To earn $1, diversified banks spend about 60 cents. A convoluted set of financial services processes, fragmented systems and legacy interfaces affect structural expense. Continual processing and system errors cause frequent rework and ineffective controls.
In the comparative chart between technology and operational efficiency, the vertical axis shows TowerGroup’s IT spending estimates for selected banks, and the horizontal axis reflects their cost-to-income ratio. The diagonal arrow points to an efficiency goal of reducing structural expense with an optimal level of IT investment. Some banks have improved through process simplicity, execution, standardisation and eliminating patchy functionality and redundant operations. Others have been mired in restructuring cost, penalties and write-offs.
However, enterprise technology solutions can improve cost structure. Corporate mergers have helped in consolidating technologies and getting rid of lesser solutions. Efficient banks have the upper hand in mergers, and only the fittest may survive.
Guillermo Kopp, vice-president of financial services strategies and IT investments at TowerGroup.
E-mail: gkopp@towergroup.com.
