Banks and Digitalisation

In a somewhat sensational report released on 16th January 2017, “A Brave New World for Global Banking”, McKinsey anticipates the global banking industry is at threat to lose 30% to 50% of its profit base as new intermediaries enter the market.

McKinsey writes:
“more severe digital disruption could further cut their profits from $110 billion today to $50 billion in 2020, and slice returns on equity (ROEs) in half to 1 to 2 percent by 2020, even after some mitigation efforts”

Around the world regulators are allowing new entrants to the financial services vertical but McKinsey does not think it will be start-ups that will disrupt the industry…. “Over time, huge tech companies may be able to insert themselves between banks and their customers, capturing the vital customer relationship and presenting an existential threat.”

To meet the challenge, McKinsey states the banks must reorient their business models and aggressively link up with platform providers as well as other banks to share costs. This will require a re-engineering of the industries’ IT infrastructure and the adoption of a proactive regulatory strategy.

McKinsey states:
“The industry must move beyond traditional restructuring and renew the bank via new technological capabilities, as well as new organizational structures. Any new business model that banks design will likely require new technology and data skills, a different form of organization to support the frenetic pace of innovation, and shared vision and values across the organization to motivate, support, and enable this profound transformation.”

Essentially McKinsey is calling for the entire industry to completely overhaul the existing IT infrastructure, i.e., a complete re-engineering of the existing architecture from both process and data perspectives. This cannot be achieved without first re-mapping and documenting the bank’s entire existing environment. Which implies identifying and tracking all transactional activity executing across the highly disparate and fragmented infrastructures. And this can only be done by automation – automation made possible by the HELIXsystem Process Assembler.

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