CORPORATE AND TRANSACTION BANKING - CGI FI · BANKING 4 CLIENT INSIGHTS INDUSTRY TRENDS ... Increasing regulation and security challenges remain the top cited trend this year in corporate

2018Client insights and CGI perspectives

on business and technology trends

CORPORATE AND

TRANSACTION BANKING

An outlook on trends and priorities based on in-person conversations with business and

IT executives around the world

CORPORATE AND TRANSACTION

BANKING

2

INFORMING STRATEGY THROUGH CLIENT INSIGHTS

Each year, CGI leaders meet face-to-face with business and IT executives to hear their perspectives on the trends affecting their organizations and the implications for their business. Our experts incorporate the findings and insights from these conversations into our annual strategic planning process and share them with clients through CGI Client Global Insights reports.

In this report, CGI presents the insights and perspectives from our conversations with corporate and transaction banking executives, who cite regulation, security, new technology advances, and real-time payments and platforms as dominant drivers this year.We thank the more than 1,400 commercial and government executives across the globe who participated in interviews this year, and we value the opportunity to help drive forward their future strategies and investments.


BANKING

3

Percentage of interviews by region

48%

41%

4%

63%

7%

37%

INTERVIEW INFORMATION

27 clients in corporate and transaction banking

Percentage of interviews by role

Europe

North America

IT leaders

Business leaders

United KingdomAustralia


BANKING

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CLIENT INSIGHTS

INDUSTRY TRENDSRegulation and security remain top industry trendIncreasing regulation and security challenges remain the top cited trend this year in corporate and transaction banking, followed by technology advances and the adoption of new technology, which are driving fundamental change across the banking value chain.

Standardization and the move to around-the-clock, real-time payments is the third trend, which, in turn, drives the need for real-time, low-cost and resilient operational platforms across the whole sub-sector — this year’s fourth trend. “Resilient” is the most crucial aspect. Banking systems need to work not only in real time, but also need to be available 24/7 and ensure security and data privacy, especially when they are opened up to third-party providers.

From a regional perspective, European executives we interviewed are focused on operationalizing new regulatory schemes by, for example, implementing open and real-time platforms, while North American executives are in a more anticipatory mode, waiting to see the full impact of the shift to open banking and “real-time everything.”


BANKING

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CLIENT INSIGHTS

2017All responses

All responses North America Europe

1

Mounting and changing regulation and security standards 89%

92%85%

79%

2

Technology advances and the adoption of technology 78%

85%69%

55%

3

Industry standards, real-time payments and payment regulations 74%

85%62%

66%

4

Real-time, low-cost, resilient operational platforms 70%

62%77%

48%

5

Highly competitive and innovative market 67%

62%69%

59%

2018 top trends


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CLIENT INSIGHTS

BUSINESS PRIORITIES

2018 top business priorities


1

Harness data insights to protect the bank and drive revenue 74%

77%69%

63%

2

Drive a client-centered operating model 67%

62%69%

74%

3

Optimize operations to cut costs 67%

46%85%

63%

4

Protect the business from changing threats 67%

69%62%

59%

5

Drive innovations in corporate digital servicing 59%

54%62%

70%

Focus on data, customers and protection remain keyData has become the top business priority for the corporate and transaction banking executives we interviewed as they look to elevate their service offerings by delivering customer value and differentiation, improve their business processes and reporting, comply with new regulations and enhance security.

Executives also cite delivering customer-centric operating models and optimizing operations to cut costs as a key business priority. In the face of increasing regulatory burdens, nearly twice as many European bank executives cite the importance of addressing cost pressures through optimization (85%) as do their North American counterparts (46%).

We asked both business and IT leaders to give their perspective on business priorities. Interestingly, the most commonly identified business priorities differ significantly among IT leaders compared to business leaders. For example, among IT leaders, driving a client-centered operating model and rapid innovations in corporate digital servicing are much lower priorities than their business leader counterparts.

Business priorityBusiness leaders

IT leaders

Harness data insights 80% 71%

Drive a client-centered operating model 90% 53%

Protect the business from changing threats 70% 65%

Drive rapid innovations in corporate digital servicing 80% 47%

2017All responses


BANKING

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CLIENT INSIGHTS

IT PRIORITIES

2018 top IT priorities


1

Protect through cybersecurity 74%

77%69%

71%

2

Digitalize and automate to improve end-to-end

customer experience 67%

38%92%

64%

3

Deliver data for business control and clients 63%

54%69%

4%

4

Simplify technology and adopt new models 59%

54%62%

96%

5

6

Address new regulations

Drive agile, DevOps and cloud at scale

56%

56%

46%

46%

62%

62%

7%

75%

Cybersecurity has risen to take the top spot among IT priorities this year, and two new top-five trends this year are delivering data and addressing new regulations. While data also is cited as a key business priority, the business focus is on generating revenue from data, while the IT focus is more on how to deliver data and demonstrate control.

