The Startup Magazine 5 Key Capabilities Banks Should Prioritize in Their Modernization Process



In recent years, modern finance solutions have become increasingly more sophisticated, with vendors promising an overwhelming plethora of capabilities. However, not all these novel features are necessary for all banks and financial institutions. Implementing all these extra features without studying them thoroughly may only serve to add system complexity, raise maintenance costs, and complicate user training.

A better approach to bank modernization would be to choose focused solutions that offer crucial capabilities and to add or enable other features as needed. This allows banks to derive maximum utility from their investment while simultaneously improving the overall experience of the system’s users.

Thankfully, the modular system architecture of many current modern finance solutions makes this far easier than it used to be. If your bank is currently in the market for a new finance system, consider prioritizing modules and customizations that provide these 5 key capabilities:

1.) Integrated Data Management

Banks and other service-oriented organizations are now increasingly moving away from data silos toward a single source of truth (SSOT) data model. Under such a model, all of an organization’s business units freely share data. This enables integrated management, which offers cascading benefits across the entire organization. 

For example, a retail banking customer that is already in the system will not need to fill out an excessive number of forms or go through a lengthy vetting process when applying for an insurance policy. Instead, their risk profile could be assessed based on their transaction history,  the information they had already given, and any sanctions that may have been leveled against them by regulatory agencies and other financial institutions. If their insurance policy is approved, the bank’s marketing department can also easily check the customer’s complete history as both a retail and insurance customer to send them special offers. 

This will be possible even if insurance, marketing, and retail services belong under different business units. New systems can even leverage advanced artificial intelligence (AI) and machine learning (ML) algorithms to harness “Big Data” and dynamically predict the customer’s lifetime value for the bank.

That is just one example of what integrated data management capabilities can offer to a bank. Adopting a system that enables such capabilities can provide time and money-saving benefits across the entire organization.

2.) Multidimensional Analytics

One of the main challenges of banking is the near-infinite possibilities when it comes to potential product offers. It can be difficult for decision-makers to settle on a channel, price, feature set, and marketing approach for any given customer. What’s more, each customer type and each client also have unique risk profiles that the bank needs to consider. 

Modern finance solutions with integrated data management capabilities can provide the answer. Integrated data management permits the implementation of multidimensional analytics, which can be used to develop highly refined product offers to any customer type. Because these solutions draw data from all the organization’s business units, blind spots and discrepancies in data analytics and reporting can be reduced, giving banks improved situational awareness.

These improved analytics capabilities can also be leveraged to improve profitability in multiple areas. Relative risks, ideal asset and liabilities spreads, and optimal rates can all be determined with better accuracy using current solutions. These could also be calculated dynamically according to real-time data, ensuring timely decision-making.

3.) Intelligent Procurement

With the right digital procurement tools, banks can enjoy an enhanced level of cost savings over traditional cost management methods. Cloud-based finance tools are now becoming increasingly capable of creating higher baseline cost savings for every transaction made by banks. The added value gained from these savings alone may already be enough to justify the cost of a system upgrade, particularly for financial institutions that have very high transaction volumes.

Savings and gains from better digital procurement tools can be had in several areas. Being able to dynamically automate the source-to-settle process of routine transactions can save the bank time, reduce the chances of human error, and improve service levels. Additionally, these tools can allow bank staff to simultaneously process more transactions and focus on higher-value tasks, raising their relative productivity and job satisfaction.

These newer procurement tools also offer better functionality over previous iterations, saving banks significantly more per procurement. Their AI/ML capabilities for managing credit, market, and fraud risks across multiple procurement cycles are also much improved from previous generations, reducing the potential penalties from unforeseen events.

4.) Unified Forecasting and Planning

Banks interested in modernization should also look into solutions that offer fast and accurate forecasts and scenario modeling for all areas of business. The ability to forecast and model scenarios quickly can greatly reduce risk exposure and costs associated with any given action.

New finance systems can use data integration and AI/ML to create finely tuned forecasts and modeled scenarios for the needs of any of a bank’s business units. This capability can also improve the synergy between different business units and departments, reducing costs and speeding up the time to implement major changes.

5.) Effective Risk and Compliance Management

New software suites are better at automating new compliance procedures. While older onsite banking solutions may sometimes be customized to help banks meet new regulations, this is not always guaranteed.

Keeping up with legal compliance and international standards is important for several reasons. First, compliance can reduce reputational risk to banks, effectively increasing potential customers and income. Second, complying with legal requirements may help banks avoid expensive fines, reducing the cost of facilitating transactions. Third, meeting compliance standards can open up new markets and growth opportunities for banks. Lastly, compliance helps shield the bank and its stakeholders from fraud and other malicious activities.

Cloud-based solutions are especially suited for risk and compliance management. This is thanks to the scale and specialization of finance IT teams that work for reputable service providers. Service level agreements are also included in most cloud-based finance solution contracts, guaranteeing that banks can enjoy reduced risks and perfect procedural compliance when facilitating transactions. 

Take Steps to Modernize Your Banking Capabilities

Banks and other financial institutions should avoid framing modernization as just another expense. Though there may be hiccups during the system implementation process these are outweighed by benefits in terms of higher savings, increased potential income, better risk reduction, and improved situational awareness. By selecting modern finance options from a reputable vendor, banks can increase these benefits even further.

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