The COVID-19 crisis is accelerating innovation and spurring a new round of technology investments by wholesale banks.

Growth and profitability in the banking industry are increasingly tied to “non-banking” factors like innovation, development cycle times and continuous technology investment. But skepticism about the ROI on major technology investments has slowed the deployment of technology in wholesale banking, relative to that in retail banking and consumer businesses.

 
“Most banks are still in the early stages of transitioning their cultures and talent acquisition to look more like technology companies,” says Don Raftery, CRISIL Coalition Greenwich Co-Head of Banking and author of The Future of Banking: Digital Transformation – The Pathway to Profitable Differentiation. “After all, most banks are not data and tech companies—at least not yet.”

In the wake of a global pandemic that shifted so much business and social interaction to digital channels, banks no longer have the option of going slow or waiting to see how big tech investments play out for rivals. The changes triggered are accelerating digital transformation investments for many banks in an industry that was already spending billions of dollars annually on IT enhancements.

“Banks that excel in using technology to lower costs and better serve clients are building a powerful competitive advantage over rivals with less digital prowess or fewer resources to invest,” says Don Raftery. “Meanwhile, wholesale banks that continue to rely primarily on “white-glove” service provided by Relationship Managers will be rapidly outdistanced by the competition if they fail to keep up with digital investments.”

Drivers of ROI on Bank Technology Investments

Banks’ effectiveness in targeting their IT spending will help separate winners from losers in the post-COVID marketplace. Using findings from the Greenwich Digital Transformation Benchmarking Studies across 2019-2020, this new report pinpoints the key drivers of ROI for bank technology investments and identifies three areas that consistently deliver positive results for banks:

• Client Experience, which is highly correlated with wallet share
• Banker Productivity, which affects bank performance in both client experience and sales
• Marketing of Innovation, which is often overlooked in IT planning but can have a huge impact on ultimate ROI

The report analyzes data from each of these areas to show which specific improvements and innovations drive ROI on technology investments.