Diversification Could Have Saved the Financial Industry, Says TowerGroup’s Silva

Diversification could have saved the financial industry, said Ralph Silva, research director, European banking and payments, TowerGroup, and yet governments are currently carving up banks, such as Lloyds Group and The Royal Bank of Scotland (RBS), into distinct business units. Silva explained that the banks hardest hit by the crisis were the ones highly concentrated in one or two financial services industry sectors and with limited geographical spread. Other banks that had diversified businesses across many geographies, such as HSBC, have tended to survive the downturn better.

Speaking to over 100 bank and corporate clients at Pegasystem’s European Banking Expo, Silva said that the days when banks determined what happened to their future are over. Today, it is politicians and shareholders that make the decisions, yet it is the banks’ senior managers that see the need for diversification. “Bank devolution is the future,” according to Silva.

Silva identified six trends that hold for both retail and wholesale banking:

  • Changing customer behaviour: less than 10% of customers have all products with one bank brand.
  • Customer retention has declined over the past six years: this trend is not based on price but customer service levels.
  • Regaining trust is a challenge: used car salesmen have more trust than banks.
  • Customer acquisition cost is going up: brand management is increasing because of negative sentiment.
  • Client support cost is also rising: service expectations are being set by grocery stores, not financial services.
  • Risk levels are rising.

Just as five out of the six trends above focus on the customer experience, the Pegasystem event shone a spotlight on its customers through a number of case studies, for example:

  • Greg Toyn, programme director at HSBC, was on hand to talk about the challenges of implementing a global project, in this case a new global payments investigations (GPI) programme created with Pegasystems. The GPI project is a core component of the OneHSBC payment transformation programme which aims to improve the bank’s payments proposition through providing best-in-class service, while at the same time reducing operational costs and eliminating inconsistencies and redundancies. Discussing best practice, Toyn said that getting stakeholder buy-in, including identifying who cares about the project and who holds the power of influence within the organisation, is crucial in order to manage the “inevitable” crisis that is likely to occur at least once during the lifetime of a project. It is important to keep a grip on the scope of a change programme and identify what is actually needed, not what people want. “What normally happens is there is a dislocation between the business side’s idea of the project and the project that the IT people are implementing. It is crucial to join those up and manage requirements and estimation,” Toyn said.
  • Rosie Jones, transition analyst in Tesco’s treasury department, spoke about the company’s overhaul of its treasury in several change projects to enable straight-through processing (STP). She said that previously, in 2007, the treasury had numerous ways of making payments and wanted a better, simpler, and cheaper way to do so; therefore, it decided to restructure its treasury environment, which included implementing a treasury management system (TMS) upgrade and new systems for dealing, confirmation matching and payments. The desired outcome was the introduction of STP and improved system service levels. Currently, Tesco’s in the UK is fully STP for payments and is doing final testing for its operations in Asia.
  • Loretta Gannon, a member of BNY Mellon’s (BoNYM) innovation team, representing treasury services global product management and strategic development, spoke about the successful electronic bank account management (eBAM) pilot programme the bank completed with United Technologies Corporation (UTC), a US government contractor. The pilot used Alliance Lite from SWIFT and BoNYM’s operating environment, which included Pegasystems, SWIFT FileAct and an XML utility. Benefits from the bank’s perspective were: enhanced product offering; standardisation lowers the total cost of ownership (TCO); improved clients services and service level agreements (SLAs); and gained efficiencies through the technology. The client benefits from faster account opening and closing and easier maintenance. Gannon believes that the eBAM standard will create a tipping point for adoption and move the industry into a “new paradigm”.


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