Investment banks are trapped in a vicious circle. They must comply with ever-more regulation and operate in increasingly competitive global markets whilst innovating more quickly than ever before.
Silicon Valley is coming and if banks don’t up their game, then tech companies will take over the industry’s business. There are hundreds of startups with a lot of brains and money working on various alternatives to traditional banking"
CEO, JP Morgan
Post financial crisis, banks are left with high cost bases and legacy operating models which are not not fit for purpose in today's rapidly evolving world.
Markets are also increasingly competitive and globalized, meaning that margins are declining and banks are faced with new market entrants.
Regulatory change is also hampering the ability of banks to innovate. The cost of complying with regulatory demands means that 72% of profits are put back into compliance.
As a result, the average Return on Equity across the industry has fallen from over 20% to over 7%, barely enough to cover the cost of capital.
Banks are facing the challenge of needing to innovate with software on top of a highly legacy, complex, interconnected application stack. This situation makes delivering new change and customer propositions slow and risky.
The challenge is that software is how banks will solve their existential problem of needing to deliver innovation and customer value at lower cost. They need to break out of this vicious circle - and begin to operate with more speed and agility, similar to technology companies who are setup to deliver software in a much more optimal way.
Banks have traditionally been risk averse and slow to adopt new technologies. However, modern tools and platforms such as cloud computing or containerization are so powerful, that banks need to start modernizing and aggressively consuming these platforms.
Meanwhile, digital-only, mobile-first FinTech competitors are disrupting many financial services markets with new business models. These upstarts are increasingly growing market share and will increasingly put banking margins under further pressure in the years ahead.
The Contino team supported us in bringing the tools together to implement a new SDLC and a fully automated CI/CD setup. We are now able to seamlessly upgrade and scale our software at our own leisure, and the visibility into what gets changed has been drastically improved.