Banking / Retail Banking
May 28, 2020

Achieving Efficiency, Cost-Effectiveness and a uniform Customer Experience in International Operations: Why Centralizing should be on the Banking CIOs Agenda

Kapil Kapur
Senior Director, Consulting Sales

The New Priorities for International Banks

The CIO of a large international retail and corporate bank recently told its vendors:- We want to deliver an efficient, uniform, reliable, and cost-effective service to our customers”. There was a strong emphasis on the words “cost-effective.”

The CIO continued, “... the service must make it easier for our customers to engage with us across the world, without increasing our own risk, and it must meet the regulatory frameworks of all the jurisdictions that we work across. Our management wants us to deliver a higher level of service to our customers and bring down our cost-to-income ratio.”

These words resonate with the priorities of almost every international bank as they search for ways to:

Deliver a uniform customer experience across geographies, lines of business, and channels. The bank’s customers expect consistent experience, business rules, and processes, no matter how, when, or where they interact with the bank.
Meet compliance and regulatory reporting requirements across all the countries where the bank operates. Regulators across the world are stipulating new requirements at an alarming speed, giving little lead time to banks to comply.
Reduce the banks’ operational risk. With falling margins and increasing regulatory costs, banks need to eliminate losses due to avoidable operational errors. The expectation is to use technology to reduce operational errors down to zero.
Leverage technology to find new innovative ways to take the banks’ products and services to its customers. Banks find themselves competing or partnering with nimble Fintechs to offer new services in the marketplace.
Reduce the cost of operations. Falling interest rates and incomes have put pressure on banks to reduce their costs to maintain healthy cost-income ratios.

Why Centralization of Operations?

Reduce Cost and Drive Efficiency

Today, a typical international corporate bank spends about 70% of its IT budget on “Run-the-Bank” activities for the maintenance of its legacy systems. As a result, when posed with the challenge to cut costs, most IT Execs tend to look at this large chunk of cost to find ways to reduce costs. However, the trick lies in focusing on using "Change-the-Bank" projects to transform the bank and use the “Change-the-Bank” budget to find ways to reduce “Run-the-Bank” costs. Banks using dispersed core banking systems across the world should trigger the initiation of transformational centralized core banking projects aimed at reducing long term operational costs.

This reduction is often a result of a simplification of procedures and reduced operational overheads.

Unified Experience

A standard set of banking products and operational procedures adopted centrally by the deployment of a centralized core banking system allows banks to offer a standard experience to global customers.

Through the Centralization of Operations, Global International banks can address the dual needs of customer intimacy and the implementation of a unified (?) vision. Customer intimacy is nurtured through geographical proximity to customers across different continents. At the same time, a centralized core banking system having a unified set of business rules helps better alignment with the bank’s central vision.

Agility

Customer data and transactional data stored in a central core banking system allow banks to meet fast-changing regulatory requirements with ease. For example, a new KYC requirement stipulated by a certain central bank does not require data updates or consolidation across multiple systems located across the world.

Open Innovation

Omnichannel offerings can be based on microservices. When coupled with and a modern core banking system, they allow banks to offer their services and products to their customers in almost every conceivable manner. API based integrations give controlled access to the external world. This allows Fintechs and other providers such as PSP's to work jointly with banks to offer innovative solutions and services to the end clients.

Our experience

Over the last two decades, many leading global corporate banks have worked with Oracle to help them navigate their complex transformational journey.

One corporate bank with a network of 7 branches across Europe wanted to streamline its operations across the continent. Each branch had its own IT setup resulting in a fragmented arrangement, causing inefficiencies. Oracle helped the bank to centralize its IT infrastructure at a single location. It’s IT and operations were centralized in Dublin, and hosting was centralized in London. This helped to reduce cost overheads across different countries.