What is the biggest competitive threat to today’s banking incumbents?
If you asked many of them, they might say the biggest threats come from fintech start-ups, blockchain innovators, or some other new business model that no one has invented yet.
But a new paper from American Banker argues that the biggest threat is coming from within banks themselves—in particular, their reluctance to move to the cloud technologies required to become a digital business.
“The primary threat to any financial institution is therefore not external at all,” the authors write. “It is its own internal inability to nimbly execute on the digital imperatives necessary for success in the difficult-to-predict but most certainly lucrative future of finance.”
CFOs can lead this charge towards a digital future, the writers argue, because the systems under their purview—ERP, ledgers and sub-ledgers, reporting, audit, etc.—hold the key to agility, efficiency, and innovation.
Internal decision-makers depend heavily on enterprise resource planning (ERP) and enterprise performance management (EPM) systems. They rely on these systems to understand what’s going on across the business; to optimize allocation of resources for maximum return-on-capital; and to keep within the institution’s acceptable limits of risk. Financial services companies have much to gain from cloud ERP and EPM systems, which are much more agile, efficient and innovative than their on-premises predecessors.
There are a number of advantages that financial services institutions can gain from moving ERP and EPM to the cloud, including:
Governance, risk management, and compliance mandates can often constrain the agility needed to compete in fast-moving financial services markets. Here again, the cloud can be of extraordinary value. Cloud applications are updated quarterly by the providers to help compliance with regulatory requirements, consumer protections and risk management—making it easier and less costly for banks to comply with new or modified mandates as they emerge. Banks can allocate their finite resources to high-value innovation—rather than to low-value compliance burdens.
The future belongs to those who transform digital uncertainty from an institutional threat to a source of sustainable competitive advantage. In an upcoming webinar, American Banker will discuss why a digital advantage is critical for the future of banks. You’ll learn how to handle moving to the cloud, why it’s about more than just the technology, and how the choices you make can affect your business.