Last week, the Financial Services industry saw another global banking group announce plans to execute an aggressive cost-cutting plan. Similar decisions have been made within the last twelve months by other global banking leaders, and tightening the belt can be anywhere between a few millions to billions of dollars of targeted savings, involving up to tens of thousands of job cuts.
This isn’t something written in stone by an old civilisation or made up by a New Age movement; the culprits behind these necessary step changes are the volatile macroeconomic environment inherited from 2007, increasing regulatory scrutiny and practices in a move towards a more stable global financial system.
In this blog I will take you through the three key areas where I see we are currently helping banks to cut direct costs, while maintaining continuity and improving outcomes in the areas of business execution and revenue recognition.
Competitive product and services portfolio, continually changing regulations and rulebooks, fast-evolving technology and clients’ requirements are driving increasing IT costs and complexity. Bank technology platforms and the products they run are not isolated anymore; dependencies are connecting every component to allow a better and more consistent client experience, faster Straight-Though Processing (STP) and feature-rich service.
Cutting costs does not necessarily mean that technology stacks or client value propositions need to be altered or completely stopped. We have has successfully managed a number of bank channel infrastructure migrations where front-end client connectivity, pre-processing functions and bank back-office systems integration points are partially or completely outsourced on our cloud technology.
For the last few years, these bank functions “outsourced” to us have grown at an accelerating apace, proving that Banks are leveraging us as a technology partner to achieve their strategic goals and delivering more for less. Payments and Cash Management, Transaction Banking, Cards, Securities and Trade Visibility Services are a large part of the business.
When delivered as a Managed Service, the complexity of the key bank functions such as applications support, service integration, and operational support can be significantly reduced. Whether we are the bank’s technology partner for client channels, bank cross-product integration, Cash management or Securities Post-Trade processing, it is the whole governance and lifecycle ecosystem that becomes consolidated and commoditised. Keeping the bank’s focus on the core activities and business processes becomes easier when budget and resources are freed up because of GXS Managed Services. Specifically, the product P&L of local bank products or whole functions can become less complex. I invite you to have a look at my previous blog about where a bank should grow its own timber.
Banks are in a constant state of migration; even the lifecycle of clients and counterparties in Business As Usual (BAU) are best run as programmes or projects. Managing project costs and resources is probably the most daunting exercise, both when planning year-on-year for budget activities and day-to-day P&L monitoring. Traditionally, banks have been cost-effective at managing waterfall-types of projects, long-planned changes with static dependencies. Industry events or change iterations happening within an 18-month horizon are often scenarios where complexity, dependencies and requirements for specific know-how increase the headache for the project teams on a logarithmic scale.
Client enablement, BAU client community management and customer on-boarding are typically the “People” area within the GTS Delivery function of the bank that we can support. Staff augmentation for specific periods, markets or capabilities, whether it is for a one-off migration or for BAU, is the quick-win for any bank under great pressure to reduce costs. GXS currently provides those services today to large global banks; delivering a staff augmentation service called Client Enablement Services. Our teams can be embedded within the bank’s organisation, quickly deployed or ramped down as needed. We currently have more than 550.000 businesses connected to us, our client enablement teams are some of the most experienced and productive in the world.
To conclude this final blog from me this year, the Mayans may have predicted the 2012 apocalypse; however they certainly didn’t see the Spanish Conquistadors coming. In a similar twist of fate, we are currently engaged with Transaction Banking, Payments and Cash Management, also Client enablement functions where cost-cutting exercises are taking place.