As financial services organizations look forward to how banking logistics will evolve in 2017, there are several trends emerging, particularly in the areas of technology innovation, regulatory compliance and optimization pressure. Let’s take a closer look at these three trends.
Technology innovation in the realm of cloud services and mobile will continue to change how banks and financial firms do business in 2017. This will impact financial services and banking logistics as customer expectations around technology capabilities, fulfillment times and the need to streamline business operations will continue to drive companies toward cloud based and mobile services.
This is a challenge for many businesses, but in the world of financial logistics, decisions around cloud and mobile technology require a strong understanding of the benefits and risks associated with these technologies. Cloud applications in particular offer significant benefits in the areas of reducing capital expenditures, improved efficiency, scalability and flexibility, system consolidation and reduced maintenance. They provide agility that allows banking and financial institutions to deliver services in many parts of the world, or to expand quickly, without a large increase in operational costs.
Institutions also need to understand and have a plan for dealing with the risks. Security concerns, for instance, once held many institutions back from taking their logistical and other critical business processes onto cloud or mobile platforms. However, as providers of these technologies continue to address these risks with stronger security protocols, more financial institutions are likely to adopt cloud and mobile technologies to help them meet customer expectations and achieve operational and financial goals.
According to a recent survey by PWC, 87% of financial institutions surveyed said that risk management and regulatory integration would be very important to their business over the next few years, but only 40% of institutions surveyed indicated they were well prepared to address this trend. And in the last 12 months, the regulatory environment has become even more challenging due to emerging global instability. This trend is likely to continue in 2017, as forces set in motion during 2016 play out across the global stage.
Starting with the Brexit vote, continuing through the election and inauguration of Donald Trump, and with elections in Europe still ahead, it’s clear that the status quo of the last fifteen or twenty years is entering a period of rapid change. It’s not just about electing new leaders – the financial and banking industry will be forced to deal with the fallout of a new understanding around globalization.
For instance, the United Kingdom electing to exit the Eurozone will create major changes in how banking and finance firms will do business in Europe. Other countries may even follow suit, which will require institutions to be agile and adaptable in order to navigate the new environment. This will impact many business processes, but perhaps especially logistics, as regulations and procedures for international shipments could be subject to change.
In 2017, what were once simple shipments or transactions could become much more complicated. It will be more important than ever for companies to have strong expertise around regulatory compliance and the technical know-how to make compliance a priority.
The PWC survey also found that pressures to optimize distribution were another banking logistics trend to watch in 2017. According to the survey, approximately 85% of those surveyed said optimizing distribution and logistics is very important in today’s financial industry, but 70% of those surveyed said that they thought banks had a long way to go before they would master optimization of their supply chains.
This problem is likely to loom large in 2017. As more banks add ATM’s, they will continue to face significant challenges to ensure that those machines have the cash on hand to meet customer needs. This adds to the already high cost – in excess of $300 billion annually – of handling cash in the banking supply chain.
But moving cash isn’t the only distribution process that banks must optimize. There’s also the increasing pressure from customers to deliver packages more quickly, with better predictability and accuracy. You could call this the Amazonification of banking.
So optimization pressures will come from all sides in 2017 – it will come from customer, via demands for banks to meet the need to deliver cash and packages in more locations, more quickly and more accurately. Pressure will also come from shareholders and stakeholders who demand that this be done at lower costs, more securely than ever.
2017 promises to be a challenging year for many logistics organizations in the banking and financial services industry. The organizations that will be most successful will be those that are able to adapt and evolve their processes and technology to meet a changing business environment.