First Things First

The financial services industry has reached a point where technological innovation and market conditions finally are converging to make a reality of business opportunities that previously were unattainable goals, according to J.H. Caldwell, a partner in the capital markets credit risk advisory group with New York-based Deloitte & Touche. However, Caldwell stresses, firms first must square away their compliance efforts before pursuing growth initiatives.

For the report "Global Industry Outlook: Shaping Your Strategy for a Changing World," a joint research project conducted by Deloitte & Touche and the Economist Intelligence Unit, 175 financial services executives were polled to determine the issues that will most shape the industry in the years to come. The majority of participants were from banks; however, there also was representation from the asset management, securities and insurance communities. Globalization, regulation and risk were rated by respondents as the top three areas that will impact their bottom lines over the next three years.

From Struggle Arises Opportunity

Even though these market forces have placed significant burdens upon financial institutions, a natural offshoot of responding to these pressures is a significant improvement in the quality of the customer data that firms house, Caldwell points out. In turn, this has created business opportunity. "This all ties into a refocusing on customer relationships with technology and innovation, specifically around direct customer access and pricing pressures," Caldwell says. "You want to target unique segments, so you need to get better at data mining. After the last few years with all the heightened regulatory scrutiny, now is the time to invest in these pieces because some of that money has finally been freed up."

And, thanks to improved management, data has been untethered as well. Further, according to Caldwell, organizations are ready to start reaping returns from their compliance investments.

By increasing automation in data management, financial institutions gain a greater ability to access data and increase the quality of this information, he explains. "[Financial institutions] know more, and they can look at CRM differently," Caldwell explains. "They used to look at siloed data. Now they can link all this together for true CRM. They're figuring this out as a result of SOX, Basel and other regulatory activities."

Despite the importance of technology and innovation as enablers of banks' CRM strategies, those two categories ranked significantly lower in the study than globalization and regulation as factors most affecting organizations' profits. "A lot of regulatory pressure has been put on institutions," Caldwell says. "This doesn't mean financial institutions are taking a lax approach to product development. It just shows they have to take first things first. Once you get the regulatory piece done, innovation will fill in afterwards."

And bankers should take heart, Caldwell comments, as innovation is beginning to gain momentum. Already, the much-coveted 360-degree customer view -- once a pipe dream -- is becoming a reality for banks, he notes. Caldwell adds that the study also revealed that financial institutions are ready to deploy the mobile banking technology about which they have been talking for so many years as well as scaled-down wealth management for the not-so-rich, among other innovations.

"The survey revealed that the technology, concepts and marketplace all caught up, finally," Caldwell relates. "The top 100 financial institutions invest $1 billion in product development a year together. It's neat that we're at a point in the market where everything is coming together. But none of this will happen until the regulatory piece is addressed."