Large FIs spent $25M rolling out failed risk management frameworks during the 2000’s. So why try again?
- Information security
- Data governance and classification
- Access controls and identity management
- Business continuity and disaster recovery planning and resources
- Capacity and performance planning
- Systems operations and availability concerns
- Systems and network security
- Systems and application development and quality assurance
- Physical security and environmental controls
- Customer data privacy
- Vendor and third-party service provider management
- Incident response, including by setting clearly defined roles and decision making authority
This week I’m in Singapore, which provides a beautiful backdrop for Sibos 2015, the annual conference that brings together thousands of business leaders, decision makers and topic experts from a range of financial institutions, market infrastructures, multinational corporations and technology partners.
This year’s conference theme is connect, debate and collaborate and takes place at a time of increasing headwinds from a slowing global economy, higher compliance costs, increasingly global corporates, and competition from both banks and nonbanks alike. I spent the past few months taking a deep dive into corporate banking performance over the past 10 years–a period of both tremendous growth and unprecedented upheaval. As expected, corporate banking operating income and customer deposit balances have experienced healthy growth rates over the past 10 years. But surprisingly, despite increases in customer deposits, corporate banking income was largely stagnant over the past few years.
Corporate banking plays a dominant role for the largest global banks. In 2014, corporate banking was responsible for 33% of overall operating income and 38% of customer deposits across the 20 banks included in this analysis.
As outlined in the new Celent report, Corporate Banking: Driving Growth in the Face of Increasing Headwinds, this critical banking sector is shaped by four external forces: economic conditions, the regulatory environment, business demographics, and financial technology. These same factors are slowing corporate banking growth and creating an environment in which banks are overhauling client offerings in the face of regulatory pressure, re-evaluating geographic footprints in response to shifting trade flows, and investing in technologies to ensure a consistent, integrated customer experience.
Much of the discussion at Sibos is on exploring transformation in the face of disruption. As they look to an unsettled future, corporate banks that are flexible, adaptable, and creative will be the ones that succeed. Changing time-tested ways of doing business is painful, but critical for future success.
- BBVA Innovation Center: Headquartered locally in Madrid, the BBVA Innovation Center is where many of the innovative ideas and designs are cultivated. Acting as an incubator for creativity, the bank is able to internally design and test prototypes for new ideas. Products like Tu Cuentas, BBVA Contigo, and ABIL ATMs have come out of the work done there.
- Acquisition: BBVA, in the highly publicized acquisition of the US-based neo-bank, Simple, has ventured into new territory by leveraging acquisition to adopt innovation. It remains to be seen how the two businesses come together, and what role Simple will play in the larger BBVA vision, but the deal offers an example for other banks to follow. As institutions start to look more like software companies, they will begin to do what businesses in industries like tech and pharmaceuticals have been doing for a long time: letting others innovate, and then acquiring them.
- Venture capital: Innovation needs resources, and with BBVA Ventures, the bank has taken the step to partner and invest with entrepreneurs to help ideas grow and become successful. BBVA Ventures has already invested in companies like FreeMonee, SumUp, and Radius, and last year announced $100 million for investment into new projects.
- Not every touch needs to be a sale.
- Foregoing short-term income for longer term gain can (in many instances) make sense
- Surprising customers on the upside can yield long-term benefits