Five immediate benefits of IT outsourcing for your bank
Interview with banking experts Daniel Scherrer and Javier Verdes.
Banking IT is transforming: how to reduce costs and drive innovation with Banking as a Service
25 September 2024, Text Tanja Dujic 4 min.
Rising IT costs, increasing regulations and growing system complexity – the list of the current challenges facing banks reads like a never-ending register of complicated and often contradictory problems. Smaller banks and new players in the banking environment in particular lack the resources and know-how to overcome these challenges.
How can banks adapt to these constantly growing expectations in order to remain competitive yet compliant with regulations at the same time?
Our conversation with Daniel Scherrer and Javier Verdes from Swisscom reveals how the managed finance ecosystem (MFE) addresses these problems and what benefits this will bring for your bank.
Daniel: For a long time now, we’ve understood that advancing digitalisation is requiring banks to shift their resources more and more towards IT. What specific problems do you see when talking to customers?
Javier: The situation is indeed critical for many banks. IT costs are taking up an ever-increasing proportion of budgets, and the pressure to innovate is increasing along side this. On top of that, there are constantly new regulatory requirements that have to be implemented. Many banks feel like they’re in a hamster wheel – they’re investing a great amount of time and money just to stay up to date instead of really moving forward.
Daniel: Javier, what consequences will this have for banks that are not expanding their IT infrastructure now?
Javier: The consequences are profound, as banks that are not taking the necessary steps now will lose their competitive edge because they’re allocating too many resources to maintaining old systems. Innovations are being neglected, which can impact customers negatively in the long term. In turn, customers may choose to migrate to the more innovative fintech companies. Another problem that I often see is that many banks find it difficult to implement all the regulatory requirements in a timely manner, leading to the potential for a compliance risk. And finally, many of these potential consequences are also related to human resources. Even now, qualified IT staff are hard to come by in all areas and there’s no improvement in sight.
Daniel: That sounds like a disturbing trend. How can banks solve these problems?
Javier: This is where the concept of ‘Banking as a Service’ comes into play. This enables banks to modernise their entire IT infrastructure without having to make costly investments. This model helps banks have access to state-of-the-art technology, reduce their IT costs and focus all their efforts on their core business.
Daniel: That sounds promising. How does that work exactly?
Javier: Essentially, it’s about using banking IT as a service. Take our managed finance ecosystem, for example. This is a comprehensive platform that covers all banking processes – from payment transactions and investment transactions to regulatory requirements. Banks can choose exactly which services they need and benefit from continuous updates and developments.
Daniel: What concrete benefits does this offer for banks?
Javier: Firstly, a significant reduction in costs. Shared use of infrastructure creates economies of scale that benefit everyone. Secondly, more flexibility. Banks can react quickly to market changes without having to manage large IT projects. And thirdly, a significant reduction in the burden of regulatory issues, as these are implemented centrally for all users. And let’s not forget the innovation aspect. Banks will gain access to the latest technologies such as AI or blockchain without having to invest their own money in their development. This opens up new opportunities for banks to set themselves apart on the market and develop new business models.
The 5 most important benefits of IT outsourcing for banks
The MFE enables banks to significantly reduce IT costs. Instead of investing in expensive in-house infrastructure, you use a shared platform.
With the MFE, you outsource complex IT processes and gain time for the essentials.
The MFE gives you access to the latest technologies without having to invest in them yourself.
We take care of implementing regulatory requirements.
With the MFE, you can rely on our team of experts.
Daniel: That sounds impressive. But isn’t it risky to outsource such central processes?
Javier: That’s a legitimate question. But outsourcing certain key processes actually reduces risks. A specialist provider can often guarantee a higher level of security than an individual bank. Banks are also able to remain flexible – they can decide at any time which processes they want to outsource and which they do not.
Daniel: Finally, if you could give banks just one piece of advice, what advice would you give to bank managers who are thinking about modernising their IT?
Javier: My most valuable piece of advice would be to think long term.
The banking IT of tomorrow will need to be flexible, scalable and capable of innovation. Take a critical look at whether your current systems can do this. And if not, find out about alternatives such as Banking as a Service. It could be the key to staying competitive in this digital age.
In summary, the MFE enables banks to drastically reduce their IT costs while at the same time become more innovative and meet regulatory requirements more easily. Banks can focus fully on their core business and customers while we take care of the complex IT landscape.
Daniel: That sounds impressive. If a bank is interested, what would the next steps be?
Javier: Banks that want to take advantage of these benefits should act now. We offer a free, non-binding consultation in which we analyse how the MFE can solve a bank’s specific challenges together with the bank. We also create an individual cost–benefit analysis so that our potential clients can see exactly what savings and efficiency improvements are possible for their bank.
Daniel: Thank you for these informative insights.