Nearly 600 global senior level banking and insurance executives agree that technology-led innovation and changing customer needs will lead them to rethink the way they do business between now and 2010, according to a recent study by the Economist Intelligence Unit (EIU). Based on a survey of 577 senior

executives in the financial services industry from 23 countries in Europe, the Americas and Asia Pacific, the results indicate that the ability to adapt business models will become a significant source of competitive advantage in the banking and insurance industry in the years ahead.

Conducted by the Economist Intelligence Unit and sponsored by SAP AG, the study, “Business 2010: Financial Services; Embracing the Challenge of Change,” is available at www.eiu.com/business2010. The study’s findings include:

* More than 60 per cent of executives say new business models are increasingly crucial to competitive advantage. While in the past banks and insurance companies have focused on creating new products and services, they are now rethinking this strategy due to the important role that technology will play in adapting their business models for managing customer and regulatory demands.

* Fiercer competition from mergers and acquisitions is expected. Three-quarters of all participants say that industry consolidation will constitute a larger competitive threat in 2010 than new competitive entrants into the market.

* Customer service will be the area most impacted by technology. More than 70 per cent of respondents say that customer-related activities and product development are areas in which IT will be most critical in 2010. Banks and insurers will seek data management and analytical tools to help them improve customer relationships by predicting customer behaviour and identifying news sales opportunities.

* Accurate and timely data management will be important. More than half of the financial services executives surveyed agree that data management and analytics will have the most impact on their company’s ability to innovate by 2010.

* Technology innovation will be essential. Approximately 84 per cent of financial services executives believe that technology will be crucial to their firms’ ability to adapt business models and implement new strategies.

* Compliance will be key. Regulatory compliance and corporate governance, including Basel II and the Sarbanes-Oxley Act, are changing the way firms report financial results, manage capital and measure risk. The impact is expected to be heaviest in the more developed financial markets.

“After many years of being resistant to change, banks and insurers are rethinking their business models and will be looking to technology in the next five years to stay competitive,” said Thomas Balgheim, senior vice president, Financial Services, SAP AG. “The EUI survey offers a glimpse into the future of the financial services. It reveals that a flexible IT infrastructure that enables rapid response to changing customer and regulatory needs has the power to differentiate a company. SAP’s strategy of enabling innovative business processes on the adaptive and open SAP NetWeaver™ platform supports financial services executives’ needs to drive business change.”

“Command of technology will be vital to financial services firms as they adapt business models to compete in 2010,” said Denis McCauley, director of global technology research, Economist Intelligence Unit. “But just as critical will be command of information: IT’s job will be to deliver more accurate, timely and relevant information-most importantly on customers and operations-throughout the organization.”

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