Banking and capital markets (BCM) organisations are striving to get to grips with a new competitive era in which the bars for innovation and customer expectations keep rising, while costs have to be cut further and faster than ever before. Incremental innovation and marginal cost savings won’t be enough to sustain profitability and growth in this disrupted marketplace.
More than 80% of BCM CEOs are optimistic about their prospects for revenue growth over the coming 12 months (40% are ‘very confident’ and 45% are ‘somewhat confident’). Scope for optimism includes rises in interest rates, which would give an immediate boost to long subdued net interest income. There is also the possibility of renewed fiscal stimulus, which would provide fresh impetus for lending, deal and trading activity. Yet, around four out of five industry leaders see at least some threats to growth from over-regulation and the uncertain economic climate. And, concerns over the impact of geopolitical uncertainty are among the highest of any sector in the CEO Survey.
When ‘extreme concerns’ over the impact from over-regulation, the pace of technological change, changing customer behaviour and competition from new market entrants are put together, BCM comes out as one of the three most affected sectors in the CEO Survey. Yet, the pace of innovation also offers huge opportunities. Analytics and artificial intelligence are transforming the speed, precision and capacity of trading operations, while making it possible to target and tailor products and services for mass market consumers in ways that would until recently only have been available to high net worth clients. In turn, the leap forward in automation, robotics and blockchain offers cheap and reliable ways to run routine processes. And far from just being a threat, partnership with FinTech businesses would help more established players to secure access to cutting edge innovations and differentiate their offering.
Nearly three-quarters of BCM CEOs (74%) have changed their people strategy to reflect the skills and employment structures they need for the future. While demand for data analysts, robotics engineers and other tech specialists is clearly growing, it’s just as important to ensure that leaders understand the possibilities of today’s ever more sophisticated technology and how to harness the potential. And as operations become more automated, the value of skills that can’t be replicated by machines is increasing. BCM CEOs now rank adaptability and collaboration on a par with traditional market skills such as problem-solving and risk management. Yet, creativity, digital capabilities and emotional intelligence are seen as less valuable, which is surprising given the vital importance of innovation and customer-centricity in today’s marketplace.
With digitisation comes increased cyber risk – 82% of BCM CEOs see this as a threat to growth. More than three-quarters believe that it’s harder to sustain trust in this digitised world, but there is also a strong sense that the secure and sensitive management of data is a potential differentiator. Questions over trust are being given even greater resonance by the anxieties many people feel about globalisation. Most BCM CEOs (59%) believe that globalisation has enabled capital, people, goods and information to flow more freely, but only 11% believe that it’s helped to close the gap between rich and poor. As the focus on social inclusion and corporations’ role in supporting it increases, BCM organisations could find themselves under intense scrutiny. Yet this focus also creates opportunities to renew corporate purpose and reassert the value BCM organisations create for society.