A different world

The global pandemic converted banks’ plans for digital transformation from an opportunity with a long lead time, to an urgent necessity — even a matter of survival. With this dramatic shift in mind, the top 4 challenges for banks and financial institutions in 2021 are:

  • Growth
  • Digital adoption
  • Process & profitability
  • Systems & security

Layered onto these top 4 challenges for banks and financial institutions in 2021 are the additional burdens that come with being one of the most heavily-regulated industries in the world. Banks, insurers and financial services companies must be compliant with a host of laws and policies — and do so without becoming paralyzed by regulation.

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Contradictory Choices: 2021’s Challenges for Banking, Financial Services & Insurance

The top 4 challenges for banks and financial institutions in 2021

Below, we take a closer look at each of the top 4 challenges for banks and financial institutions in 2021 — as well as solutions that can support transformation while maintaining compliance.

Challenge 1: Growth

This is a common goal for banks and financial institutions: enhancing market share through new products and capabilities, as well as completing mergers and acquisitions. The question is how to grow strategically, without exceeding a sustainable pace or exceeding the organization’s risk tolerance.

In the case of M&A, the integration of various operational systems, technology and workforces poses a range of difficulties, especially if those systems models are not well-documented or understood across the business.

Challenge 2: Digital adoption

Adoption could also be called ‘adaptation’ — the race to build new or better digital experiences for retail and business customers, and bring business systems up to par in the cloud. This might include digital customer onboarding, faster loan approval or real-time payments. At the same time, these new approaches can’t disrupt core business systems, and focusing on customers shouldn’t mean forgetting about profits.

Challenge 3: Process & profitability

Talking of profits — one of the clearest paths to enhanced profitability is introducing operational efficiencies based on automation and analytics. The goal is optimizing processes for greater efficiency and better customer experience; the challenge is to innovate without neglecting existing lines of business, and to transform without getting bogged down in the transformation itself.

Challenge 4: Systems & security

As with digital adoption, many banks and financial institutions are weighed down by legacy technology on the operational side of their business. Outdated back-end systems may no longer be fit for purpose and are unlikely to integrate well with newer systems. In some cases, this ‘technical debt’ may lead to vulnerabilities, requiring frequent and expensive security checks.

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A common solution

Despite being very different in the risks they pose, the top 4 challenges for banks and financial institutions in 2021 have a common solution: effective process management. But too often, process management is still an afterthought. It’s the reinforced steel frame inside the car, when bragging rights are reserved for the car’s sleek curves or zero-to-sixty performance.

Neglecting the powerful role of process in business transformation is where many banking leaders get into trouble, because it is an essential framework that drives business change. A weak process culture in an organization means it is difficult to scale and grow, adapt to changes in the market, make customers happy, comply with regulations, or tackle any of the challenges above.

Scaling up with the right tools

Scaling without a strong process framework is like scaling up from home cooking to a restaurant without recipes or a menu — the larger the endeavor, the more important documentation becomes.

Once again taking the case of mergers and acquisitions as an example: firms must map the systems of two institutions to merge customers, build standardized processes that unite both organizations’ systems of record, and to render decisions and processes accessible to business analysts. These practices quickly reveal the strength of an organization based on its process capabilities alone.

The right suite of process management tools can ensure banks, insurers and financial services organizations can leverage their advantages in size, institutional maturity and name recognition to fend off digital challengers, while adapting to customer needs and the new opportunities represented by rethinking their business models.

After all, in highly regulated, process-driven environments such as banking, financial services and insurance, process is the difference between making a profit — and making it up as you go along. To find out more about these kinds of contradictory choices, download our white paper on 2021’s challenges for banking, financial services & insurance leaders today.

Published on: February 23rd 2021 - Last modified: February 23rd, 2021