A strong focus on expense management helped the banks offset the impacts of margin compression, and investment and compliance spend demands, resulting in positive jaws for the first half of the year. But increasing inflationary pressures are a headwind that threatens the banks’ cost base reduction efforts.
The banks are looking to automate back-office functions and digitise banking systems to deliver measurable cost out and reduce operational risk. They are concentrating technology investment in digitising customer-facing processes and infrastructure initiatives, such as consolidating their networks, transitioning to the cloud and building out platforms to support future growth. A major need is to leverage data and analytics to inform risk management and, perhaps most importantly, enable the banks to form a forward-looking view of risks and opportunities.
However, reducing the cost base remains a challenging task, given banks’ traditional operations silos, complex legacy systems and the need to respond to ever-evolving regulatory requirements. This is contributing to the banks’ struggle to drive integrated, holistic operations transformation.
Tackling financial crime risk
Financial crime risk, in particular, would benefit from an integrated approach. The banks are being challenged, both internally and externally, to keep up with the onerous demands of mitigating financial crime risks. The answer lies in using advanced data and analytics techniques, leveraging artificial intelligence, machine learning, natural language processing and cognitive automation, to accelerate or automate a significant portion of otherwise labour-intensive compliance monitoring. This will improve inefficiencies in existing investigative processes and reduce operational costs.
Compliance teams can also leverage advanced analytics in a range of preventative financial crime use cases. These include enriching the KYC process, enhancing sanctions screening performance and monitoring transactional activity – helping to proactively identify risks and opportunities.
Banks that innovate and adopt new technologies and techniques to address these regulatory compliance demands will be industry leaders in the years to come.
Acquiring and retaining talent remains a significant challenge. In-demand critical skills, such as data and engineering, are particularly hard to find, with retention exacerbating the challenge for the banks.
In the war for talent, salaries aren’t the only factor. Employees also want a quality work experience and a job that offers meaning and purpose. Rather than the Great Resignation, we are observing something more akin to the Great Reshuffle, as employees choose to move to more personally satisfying roles.
To compete for and retain the best talent, banks must:
- Boost employee engagement by focusing on purpose, including embedding an environmental, social and governance (ESG) agenda in mainstream strategy.
- Proactively redesign an employee value proposition (EVP) centred on employee experience. Banks must also be able to translate their purpose into an EVP that resonates with an increasingly diverse workforce – without becoming so diluted that it loses all meaning. This includes providing meaningful tailored rewards, tangible career pathing and training, and flexible work arrangements.
- Design the organisation to perform, scale and adapt. Determine what work elements are needed to achieve the bank’s goals and redesign work outputs to increase effectiveness and efficiency.