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Aspiration >> Reality – Being agile as a response to today’s challenges of the finance industry

Key Facts

  • The financial industry is undergoing a structural change

  • It is important for financial institutions to focus on the mechanisms of action of this shift

  • Banks have to orient themselves to the principles of agile, innovative organizations and governance, align products, processes and technologies

REPORT

The conditions in the financial industry are subject to a structural change. Driven by financial crises, digitalisation, mobilization and immediate availability of computer access by smartphones up to software deployment process on app stores, financial institutions see themselves exposed to a number of new challenges. The White Paper “Aspiration >> Reality”  analyses and identifies the challenges for financial institutions and shows the underlying mechanisms of action. It shows solution scenarios for dealing with these phenomena, to anticipate the constant changes and to take advantage of them.

The political will to face market liberalization through active opening and lasting regulation of the market challenges the banks on the one hand with the drying up of far more stable sources of income. On the other hand, these changes benefit the emergence of many new trade foreign competitors, which break up the value chain and skim market potentials.

Figure 1: Relative growth of bank attackers

 

Through regulatory pressure from national and international regulatory authorities, the banks wear forced to make greater demands on compliance and accelerate the implementation of higher qualities through Change the Bank (CtB) efforts. These requirements and high legacy debts produce a massive change in pressure for banks.

 These framework conditions form the challenges for the banks. Currently established institutions are showing little effort to develop innovative solutions that replace traditional and mostly inflexible products but focus still unilaterally on cost and risk optimization.

Figure 2: Industry comparison of the innovation intensity and success of financial service providers

 

The STEM skills (mathematics, computer science, natural science and technology) needed for agility in the development of innovative solutions are under-represented, and there is only limited institutional experience with agile governance and development.

There must be the objective for responsible management to initiate a gradual introduction and permanent transformation process leading to more agility. It is essential that relevant leaders have appropriate skills to understand the cause-effect relationships and approaches, to design images and development paths for the respective institution to design. As a result of this transformation new innovation opportunities will be created as an institutional standard in the financial industry through agile governance, modularized products and processes as well as  the use of modern technology paradigms.