Insight
Banks Facing the Challenges of Economic and Technological Evolution

The past few months have marked a fruitful period for the global banking sector, recording its best results since 2007. However, despite this exceptional performance, banks are facing recent structural and macroeconomic changes, forcing them to rethink their strategies to adapt to market developments. Discover the current challenges facing banks with Capital Banking Solutions.

New Challenges and Trends in the Banking Sector

Over the past decade, the global financial sector has undergone significant transformation, with over half of the existing $402 trillion in assets escaping banks’ balance sheets. Interest rates have also risen, boosting net interest margins and propelling sector profits to around $280 billion in 2022. Technology, another major player, has evolved rapidly, shifting from large-scale programs to the rapid implementation of generative artificial intelligence (generative AI).

Changes in Distribution Modes and Digital Payments

Transformations affect various aspects, including consumer digital payments, which have increased by over 50% in recent years. The shift to contactless digital payments is accelerating, as is the growing demand for integrated financing offered via online platforms or apps. Capital markets and investment banks are gaining market share compared to traditional banks, especially in the stock and capital markets.

New Distribution Models and Technological Risks

Distribution channels are evolving towards fully mobile environments, forcing banks to rethink their operations to meet the evolving needs of their customers. Faced with changing risks, such as new regulatory requirements and technology and cybersecurity threats, banks must accelerate their adaptation.

Regional Differences and the Impact of Technology

The global study highlights significant regional variations, with a particular focus on the Indo-Crescent region, encompassing East Africa, the Middle East, India, ASEAN countries, and Australia. Opportunities are emerging in these regions, often characterized by a growing middle class and increased openness to cross-border payments.

Technological Priorities and Opportunities

In terms of technology, financial institutions should continue to leverage generative AI to boost productivity. The most successful banks are investing more in technology, especially generative AI, enabling enhanced customer interactions and efficient use of intangible data.

New Business Models and Balance Sheet Management

Faced with the new economic era, financial leaders must rethink their business models and consider more flexible approaches to managing balance sheets. The emphasis is on the ability to dissociate assets, syndicate them to other institutions, or distribute them to better-suited partners, thus opening up new business opportunities.

Conclusion

As banks navigate this complex landscape, awareness of the need for adaptation and innovation is crucial. Effective risk management, agile technology implementation, and exploration of new balance sheet approaches are key to thriving in this new financial era.

Source: The McKinsey

Author: Etienne Roze

 

About Capital Banking Solutions

For over 25 years, Capital Banking Solutions has been developing and integrating innovative banking solutions tailored to various international banks. Leveraging our expertise, extensive experience, and ongoing research and development efforts, we offer a broad range of innovative products to address the needs and challenges of the banking market and our 200 banking and financial institution clients.
We are leaders in universal banking, retail banking, corporate banking, private banking, Islamic banking, microfinance, neo-banks, family offices, and asset management and brokerage companies. Our software solutions are open architecture, modular, and available on both cloud and on-premise platforms. With 300 expert employees based in France, Switzerland, Dubai, Lebanon, Ivory Coast, Egypt, Morocco and the USA, we ensure seamless product support, services, and a close relationship with all our clients.

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