By Kris Kowal, Global Head of Retail Banking, SAP
Banks are being tested as they construct new strategies to address various internal and external factors – both known and unknown. So far, efforts to reduce inflation and boost money supply have shown signs of success in many countries. However, ever-evolving customer expectations, regulations, and macroeconomic factors place considerable pressure on income generation and cost management.
In response, most banks are fine-tuning the fundamental foundation of their business model. According to a recent IDC Info Snapshot, this trend impacts not only large international banks but also midsize ones (with annual revenues between $500 million and $800 million).
With revenue growth ranking as the top objective in the study, 41% of surveyed midsize financial institutions are focused on nurturing a workforce of “customer-centric employees” to differentiate themselves more competitively.
IDC’s findings underscore a broader industry-wide shift towards adapting to the ever-evolving economic environment and aligning business strategies with the changing dynamics of global markets. However, more successful banks are going a step further by rethinking their core technology framework to enhance their customer experience with long-term resilience across their ecosystem.
How midsize banks are getting ready
To attract and retain customers, banks must give employees the advanced digital tools and user experience necessary to drive engagement, growth, and satisfaction during every customer interaction. Doing so allows employees to contribute to process improvement, make decisions accurately, and offer relevant products and services.
Banks operating in a secure and nimble cloud environment can find immediate access to those technologies, including generative, machine learning, and predictive analytics. This allows organizations to develop new business models in the cloud responsively to changing banking requirements and expectations while avoiding disruption, gaining efficiencies, funding innovation, transforming mission-critical systems, and mitigating risk.
Take, for example, AstroBank Public Company Limited. Recognizing the opportunity to create a new accounting system to support its growth better, the midsize bank built a tightly integrated, next-generation ERP landscape in the cloud.
This digital transformation is helping the bank’s workforce of approximately 450 employees to improve accounting processes, safeguard compliance, and shift financial operations to improve productivity, speed, and innovation.
Each step along this transformation journey has led to a variety of structural improvements, including:
- 3,000% reduction in financial closing time
- 30% reduction in the cost to manage financial operations
- 30% boost in productivity, which is expected to rise 50% higher
According to IDC research, AstroBank is not alone in taking this approach to reframing its core ERP system in the cloud. Surveys show that more than 98% of financial institutions worldwide have already adopted cloud technology for at least one or two workloads, with many planning to be “cloud first” in the future. Even 39% of institutions currently running on premise ERPs plan to move those platforms to the cloud within the next 12 months.
The adoption of cloud ERP allows banks to deliver on their customers’ needs and expectations fully with smoother connectivity, data-driven intelligence, operational effectiveness, financial insight, and risk control. In return, growth-focused banks can build a platform of banking and related nonbanking services – from simple after-sales services to complex outcome-as-a-service models and data monetization.
In addition, critical workloads such as payments, core processes, and insurance systems are moving to the cloud. This approach enables banks to move beyond financial reporting and profit and loss to leverage advanced data analytics to gain greater insight and plan more strategically.
Where lasting customer outcomes begin
As evidenced in IDC’s research as well as AstroBank’s experience, cloud technology is quickly becoming a part of financial institutions’ strategy for 2024 and beyond. This widespread adoption signals a collective recognition of the technology’s potential to meet customer expectations, drive operational effectiveness, and unlock new avenues for growth.
And as the industry continues to transition toward cloud-first approaches, the integration of the latest innovations and strategic planning emerges as a cornerstone for midsize banks. This is especially prudent for midsize banks aiming to not only survive but also thrive in an era of constant change and increasing competition.
Discover how midsize banking institutions are becoming more competitive with the help of cloud-based technology. Read the IDC Info Snapshot “Why Technology Is the Key Growth Lever for Midsize Financial Institutions,” sponsored by SAP (IDC #US50580623, May 2023).