In addition, automation has risen in importance as banks seek to cut costs where they can and improve the customer experience. European executives, especially, are giving a lot of attention to digitalizing and automating their business processes, driven by the need to meet new regulations.

Cybersecurity and data privacyIn 2018, cybersecurity and regulation figure prominently among business and IT priorities, increasing in frequency across all industries. In corporate and transaction banking, 67% of executives interviewed are focusing on testing and verification of response capabilities as the most common response in this area, followed by employee training and awareness (63%) and data asset discovery and tracking (also 63%).

2017All responses


BANKING

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CLIENT INSIGHTS

6%

6%

6%

6%

28%

28%6%

38%

37%

22%

17%

DIGITAL MATURITYMajority of banks in build or launch modeNearly half the corporate and transaction executives we interviewed (48%) have a digital strategy, while 19% have begun to develop such a strategy. However, of those with a strategy in place, only 12% have an operational digital strategy that includes partners, despite the move to unbundle the value chain and open up to third parties. Likewise, only 12% have an enterprise strategy in operation for the internal organization. Overall, the majority of banks are still in the building or launching phase of their digital strategy implementation.

Stage of digital transformation strategy implementation

For the entire enterprise extending to our external partners and suppliers

For the entire enterprise, with a scope focused on the internal organization

OtherDon’t knowProducing results Operational Launching Building

Top challenges 2018 2017

1 Cybersecurity 78% 46%

2 Regulatory compliance 74% 57%

3 Demand for speed versus legacy constraints 63% N/A

4 Lack of funding 37% 50%

Cybersecurity has shot up to become the top challenge for implementing a digital transformation strategy, followed closely by regulatory compliance. The impact of regulation is felt more acutely by European executives interviewed, with 92% saying it is their top digital transformation challenge, compared to 54% of their North American counterparts.

Interviewed executives provided more than one response.


BANKING

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CLIENT INSIGHTS

CIO and lines of business jointly

empowered

Lines of business

CIO Separate digital innovation group

Chief digital officer

Team or role primarily responsible for driving transformation

56% 48% 37% 33% 19%

Data analytics and business intelligence is the dominant transformation activity this year, with 48% of executives interviewed either in the process of implementing or having completed implementation. Automation also is on the rise. Basic robotic process automation already is very mature, with 66% of executives interviewed saying they have automated processes to some degree. Now, banks are looking at more “intelligent” process automation. Sixty percent are either investigating the benefits of some form of artificial intelligence or are in a proof-of-concept stage.

More than half of corporate and transaction banks are driving digital transformation by jointly empowering their CIO and lines of business. Slightly less than half are working solely through their lines of business, while 37% are relying solely on their CIO. Few executives (19%) say they have vested the transformation leadership role in a chief digital officer.

Stage of technology transformation

Interviewed executives provided more than one response.

19%7%

15% 11% 26%

Robotic process automation (RPA)

18%19%11%

15%

41%

4%

19%

4% 22%

Artificial intelligence (AI)

Simple automation

18%15%

44%

22% 7% 33%

Analytics and business intelligence (BI)

16%7%

Investigating Transformation in progress Transformation achieved Not for us OtherProof of concept

7%

DIGITAL MATURITY


BANKING

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CLIENT INSIGHTS

Security and modernization are top spend areasForty-four percent of executives interviewed say their budget has been reduced, while 56% note the cost of control is impacting their budgets. While this paints a very challenging picture, it is interesting that 59% of executives also are seeing investments in new business and IT models. Moreover, 70% believe that data and automation also will be a key spend trend area.

Planned investments in innovation

Now Within 3 yearsSecuring the bank and its customers

74% 67%

Payments modernization and technologies

67% 74%

Digital insight and predictive analytics

59% 56%

Agile IT development factories

56% 56%

Omni-channel customer management

52% 41%

INNOVATION SPENDING


BANKING

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CLIENT INSIGHTS

Corporate and transaction banking 6%

BENCHMARKING IT SPENDING PATTERNS

The CGI Client Global Insights offer a wide range of benchmarking capabilities to support clients with their business planning. For example, in the area of IT spending, we asked corporate and transaction banking executives to estimate their IT spend as a percentage of overall revenue. The average of their responses indicates that IT spend represents 6% of revenues. Average IT investment percentages of revenue in this sector are comparable to levels in the retail banking sector, and well above the overall average of 4% across the industries we examined.

