The finance function: tailor-made for the future
The finance function is already changing, driven by pressures to boost customer service, adhere to regulatory scrutiny and reduce costs.
More than your regular service
The customer must be at the heart of banks’ new business models. Even today, it is not enough to provide routine banking services to win lasting customer loyalty. As we look forward to 2030, we expect customer needs to evolve toward hyper-connectivity with banks increasingly aware of how each customer micro decision will impact their business strategy.
The finance function can accelerate this change by employing analytical tools that will deliver significant insights, enabling the function to continually look ahead. As we look forward to 2030, we expect customer needs to evolve towards hyper-connectivity with banks increasingly aware of how each customer’s micro decision will impact their accurate forecasting and dynamic pricing to enable the business strategy.
Banks that deliver superior customer service will be able to contend with shifting expectations related to everything from real-time digital transfers to better budgeting, and financial well-being services, while at the same time identifying points of differentiation and maintaining a competitive advantage.
Complying with new requirements
In addition, regulators and governments are also demanding ever deeper and faster insights into financial operations. By 2030, we predict that regulators will expect complete transparency to appropriate financial data.
In recent years, as well as preparing for the delayed Basel III accords, and the end of the London Interbank Offering Rate (IBOR), banks have also had to develop strategies for the General Data Protection Regulations (GDPR) and the Payment Services Directive 2 (PSD2).
Ramped-up regulation has created an ever more complex set of controls and systems that banks need to manage. Faced with old, siloed technologies, the finance function needs to consider how best to comply with these changes and strengthen its systems to cope with perennial legislative change.
By 2030, it’s likely that the sheer complexity of such compliance demands will be serviced by transparent, yet secure, industry-wide data models.
This standardization will reduce regulatory costs for banks and ensure that compliance standards are better understood and more transparent, leading to a higher level of public trust in the financial system. This is crucial – in Europe, just 36% of customers reported a high level of trust in their bank.
The future of the bank finance function
Don’t think about how to change finance in your bank; think about how finance can change your bank.
By 2030, the reimagined finance function will be using the latest technologies to constantly monitor key variables in real-time and explore “what if?” scenarios based on their conversations with leadership, investors, regulators and other key stakeholders. This will help banks identify the marginal impact of every macro change and micro customer decision.
It will be able to explain how these changes could affect every stakeholder group and partner with other business units and the wider business ecosystem to develop strategies to navigate these potential outcomes.
This agility will be aided by transparent yet secure industry-wide data models that give regulators automated, real-time access to the data they need – ensuring robust, automated compliance that will increase trust in the system while reducing costs even further.
All this will improve market competitiveness – increasing profitability, helping CFOs make more of their organizations’ financial resources, and fueling the ongoing evolution the rapidly-evolving future of banking demands.
The technology is already here. The banking sector is just waiting for finance leaders with the vision to empower their people and organizations to make the most of it.
How to unleash the power of the finance function
With change the only certainty, the right combination of technology and human skills will be vital.
Being at the heart of all organizational financial data, CFOs and the finance function are best placed to unlock the potential of predictive data analytics and anticipate the future – to identify new sources of value.
To do this successfully, they need the right vision, technology and skillsets to enable their teams to deliver effective strategic business recommendations.
Empowering the finance function with a skillset that complements enhanced technology systems will help galvanize its role as a dynamic and collaborative division in the bank.
CFOs who say that their current finance function does not have the right capabilities for future priorities.
The following macro-level technologies are designed to help transform the finance function:
1. Advanced data analytics: Understanding data is essential to quickly parsing and identifying critical patterns. In our survey, 23% of respondents said improving their analytics is their top transformation priority.
2. Cloud and software-as-a-service (SaaS): Banks are large complex organizations with fragmented legacy systems and siloed data. Cloud and SaaS platforms help consolidate these assets, streamlining operations and improving operational flexibility.
3. Robotic process automation (RPA): Automated finance processes help cut overheads, radically improve working speed and accuracy, and maintain perfect, transparent audit trails.
4. Artificial intelligence (AI): Thanks to its ability to learn and train itself, AI can complement other transformation technologies like RPA and analytics.
5. "Blockchain": Technological transformation requires tight security – blockchain provides this by locking data into transparent, unmodifiable, chains of discrete data.
CFOs who say combining “state-of-the-art” technology with process improvement will be a major focus of the future of the finance function.
At the same time, the skillsets required to apply instant tech-enabled insight will be different to those found in the finance function today.
However, with the emergence of platforms such as Anaplan, which unifies data from each business unit to help organizations make informed decisions faster, the finance function does not face an insurmountable task in updating its skillset.
As gatekeepers of organizational finance, CFOs must ensure that funds are correctly distributed to ensure that its functions’ skillset can meet banks’ ever-changing needs. Furthermore, there is a growing need for CFOs themselves to improve their soft skills – making the role of the CFO more prominent than ever before.
“Many CFOs now feel they are becoming the secretary of state for the organization,” says Tony Klimas, EY Global Performance Improvement Finance Leader. “Instead of just worrying about financial numbers, financial performance, and raising capital from the financial markets, they are spending time interacting with the media, politicians and other external stakeholders.”
Additional EY Banking finance transformation contributors include Steven Krueger, Partner in our US Financial Services group and Steven Ruggio Partner in our Asia Pacific (Australia) Financial Services group.
Technological change, combined with shifting demands from consumers, regulators and other third parties, all mean banking and capital market organizations need to fundamentally rethink how to run their finance functions. CFOs who take charge have an opportunity to transform the way these institutions work for the better – leading to more flexible, more transparent, and more effective service provision that can deliver a true competitive advantage.