of banking and capital markets CEOs are changing their strategies for customer growth, loyalty and retention while continued concern about regulation continues.
Banking and capital markets CEOs are confident about their companies’ prospects – nearly 90% are looking ahead to an increase in revenue growth over the next year.
But success is going to be hard won as the industry faces the headwinds of a challenging global economy, low interest rates, higher capital demands, increasing regulatory constraints on business and lower rewards with which to attract talent.
Winning over customers
Half of banking and capital market CEOs are concerned about shifts in consumer spending and behaviour, though these developments offer opportunities for nimble and innovative players. Nearly 90% of industry leaders are planning to change their strategies for customer growth, loyalty and retention, with more than 30% anticipating a major change. Strengthening the customer base and improving customer service are both in the top three investment priorities.
Developments in technology are changing how products are designed and distributed and could open the door to new entrants. Nearly three-quarters of banking and capital markets CEOs are planning to increase investment in technology and more than two-thirds strengthen their capacity for innovation, though less than 30% are concerned about the threat from new entrants.
More than half of banking and capital markets CEOs see lack of trust in the industry as a barrier to growth. Nearly 90% are looking to change the way they engage with customers. In line with this, more than 60% are developing a framework to support a culture of ethical behaviour. Increased engagement with users of social media (75%) is noticeably higher than traditional media (58%), reflecting new strategies for interaction, engagement and influence.
Eurozone fears recede
Recession in the US has supplanted the break-up of the Eurozone as the most threatening economic scenario perhaps because of the fiscal cliff debate in the US. Seventy per cent of industry leaders say that recession in the US would have a damaging impact on their business, and a significant 34% believe it is now likely. Just over 60% say that a break-up in the Eurozone would have a negative impact, but only 19% believe it is now likely.
Improving operational effectiveness
When growth was surging, a huge amount of operational capabilities were bolted on in a hurry, creating overly complex and expensive operating structures. This is now a good juncture to rationalise these structures as organisations look to cut costs, enhance efficiency, and simplify while also strengthening operational oversight.
Improving operational effectiveness is a top three investment priority for 58% of banking and capital markets CEOs. More than 60% are planning a cost reduction initiative over next 12 months and more than 70% anticipate a change in their organisational structure.
Attracting talent when rewards are down
More than half of banking and capital markets CEOs continue to see the availability of key skills as a threat to growth, though less than a quarter are planning to invest in filling talent gaps.
Nearly 70% of industry leaders are striving to match pay of peers to retain top talent. But as returns continue to come under pressure and regulators press for inclusion of risk mitigants, the traditional compensation model may need to be rethought.
Ninety-five per cent of banking and capital markets CEOs continue to say that governments and regulators influence their strategy, almost as many as customers (97%). This is reflected in concerns over excessive regulation (81% seeing this as a threat to growth), protectionist tendencies of national governments (50% seeing this as a threat), the tax burden (59% seeing this as a threat) and government response to debt and fiscal burden (67% seeing this as a threat). Industry leaders are continuing to strengthen engagement with government and regulators (77%).
On the front foot
There is advantage to be had by banks that actively manage these challenges. Proactively managing regulatory challenges, non-performing assets or businesses, and adapting to changing technologies and customer expectations will create a much stronger position than those that simply seek to muddle through in anticipation of better times ahead.
The organisations on the competitive front foot are: