The pace of change is picking up in the financial services industry. Rising interest rates are roiling financial markets again, putting pressure on banks to find new ways to grow and secure profits. The challenge is compounded by rising costs — which is hurting operating efficiency — and a flurry of technological advancements that are enabling upstarts and incumbents alike to reinvent financial services and forge new markets. New, web-based remittance companies like Venmo and Azimo are just a couple examples of that trend.
The financial services industry is entering what I call a reinvention phase. And while fraught with risk, this next phase offers unprecedented opportunities for banks to leverage cloud services to catch up to — and, yes, to overtake — market leaders.
Take ConnectOne Bank, a New Jersey-based community bank operating in the highly-competitive New York area market. Partly driven by mergers, the midsize bank has been growing at breakneck speed over the last decade. But as ConnectOne expanded, it quickly ran into bottlenecks.
The bank’s disparate accounting systems required constant manual reconciliation across multiple on-premises systems. Monthly book closes were lengthy. Regulatory audits were a painful and costly process. Something had to be done, or ConnectOne’s ambitious growth trajectory would soon be threatened.
Seeing the writing on the wall, ConnectOne made a smart decision: consolidate its core financial functions on a single cloud-based platform. By moving to the cloud, the bank could eliminate most of its manual book-balancing routines and create an easily scalable digital infrastructure to support ongoing growth and innovation.
The results were impressive: the bank cut its monthly close cycles by seven days; saved weeks on regulatory and U.S. Securities and Exchange Commission reporting; and sped up audits by 10 percent, saving ConnectOne thousands of dollars annually in auditor fees.
What’s more, ConnectOne achieved all of this without spending a dime on new on-site servers. The company also kept its IT team lean during the transition, and today it’s more capable than ever of keeping the bank’s growth trajectory on track.
Today, ConnectOne is nipping at the heels of much larger banks and tapping analytics tools built into the Oracle Cloud platform to help outmaneuver market leaders. As ConnectOne Bank’s CEO Frank Sorrentino said, “We’ve been given a much larger lease on life due to our ability to use cloud technology to be able to compete with the largest of competitors and the most innovative of competitors.”
ConnectOne is just one example of how cloud services can help financial firms close the productivity gap with industry pacesetters. In a new study commissioned by Oracle, Dr. Michael Mandel, senior fellow at the Mack Institute for Innovation Management at the Wharton School, reveals how cloud services accelerate the diffusion of advanced technologies and industry best practices to all companies — not just those on the cutting edge.
Closing the Gap
Mandel says that cloud services level the playing field, giving lagging firms the power to play catchup. In the area of compliance, for example, cloud solutions from Oracle and IBM Global Business Services provide continuous software updates that address ongoing changes to complex regulations and accounting standards. That’s something most small and mid-sized firms are hard-pressed to handle on their own.
Remember that moving to the cloud is not merely about standardizing processes. It also gives companies access to a rich set of cloud-enabled technologies. For example, as interest rates rise, markets will become more volatile and companies will need to react faster to change. This is where harnessing cutting-edge cloud technologies like intelligent automation, predictive analytics and blockchain will become critical to closing the productivity gap with industry leaders.
Everyday my team is engaged with helping companies discover new cloud-enabled opportunities. For instance, we’ve been working with Oracle to look at the finance function end-to-end to identify use cases where enterprises can automate mundane, low-value activities and unleash people to tackle higher-level tasks. We’re also helping companies use the power of cloud-based analytics to not only predict market trends but also recommend the best course of action to optimize business outcomes and identify unknown opportunities and risks. These are transformative capabilities enabled by what IBM calls cognitive computing.
The CFO’s New Role
Who’s leading the charge for cloud services? In his study, Mandel says that CFOs are best positioned for this role — and I agree. More and more I’m seeing finance leaders pushing for digital transformation in the cloud. This makes sense because the CFO — perhaps more than any other executive besides the CEO — has direct access to the trusted information needed to understand and communicate enterprise performance across every line of business. CFOs are uniquely situated to see how cloud services can propel the business with a combination of cost control and innovation.
Digital disruption won’t stop anytime soon, so get used to it. The good news is that the cloud lets you confront each new disruption with a well-organized toolbox of capabilities to adapt as quickly as you need — or maybe start a few disruptions of your own.
How are cloud services helping your finance organization become a driver of efficiency and innovation? I look forward to hearing from you.
By Sarosh Khan, IBM Global Business Services