Drawing on more than 1,400 interviews across 10 industries, the CGI Client Global Insights offer numerous benchmarks, including client priorities, investment plans, innovation activities, digital transformation, cybersecurity and data privacy practices, human capital and more. This data can be compared among peers and across industries and geographies. Through our client engagements, we draw upon these benchmarks to support the development of their strategies and publish CGI Perspectives to share the findings.

Total estimated IT spend as a percentage of overall revenue or budget

Retail banking

Central and federal government

Overall average

Communications

Manufacturing

Retail and consumer services

Transport and logistics

Utilities

6%

5%

4%

4%

3%

3%

3%

3%

Data excludes answers where the respondent did not know or could not answer.


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CLIENT INSIGHTS

Global 7.0

Global 5.9

Global 5.7

Global 6.7

Banking 7.3

Banking 6.0

Banking 6.0

Banking 6.7

CTB 7.7

CTB 6.2

CTB 5.7

CTB 6.7

CTB – IT leaders 7.4




CTB – Business leaders 8.1




This year, business and IT executives interviewed ranked their satisfaction with their own IT organizations based on the 10 key attributes of a world-class IT organization, providing a comparative view of business and IT satisfaction both within and across industries. In the Perspectives section of this report, we share how this data helps corporate and transaction banks measure and benchmark their progress toward building a world-class IT organization.

As a whole, IT satisfaction among corporate and transaction banking executives ranks high in comparison to other industries and, indeed, other banking sub-sectors. Satisfaction with security programs is particularly high — good news given the ongoing emphasis on security — with business executives ranking security satisfaction at 8.1 out of 10.

Business leader satisfaction vs. IT leader satisfactionScores from 1 to 10, with 10 most satisfied

Running a secure IT environment and ensuring data privacy

Delivering projects on time and on budget

Consistently introducing applicable innovations for the business

Having in-depth knowledge of the company’s business domain

CGI can provide clients with a discussion of all available benchmarking, including each client’s positioning, on topics such as digital maturity, IT budgets, IT satisfaction, innovation investments and more.

BENCHMARKING SATISFACTION WITH THE INTERNAL IT ORGANIZATION


BANKING

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CGI PERSPECTIVESIn this section, we share our viewpoint on key insights provided by the corporate and transaction banking executives we interviewed.

INDUSTRY TRENDSDramatic change underwayThe corporate and transaction banking industry is entering a period of dramatic change, with the evolution of the open API economy, rapid digitalization, price erosion, aggressive competition and emerging technology. Advances in intelligent automation and artificial intelligence also are on the horizon, threatening to change how customer value is delivered. With much of this change impacting security, it is no surprise security remains the top cited industry trend this year. New technology advances also have shot up to second place, as we witness the complete rewriting of the banking value chain through technology innovation.

Regionally, we see different banking agendas. In Europe, for example, banks are fully focused on operationalizing new regulations, such as the Revised Payment Services Directive (PSD2), by opening up their systems and delivering products and payments in real time. Major regulatory changes have been on their agenda for a few years now, and this year, they are focused on ensuring compliance and successful execution.

In contrast, North American banks are in a more anticipatory position. They see the changes happening in Europe and are anticipating, for instance, the impact of real-time payments coming their way. In addition, there is a sense that they need to act now to keep up with their European counterparts. However, without the burden of new regulation, they are freer to focus on other goals, such as improving customer interactions and ensuring their systems are fit for purpose.

Given ever-tightening budgets and the rising costs of security, driving down costs to free up money for investment in new business and technology models has become a “business as usual” activity for most banks.


BANKING

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CGI PERSPECTIVES

BUSINESS AND IT PRIORITIES

Data has become the key route to moving forwardWhile the digital transformation journey of corporate and transaction banks is a “work in progress” and their priorities have not changed much from last year, banks find themselves at a digital crossroads. How do they remain compliant and secure, yet leap ahead of the competition? Although pressure from regulatory and security issues is high, requiring tremendous focus and effort, leading banks are seeking how to carve out a leadership position in the new world.

Data and how to use it more effectively is one route, and one that has significantly risen in importance this year. There are two key reasons for this. First, by effectively managing data, banks can generate rich insight to differentiate and elevate their service offerings through customer tailoring while improving their internal business processes and reporting. Second, given the introduction of data security and privacy regulation, along with continuing security risks, banks are under greater pressure to have and demonstrate tight control of their data.

Business priorities are more focused on generating revenue from data, while IT priorities are concentrating on better data control and driving automation to ensure more effective data management while reducing costs.

Overall, there is close alignment between business and IT priorities, with investments to ensure new platforms are implemented quickly and cost-effectively through agile methodologies, DevOps and the cloud to support more customer-centric operating models.


