Most Banks Stake out Similar Growth Strategies but Fall Short of Customer-Focused Ambitions;
46 Percent View Their Current IT Infrastructure as a Strategic Disadvantage;
Impending Shift Toward Standard Platforms and Service-Oriented Architecture
PARIS, France and WALLDORF, Germany — Nearly eight out of every ten retail banks surveyed are pursuing similar growth strategies, critically limiting their ability to achieve competitive differentiation, according to a new global survey. Banks are falling short of ambitious aims to power these strategies through keen customer insight and see a shift toward standard platforms and service-oriented architecture (SOA) as part of the solution, according to the “Global Retail Banking Benchmark” survey, conducted by the European Financial Management & Marketing Association (EFMA) and SAP AG (NYSE: SAP).
The study of 366 bankers from 180 retail banks across 44 countries suggests that one key to success for retail banks lies in outpacing peers in both business intelligence and business agility through better application of flexible and scalable IT systems. The findings of the annual survey, now in its fourth year, were presented at the EFMA conference, held recently in Lisbon, Portugal.
“Banks are well-advised to take a closer look at why they have not met their expectations of the last surveys,” said Patrick Desmarès, secretary general of EFMA. “With eight out of 10 banks pursuing the same strategy driven by customer insight, gaining competitive edge will mean being able to follow through on initiatives to improve customer information systems. These annual studies create discussion and debate across the industry and across borders, and it is great to see the study’s impact growing every year.”
The study’s results indicate that bank executives still seek to tap the value of gathering, analyzing and retrieving relevant data on customers and customer segments. However, in comparison to results of prior surveys, banks are still far from where they anticipated they would be today:
- When surveyed in 2003, 57 percent of retail banks expected to be performing regular and consistent analysis of customer data by 2007; only 20 percent now make the mark
- The current study revealed that a mere 14 percent of banks claimed that they are making full use of customer segmentation strategies, an increase from only seven percent in 2004
To underpin business intelligence initiatives, a majority of banks surveyed will continue to use both in-house systems and standard software, as the latest study shows. However, the proportion of those using primarily standard software will increase from 11 percent to 27 percent over the next three years. Survey results revealed:
- The percentage of participants viewing their current IT infrastructure as a strategic disadvantage grew to 46 percent this year, from 36 percent in 2004.
- In the first year of the survey, nearly all banks expected to have some automation of front-line tools. However, in this year’s survey, only 60 percent of banks reported gains in partial automation. The rest reported either irregular automation or none at all.
- Nearly 80 percent of banks see a shift towards standard platforms, driven by developments in service-oriented architecture and increased regulation.
“Offering valuable insight into the changing business demands of the banking sector, these surveys and our expansive collaboration with EFMA underline the growing leadership role and industry expertise that uniquely qualifies SAP to offer industry-specific solutions to banks and financial institutions across the globe,” said Thomas Balgheim, head of SAP’s global Banking line of business. “The results of this survey and our continuing dialogue with customers underline banks needs for business model innovation and reveal the value of the infrastructure improvements. For our customers, we are addressing these demands through enterprise SOA, helping banks build a business process platform for competitive differentiation and business growth.”
SAP has collaborated with EFMA on numerous retail banking studies, publishing the first joint study in March 2003. Additionally, beginning in 2005, EFMA and SAP conducted a series of road shows throughout Europe, the Middle East and Africa to meet with key stakeholders to discuss the pressing issues affecting customers, channels, products and performance in retail financial services.
With more than 600 customers in 60 countries worldwide, the SAP for Banking portfolio provides an integrated set of tools and automated processes to manage every aspect of the banking environment—from high-volume transactional banking processes and customer relationship management to financial accounting, cost controlling and profitability and risk analysis. (Additional information is available at <www.sap.com/banking>)
About the Study
The methodology for this research was based on “The Global Retail Banking Tracker,” a best-in-class, Web-based tool. For more information on the survey, titled “The Five Pillars of Excellence in Retail Banking 2007: A European Benchmark Review,” visit: www.efma-sap.info/. For a copy of the survey, please send an e-mail to andrew.wigfield@sap.com. For more information on EFMA, visit: www.efma.com.
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About the European Financial Management & Marketing Association
The European financial management and marketing association (Efma) is the leading association of banks, insurance companies and financial institutions throughout Europe. On a non-for-profit basis, Efma promotes innovation and best practices in retail finance by fostering debate and discussion among peers supported by a robust array of information services and numerous opportunities for direct encounters.
Efma was formed in 1971 and gathers today more than 2,150 different brands in financial services worldwide, including 75% of the largest European banking groups.
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