IDC recently held their conference call that provided their top 10 predictions for 2008 in the Financial Industry. This call was part of a series of Top 10 Prediction calls for the major industries they cover. For this I took the following notes:
Overview Of Spending Cycle
Historically, from 1995 – 2000 the focus was to grow at all costs. As the economy took a downturn from 2001 – 2003 the focus turned to cut all costs. Since 2004 firms have been in a period of “Rationalized Investments”. Growth has been emphasized, but with specific metrics tied to those investments. Growth initiatives must prove that they will pay off.
Firms are approving IT spending that can impact four areas. 1) Customer Acquisitions, 2) Customer Retention, 3) Knowledge worker collaboration (web 2.0 initiatives) and, 4) Improved Operational Efficiency (smart bet on platforms that can be leveraged across customers and partners)
There are three main Business Drivers for IT Spending:
- Globalization open ups new markets, but it also opens up door for competitors to take away existing business. Footprint must be strong wherever you go and firms must invest in a strong technology infrastructure. US institutions are attractive takeover targets.
- Regulatory Milestones. Meeting these milestones allows to improve operational efficiency
- Customer Centricity. This is now back with a growth tarket attached to it. Initiatives must build upon infrastructure improvements that have been made over the years.
Top Ten Predictions For 2008
1. Financial Institutions Will Move Risk Management / Analytics to Top Investment Priority. This is a result of the Sub-Prime mortgage impact. Also, data analytics are a focus as the regulatory compliance has led to significant amounts of data being available. Finally, Basel II investments has led to more tools and visibility that can feed new predictive models.
2. Contactless Mobile Payments Meets its Demise. While drivers remain to come up with a mobile payment solution, there have been delays in deploying contactless handsets and the necessary infrastructure to support contactless mobile payments. The industry ecosytem will need to come together and agree on standards and/or alternative technologies
3. Insurers Recognized as Web 2.0 Leaders. Insurers are expected to take the lead in using SOA and webservices in order to streamline operations, saving resources, and providing better service to policyholders.
4. Treasury and Cash Management Fees will Increase at Tier 1 Banks Globally. Banks are expected to raise the prices of current products and introduce new Cash Management products with higher price points. The driver for this is that banks are looking to increase their non-interest based revenues and will be doing this by introducing high value-added products and services.
5. BPO growth, already strong double digits, will accelerate. The economy and resulting budget constraints will drive important decision making on where firms will invest and where they can offload certain processes. Example: The large banks will realize that they cannot differentiate themselves in check processing,
6. Basel II initiatives will morph into enterprise data management at tier 1 Global Banks. This prediction is as a result of Basel II projects nearing completion. Meeting these regulatory requirements have resulted in new data to analyze. Expect more data management and integration efforts at tier 1 banks as they realize the power of data tied to analytics.
7. B2B Payment Hub Race will get underway. IDC says they expect at least 10 new B2B payment hubs to launch in 2008 as banks apply their learnings from electronic bill payment and presentment in the consumer market to the corporate market. So expect new services designed for electronic invoice presentment and payment. Drivers include the open standards that make it easy for corporations to switch banks. First mover advantage will be huge here.
8. Legacy Billing Systems Get Tossed. P&C insurers are expected to increasingly replace their legacy billing systems as they look to reduce complexity, reduce support costs and look to increase flexibility of billing operations. The new billing systems will be more tightly integrated with the core admin systems.
9. Number of US Banks will shrink to less than 8,000 in 2008. Consolidation will increase due to a number of factors, including 1) the economic turmoil in the US, 2) Softening Consumer Credit and Real Estate lending and 3) The weakened US Dollar.
10. Capital Market firms go beyond the grid. Firms are looking to increase the efficiency of processing the flood of data from the increased volumes of transactions. They are also looking to leverage and manage all their data assets. As analytic tools are demanding increasingly higher levels of computing power to deal with advanced and more complex securities and trading techniques. This will all result in IT departments having requirements on improving computing power, but keeping a lid on growing data center costs. Thus look for first movers in the area of cloud computing technology.
Here is the URL for you to download the slides and listen to the broadcast again if you were unable to attend the live event. IDC will ask you to provide basic information (your name, email, and company) in order to download the slides, as these proceedings are high in value but also complimentary. www.financial-insights.com/top10fi