BANKING

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CGI PERSPECTIVES

DIGITAL MATURITY

Digital transformation remains a “work in progress”While some leading corporate and transaction banks are moving forward with an enterprise-wide digital strategy and vision for the future, the digital transformation journey remains a “work in progress” for most. Unlike other industries, however, we see good alignment between business and IT, which is refreshing. For any business strategy to be successful, both the business and IT sides must be involved, and digital is no exception.

Digital maturation within corporate and transaction banking mirrors what we have witnessed in the retail banking industry to some extent. Data has become a key focus area, with all bets on finding new revenue streams and cost savings through rich data insights and supporting automation technologies — from basic automation, to robotic process automation and intelligent process automation, to artificial intelligence at some point in the future.

Conversely, the focus on implementing self-service offerings is dropping. Most likely, this is because banks believe they already have successfully executed — or are in the process of doing so — this aspect of their digital journey and are now looking to transform the supporting back-office processes.

Interestingly, the top challenge cited last year in driving digital transformation — a lack of digital leadership and skills — did not make the list of this year’s top challenges. It was replaced instead with “digital drag” caused by legacy constraints. And, last year’s least cited challenge — cybersecurity — rose to the top this year.

The shift in focus from digital leadership to legacy constraints and cybersecurity is indicative of the pressing demands placed on bank platforms and, at the same time, the progress made to date. In the face of the wide industry change driven by open banking, around-the-clock services and real-time payments, this can only increase. However, protecting the bank is an ongoing process that requires not only budget but also skill and the continuing need to stay one step ahead.


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CGI PERSPECTIVES

Balancing “to do” lists with innovationToday’s corporate and transaction banks are contending with a perfect budget storm — rising cybersecurity, control and IT modernization costs, declining budgets and the pressure to invest in new operating models and technologies. A key challenge is to achieve the right budgetary balance between their “to do” lists and innovation.

Spend trends also show that investment is now focused on securing the bank and its customers. While this will remain an ongoing “business as usual” spend in the future, banks are expecting to shift their focus to other forms of modernization, such as payments, over the next three years.

There is a subtle difference, however, between regions. Banks in North America are fully expecting to invest in payments modernization over the next three years, while European banks are more focused on standardizing their current platforms. This resonates with what we see in the industry trends. North American banks are in more of an anticipatory position as the region moves toward open banking and real-time payments, while European banks are focused on operationalizing regulatory changes that already have taken force.

Focusing on data and automation could be the answer, and that is why we are seeing an increased focus on each. If delivered correctly, both have the ability to reduce costs while driving innovation and generating new revenue streams.

INNOVATION SPENDING


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CGI PERSPECTIVES

PROGRESS TOWARD WORLD-CLASS IT

Today’s enterprises need world-class IT to compete in an increasingly digital worldWhen there are gaps between business and IT executive expectations, advancing the transformation agenda is challenging at best. To become a top-performing enterprise, there should be continuous interaction between the business and IT sides of the organization that focuses year-over-year improvement efforts on key attributes of successful IT operations.

In the corporate and transaction banking sub-sector, one such insight is the difference between business and IT on their view of in-depth knowledge. The business side is challenged with bringing IT teams up to date on its interpretation of what is happening in the industry.

Even more revealing is that innovation received the lowest IT satisfaction score among the 10 attributes. Banks are challenged to keep pace with the other banking sub-sectors and industries in leveraging emerging technologies to drive innovation. Partnering, particularly with those in the technology sector, may be key to developing and implementing an innovation vision for the future and generating new revenue streams.

CGI asked 1,400 global leaders about their satisfaction with their own IT operations focused on the 10 attributes that define a world-class IT organization, providing a benchmark among industry peers and a foundation for continuous improvement. The resulting insights identify ways clients can bridge the gaps and align activities of business and IT leaders.

ABOUT CGIFounded in 1976, CGI is among the largest IT and business consulting services firms in the world. Operating in hundreds of locations across the globe, CGI delivers an end-to-end portfolio of capabilities, from IT and business consulting to systems integration, outsourcing services and intellectual property solutions.

In the corporate and transaction banking sector, we have a long and successful delivery track record and offer a full spectrum of services and solutions in the areas of digital transformation, automation, security and risk management, regulatory compliance, legacy modernization, payments, predictive analytics and cloud computing.

CGI works with clients through a local relationship model complemented by a global delivery network to help clients digitally transform their organizations and accelerate results.

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© 2018 CGI Group Inc. All rights reserved.This document may not be reprinted, reproduced, copied or used in whole or in part by any means without the prior written consent of CGI.

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CORPORATE AND TRANSACTION BANKING - CGI FI · BANKING 4 CLIENT INSIGHTS INDUSTRY TRENDS ... Increasing regulation and security challenges remain the top cited trend this year in corporate