Gartner outlines challenges ahead for bank CIOs

27 Sep 2006

Changing demographics, stiffer regional competition and the need for transparency to satisfy e-community activists on the internet are posing major technology challenges for the chief information officers (CIOs) of European banks, it has emerged.

A survey of European bank CIOs found that they recognise the future will be very different and expect both significant business restructuring and IT transformation over the coming three years.

Some 38pc of CIOs surveyed said they will give business restructuring greater prominence in 2007, up from 24pc last year.

Gartner, who conducted the survey, said banks are currently giving increased priority to projects such as channel renewal and customer data integration (CDI) projects. Recent research with leading US banks showed that 20pc are now seeing increased sales as a direct result of their investment in CDI and the improved links they have built between their call centres, websites and local bank branches.

“Bank CIOs in all regions will need to speed up the integration of their customer data and delivery channels to stay competitive,” said Graham Taylor, vice-president for banking at Gartner. “However, the challenges presented by the shift in population, surging competition and increased transparency will drive different activity in the future and current IT projects will not suffice.”

Taylor said around the world people are living longer and this has a direct impact on their financial needs. “Many people in northern Europe now aspire to live in the warmer climate of southern Europe for at least part of the year and to retire there later in life. Meanwhile, young people from all regions of the world seek work, better pay or just safety by moving to northern Europe and banks must respond to this migratory behaviour.

Another major shake-up hitting the banking industry is the advent of cross-border banking services, with new entrants arriving in regions traditionally dominated by a number of players. We are seeing this in Ireland with the arrival of Bank of Scotland in the mortgage scene in recent years as well as the internet player Rabo Bank in the savings market.

Cross-border acquisitions have begun with examples such as French bank BNP buying BNL in Italy and Unicredito acquiring HVB in Germany. Card company CapitalOne has bought its first bank Hibernia while Google has joined PayPal as a global internet payment provider with its new Checkout service.

“The net result is that the largest banks will invest in scale, diversification and differentiation whilst the smaller banks will need to dramatically rethink their value propositions, focus on more specialised elements of the business and provide superior local service to survive through 2012,” Susan Landry, managing vice-president for the banking industry at Gartner said.

Another important trend banks will have to address is the need for transparency, driven not only by social responsibility programmes and compliance regimes like Sarbanes-Oxley but by the propensity of consumers to voice their grievances on social networking sites.

Gartner says e-community activists are fast conduits for exposing information and spreading news about banking practices. For example, online comparison services for mortgages, loans and cards expose interest rates and fees across competitive lenders and enable customers to quickly find the best deal.

“Transparency must be intertwined with mutual trust in banking. When parties lack confidence or visibility, suspicions arise which could jeopardise the relationship,” Landry said. “Technology’s role in securely managing information exchange and validation will increase as the ecosystem of industry participants evolves.”

By John Kennedy