the realistic impact of generative AI: Sales teams often fear their competitors are moving faster than them. In this rush, they commit gen AI benefits to clients without involving the practice, solution, or delivery teams. Leaders should coach the sales team and engage with strategic clients to have realistic gen AI discussions. Providers should create gen AI literacy services that peel away the hype of eye-catching Big Tech productivity announcements about gen AI offerings. Educational initiatives can help moderate client expectations and limit margin erosion
  3. Transform deal-related enabling functions: Generative AI has significant potential for summarizing and querying knowledge repositories. Service providers already use it to enhance the sales function through requests for proposal (RFP) bots, translating documents, and understanding service level agreement (SLA) requirements and the nuances of client needs. Accelerating such initiatives across sales, pre-sales, delivery management, deal finance, and business reviews can lower deal-related costs and alleviate margin pressure from productivity commitments
  4. Identify the right clients: Service providers need to identify the right set of clients for committing and delivering gen AI productivity benefits. This crucial aspect of the puzzle is frequently overlooked. The selection process should be driven by data, the client’s AI maturity, and the nature of the relationship and services used. Choosing the right clients can increase providers’ margins in their gen AI service delivery adoption journey. These clients will be more supportive of letting specific units experiment with gen AI productivity benefits, provide realistic feedback, and set internal expectations
  5. Transform effort and pricing models: Service providers are struggling to transform their effort and pricing model in the wake of gen AI committed benefits. Providers continue to rely on traditional approaches mainly because they are uncertain about linking gen AI committed client benefits to effort and pricing to manage deal margins. However, this problem must be solved to prevent it from significantly denting profitability. Apparent solutions, such as delinking price from effort, value-based pricing, and outcome-based commercials, have not worked. Since clients are more accommodating to collaborate with providers in this journey, providers should reignite these conversations, educate procurement and vendor management offices, and refresh their solutioning playbooks

While account and delivery leaders are held financially accountable for managing margins, linking this specifically to gen AI-related commitments can backfire. Instead, the focus should be shifted upstream during deal bids, solutioning, and client engagement.

To share your experience and discuss the impact of generative AI on profit margins for technology service providers, contact [email protected] and [email protected].

Watch this webinar, The Generative AI Odyssey: A Year in Review and What’s Ahead in 2024, to hear our analysts discuss the hype vs. reality of generative AI, production-level use cases, and the future of this transformative technology.

Thriving in the Competitive IT Talent Market: Best-in-Class Approaches | LinkedIn Live

Linkedin Live

Thriving in the Competitive IT Talent Market: Best-in-Class Approaches

View the event on LinkedIn, which was delivered live on Thursday, January 18, 2024.

The current scarcity of talent equipped with next-generation technology skills is leading enterprises to rely more on IT service providers for needed capabilities and creating a race for providers to attain top tech talent.

Watch this LinkedIn Live to learn the findings from our recent Talent Readiness for Next-generation IT Services PEAK Matrix® assessment, including insights into the technology talent market, key trends and emerging skills, and the current landscape.

The speakers also discuss IT service providers’ workforce management and development capabilities and talent portfolio rates, as well as provide best-in-class practices that leading IT service providers have adopted to build a sustainable pipeline of high-quality, multi-skilled talent.

What questions does the event answer for the participants?

  • What does the current IT talent market landscape look like?
  • What are the best-in-class workforce management and development approaches of top IT service providers?
  • What is the outlook for the IT talent market, and what challenges lie ahead for IT service providers?
 

Meet The Presenters

Amit Anand 20 22 batch
Amit Anand
Senior Analyst
Everest Group
Doshi Ronak
Partner
Everest Group​
Dwivedi_Arpita
Practice Director
Everest Group​

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