Flexible and efficient technical architecture is one of the key factors in determining which banks will be winners in an increasingly competitive industry, says Accenture SA director Simon Russell.
"Financial institutions are technologically hungry and spend approximately 20% of their annual budget on IT development and maintenance.
"While processing efficiency is the name of the game, it must be balanced against architectural flexibility. The existing technical architecture of a financial institution will determine the speed with which that institution can adopt a new operating model and realise the business benefits it should deliver."
Russell says the amount of change in the local financial services industry in the past five years suggests that change is likely to accelerate in the next five years.
Local financial institutions face significant pressure including political pressure to bank the unbanked and to adopt the financial services charter, regulatory pressure to adopt the new AC133 accounting standards, Basel II capital accord and the new Financial Advisory and Intermediary Services Act.
Other pressures include growing consumer awareness due to increased education and easy access to information, resulting in increased competition and product innovation, and unprecedented decreases in interest rates and an appreciating rand, which augur for a continued margin squeeze in the industry.
"These circumstances have created enormous pressure to change existing bank operating models to ensure continued growth of returns on equity," Russell says.
He says the other key factors that will determine which financial institutions will emerge as winners are innovation, investment in human capital initiatives, enterprise performance management and leadership.
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