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    Transforming banking operations through advanced operating models According to recent research, banking executives believe there is untapped potential for advanced operating models to address the most strategic enterprise challenges.

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    About the research In 2014, Genpact commissioned a research project conducted by an independent research firm. The goal was to assess the potential for new operating models across a wide spectrum of industry sectors and functions. More than 900 senior-level executives completed the survey. Respondents were screened based on their ability to materially influence functional decisions. This analysis complements other research and insight derived from Genpact’s experience designing, transforming, and operating business processes and operations.

    This document presents the findings drawn from 238 senior executives engaged in the banking industry. They are predominantly located in North America (81%) and come from companies with more than 10,000 employees (see Figure 1). More than 70% of the banks covered by the survey offer both retail and commercial services. The sample includes 201 banks that offer retail services and 206 that offer commercial services.

    Figure 1

    n=912*Company size defined by number of employees

    Sample of more than 900 executives

    Risk Operations

    MarketingProcurement

    Finance

    84%

    16%

    5,001 - 10,000

    REGIONS SIZE* FUNCTIONS

    * Company size defined by number of employees

    10%25%

    65% 15% 40%

    15%13%

    17%

    84%

    16%

    32% of finance and accounting executives from retail banking (retail only and retail and commercial both)

    81% of banking and financial services respondents from North America alone

    15% of operations executives from retail banking operations

    95% of banking and financial services respondents from larger companies (size > 10,000 employees)

    10,000 + NAMER

    APAC

    EMEA

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    Abstract

    What are the most pressing challenges for banks?

    What are the differences between retail and commercial banks in the challenges they face?

    What functions impact those challenges the most for retail banking?

    How mature are these functions?

    Can new operating models of those functions help them transform? Which models can do this?

    In conclusion

    What functions impact those challenges the most for commercial banking?

    04

    05

    08

    09

    13

    15

    18

    11

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    As the banking industry is being restructured in the wake of the financial crisis and a rapidly changing regulatory landscape, COOs and other senior banking executives are grappling with unprecedented change. In addition to regulatory and cost pressures, there is a growing imperative to meet increasing customer expectations in a volatile market. Transforming business processes to implement advanced operating models is a big part of the solution, but levels of process maturity and preparedness for transformation vary across banking functions. For retail banks, payments processing and account setup and servicing offer opportunities for wide-ranging impact, while anti-money laundering is specialized but critical. Operational transformation in commercial banking seems more likely to focus on business banking origination/servicing and risk management. In addition, the three levers of operating model transformation—technology, process reengineering, and advanced organizational structures (shared services, business process outsourcing, and hybrids thereof)—create impact differently. Using commissioned research, Genpact has examined these trends to understand how banking institutions are evolving their operations to achieve business impact.

    Abstract

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    Compliance and risk management top the list of challenges facing banks today

    Regulatory compliance, risk management, and customer satisfaction are the biggest challenges confronting banks today Senior banking executives from across all functions were asked to rate the most important challenges facing their companies. Regulatory compliance and risk management were the most frequent responses, with each cited by 73% of respondents as one of their three most important challenges. Customer satisfaction ranked third with 60% (see Figure 2).

    Figure 2

    Importance of the challenge % of respondents from banking industry stating that the challenge is among the ‘Top 3‘ for their company

    n=238 executives from retail only, commercial only, and retail/commercial banks

    0 10 20 30 40 50 60 70 80

    Reduce capital and asset intensity

    Increase growth and scalability

    Increase customer satisfaction

    Manage risk

    Ensure compliance to regulations

    Enable company’s innovation

    Reduce costs

    Enable agility and adaptability

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    Financial sector firms share concerns about compliance and risk management; other challenges vary substantially across industries

    Banking is similar to capital markets and life sciences in regard to how often executives attribute importance to compliance, but banking is closer to healthcare and high tech with respect to the need to increase customer satisfaction. Banking executives are less likely than their counterparts in other industries to point to increasing growth and scalability, enabling agility and adaptability, or enabling innovation as major challenges (see Figure 3).

    Importance of the challenge % in specific industries stating that the challenge is among the ‘Top 3‘ for their company

    Figure 3

    n=9121 n=238 executives from retail only, commercial only, and retail/commercial banks

    0 10 20 30 40 50 60 70 80

    High Tech Capital Markets Healthcare Banking1

    Insurance Life Sciences CPG Manufacturing

    Ensure compliance to regulations

    Reduce cost

    Increase customer satisfaction

    Manage risk

    Increase growth and scalability

    Enable company’s innovation

    Enable agility and adaptability

    Reduce capital and asset intensity

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    Compliance and risk are the most important challenges for retail banks across all functions; client satisfaction ranks third

    To gain insights into the differences between retail and commercial banks, respondents were grouped according to whether their companies provide retail services only, commercial services only, or both types of banking. This allowed for comparisons between the 201 respondents engaged in the provision of retail services (see Figure 4) and the 206 involved in commercial services (see Figure 5). The top challenges were generally consistent across retail and commercial banks and across functions, including operations, finance, and risk, with both compliance and risk management listed as top challenges.

    Regulatory compliance, risk management, and customer satisfaction are the main challenges confronting retail banks today • Ensuring compliance with regulations was cited most often, pointed out by 72% of retail

    banking executives as one of their top three challenges (Figure 4). • Managing risk ranked close behind, at 71%, followed by increasing customer satisfaction at 58%. • Operations executives in retail banks faced similar challenges as their counterparts in other functions.

    Figure 4

    % of respondents from various functions stating challenge as among the ‘Top 3‘ for their company

    n=201 executives from retail only and retail/commercial banks

    0 10 20 30 40 50 60 70 80

    Ensure compliance to regulations

    Increase customer satisfaction

    Reduce capital and asset intensity

    Manage risk

    Increase growth and scalability

    Enable company’s innovation

    Enable agility and adaptability

    Reduce costs

    Overall

    Finance

    Operations

    Risk

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    Commercial bank operations executives rank compliance, risk, and customer satisfaction nearly equally as the top challenges

    Figure 5

    % of respondents from various functions stating challenge as among the ‘top 3‘ for their company

    n=206 executives from commercial only and retail/commercial banks

    Commercial bank executives face many of the same challenges as their counterparts in retail banks • Ensuring compliance with regulations is often cited by commercial banking executives, with

    76% indicating that it is one of their three most important challenges (Figure 5). • Risk management is close behind, at 70%, followed by increasing customer satisfaction at 59%. • Operations executives in commercial banks tend to give nearly equal prominence to compliance and

    risk management, with each at 74%, as well as customer satisfaction at 69%.

    Overall

    Finance

    Ensure compliance to regulations

    Increase customer satisfaction

    Reduce capital and asset intensity

    Manage risk

    Increase growth and scalability

    Enable company’s innovation

    Enable agility and adaptability

    Reduce costs

    0 10 20 30 40 50 60 70 80

    Risk

    Operations

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    Anti-money laundering is seen as a critical function for compliance and risk, but payments processing and account setup and servicing are perceived to have a broader impact across all key challenges