While banks worldwide resettle IT strategies to optimize costs, only one in four are achieving expected returns from their programs, an Infosys survey found.
Banks across North America, Europe, and Asia Pacific were asked how they approached digital transformation amid cost optimization. Over half (52%) of the senior technology executives identified artificial intelligence (AI) and machine learning (ML) as one of their top investment priorities over the next 12 months. Other key investment areas for digital transformation include legacy transformation, end-to-end process digitization, and data and analytics. Importantly, over 60% of executives reported significant success in modernizing inefficient tech infrastructure through their cost optimization strategy. Additionally, 47% said increased automation and personalized customer service were major benefits.
Despite the wide benefits of cost optimization initiatives, these efforts at banks remain inconsistent with limited results. We asked our survey respondents about the barriers to sustained cost optimization initiatives at their banks – and as we explored these, three key challenges stood out.
1. Reluctance to tackle systemic change
Cost inefficiencies often stem from complex legacy systems in established banks. As banks grow, new systems are added without removing existing ones, leading to further complexity. Subsequent cost transformation efforts are often isolated away from the necessary. With the right expertise, leaders can commit to consistent and complete transformation to help break the pattern of compounding complexity for their bank – and fully optimize costs.
2. Prioritizing growth over efficiency
Cost optimization can be a moving target, with shifting goals and timelines – impacted by changes in the macroeconomic environment. This can become a burden, especially in times of strong growth. Simplifying existing processes, transforming the operating model with cloud and AI to ensure resilience and agility are crucial for sustainable cost optimization.
Banks are amongst the oldest institutions of our society and the industry is at an inflection point, with a clear need to move away from the traditional short-term, profit-driven model. Embedding cost optimization and transformation strategy across all operational areas supports long-term competitiveness.
3. A cultural aversion to change
The focus of cost optimization is usually more fixed on “cost” as a key measure. An honest discussion teams need to have at the onset of cost optimization efforts is about the valued benefits of change – and the necessary cultural transformation. Getting the right industry perspective is incredibly useful – to help ensure more complete understanding of the measurable ROI of transformation.
Optimization often leads to efficiencies that improve employee experience and productivity, empowering them to achieve more for their customers. This goes beyond better aligning the products and services the bank offers. It’s about access to the right information, enabling the bank to provide timely support when customers need these insights to make better decisions and enhance their overall financial wellbeing.
The vision and strength to change
As industry disruption escalates, banks are discarding piecemeal, siloed, and fragmented approaches. Our survey results show that they must also prioritize cost transformation, as they plan for growth. A committed, structured approach, supported by trusted partners who bring specific expertise working with financial services leaders, will enable banks to rapidly realize exponential returns from cost optimization. Teams can then move forward with agility, fully leveraging AI and emerging technologies to deliver differentiating products and services, ensuring banks remain progressive and competitive in the present and future.
The Infosys report, ‘Banking on continuous improvement,’ includes data from the referenced survey along with further insights.
About Author
Andrew, Regional Head for Infosys Asia-Pacific and member of the Global Financial Services Executive, brings extensive strategic experience. Having worked across Europe, Asia-Pacific, and the United States, Andrew has collaborated with major global organizations, including leading financial institutions. He is a senior associate of the Australian and New Zealand Institute of Insurance and Finance, a graduate of the Australian Institute of Company Directors, and holds an MBA from the Australian Graduate School of Management.
