Banking advisory services are vital in today's financial landscape, characterised by evolving regulations, digital transformation, and heightened competition. These services provide financial institutions with strategic guidance on risk management, regulatory compliance, mergers and acquisitions, and the implementation of innovative fintech solutions. In the Intellectual Property Funding domain, advisory services help businesses protect, monetize, and optimize their intellectual property assets, just in the UK banks are likely to shed more than 40% of their workforce due to innovations in technology.
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The existing banking system is under significant stress due to a combination of outdated legacy infrastructure, increasing regulatory requirements, cyber threats, and evolving customer expectations. The global financial industry has been grappling with numerous issues that stem from its reliance on decades old technology, which is inefficient, costly to maintain, and prone to errors and levels of fraud not just from outside the banks, but within them also.
Here are the key reasons why the system is stressed and the estimated costs involved in upgrading the technology and why you should adopt community banking strategies if you want to change your future, (And why up to 40 % of the current banking workforce will need to find alternative employment soon).
The current Legacy Systems and Outdated Infrastructure.
Aging Technology: Many banks still rely on core banking systems built in the 1970s and 1980s, such as mainframe systems. These systems, while robust in their day, lack the flexibility to meet modern demands. They are difficult to maintain and integrate with newer technologies, making them prone to operational errors. (Cloud Hosting and Computing is the future).
Inflexibility: Legacy systems are inflexible and often require extensive manual intervention for even basic tasks like updating account information or processing payments. This leads to frequent errors and delays in processing transactions, negatively affecting customer experience. (Customers are leaving for efficiency).
Complex Maintenance: Banks are often forced to maintain a patchwork of systems, combining legacy platforms with newer solutions. The integration between these systems is fragile, leading to frequent breakdowns and errors, especially during high-volume transactions like those seen in payment processing or compliance checks. ( Its not working, there are days when customers have no access to money).
Increasing Regulatory and Compliance Requirements
Stricter Regulations: Financial regulations such as Anti Money Laundering (AML), Know Your Customer (KYC), and the General Data Protection Regulation (GDPR) impose heavy data and reporting requirements on banks. Legacy systems struggle to meet these requirements efficiently, leading to regulatory breaches and fines. (Customers are being punished for the banks own lack of technology and service errors)
High Compliance Costs: Banks need to constantly upgrade their systems to keep up with evolving regulations. Legacy systems often require costly and inefficient workarounds to stay compliant, increasing the risk of noncompliance due to system errors or lack of agility. (Its going to be a long and expensive road for older banks.)
Cybersecurity Risks.
Increased Threats: As financial transactions become more digitized, banks face a growing number of cyber threats. Legacy systems are particularly vulnerable to attacks, as they lack modern security protocols and encryption measures that newer systems offer. (More people want to leave and bank with digital banks).
Frequent Data Breaches: Older systems are often easier for hackers to exploit due to weak security. The cost of mitigating data breaches, both financially and in terms of reputational damage, is staggering for banks. The average cost of a data breach for financial institutions can run into millions of dollars. (They never tell you they have been hacked, just that they are upgrading their systems).
Evolving Customer Expectations.
Demand for Digital Solutions: Customers today expect seamless, real time banking experiences across multiple digital platforms. Legacy systems are not designed for 24/7 operations, leading to outages, slow service, and inability to offer cutting edge services like instant payments or blockchain based transactions. (Be prepared to have your funds held under review and longer times for closing your bank account to move to a digital banking structure).
Competition from Fintech: Fintech companies, unburdened by legacy infrastructure, offer fast, customer centric services. This puts traditional banks at a competitive disadvantage, as their legacy systems cannot adapt quickly enough to keep up with fintech innovation. (Customers already know this).
Operational Inefficiencies and Errors.
High Error Rates: Due to the complexity of maintaining legacy systems, banks face a higher risk of operational errors, such as incorrect transactions, delays in payments, or mismatches in account information. These errors are costly to resolve and damage customer trust. ( This is one reason banks do not want to talk to you).
High Operating Costs: It is estimated that 60-80% of a bank's IT budget is spent on maintaining and supporting legacy systems, which leaves little room for innovation or system upgrades. (They need your money to implement these upgrades).
High Costs of Legacy System Failures.
System Downtime: Legacy systems are prone to failures that can cause significant service outages. High profile examples of banking system outages can cost banks millions in lost transactions, as well as fines from regulators and loss of customer trust. (On some days customers cannot find their own accounts).
Risk of Collapse: Prolonged reliance on outdated infrastructure raises the risk of a systemic failure that could cause catastrophic service disruptions across the entire banking system. ( This is already happening everywhere).
Cost Estimates for Upgrading Banking Technology
The cost of upgrading banking systems from legacy infrastructure to modern, fully operational technology is substantial. Below are the key areas of cost:
Core Banking System Upgrades, Software and Hardware Replacement: Moving from legacy mainframes to modern cloud based systems or distributed ledger technologies is expensive. A large bank might need to spend $100 million to $500 million on upgrading its core banking software alone.
Migration Costs: Data migration from legacy systems to modern platforms is complex, involving significant workforce and resources. For larger institutions, migration costs can run into the hundreds of millions of dollars. The complexity of legacy data structures adds to this cost.
Cybersecurity and Risk Management.
Investment in Cybersecurity: To secure new systems and mitigate modern threats, banks will need to invest heavily in cybersecurity infrastructure. The global banking industry is estimated to spend $200 billion by 2025 on cybersecurity measures alone.
Risk Management Solutions: Implementing modern risk management systems for fraud detection, regulatory compliance, and transaction monitoring also adds to the overall cost, with largescale deployments costing upwards of $50 million to $200 million per institution.
Digital Transformation Initiatives :
Cloud Computing and Data Centres: Transitioning from physical data centres to cloud based systems can lower costs over the long term but requires significant upfront investment. For large banks, this cost could be as high as $200 million to $1 billion.
AI and Machine Learning Implementation: Incorporating artificial intelligence for customer service (e.g., chatbots), fraud detection, and operational efficiency requires investments in software development and implementation, often totalling $50 million to $150 million for large institutions.
Training and Change Management
Staff Training and Reskilling: Upgrading systems also requires retraining existing staff to use new technologies. For larger institutions, this could cost tens of millions in training, development, and support and still not guarantee continual performance standards. ( its easier to let a machine handle most transactions).
Change Management: Integrating new technologies into the current banking structure involves significant change management processes, including pilot testing, gradual rollouts, and risk mitigation during transitions. These initiatives can cost $20 million to $100 million, depending on the size of the institution.
Global Cost Estimate.
Analysts estimate that globally, banks will need to spend between $500 billion and $1 trillion over the next several years to fully modernize their systems. This includes replacing core banking systems, integrating fintech solutions, improving cybersecurity, and building the infrastructure for a digital future. These costs are substantial, but failure to upgrade could lead to even greater financial losses from errors, system failures, and competition from agile fintech firms.
The current banking system is stressed due to legacy systems that can no longer keep up with modern demands. These outdated systems are expensive to maintain, prone to errors, and increasingly vulnerable to cyberattacks. Upgrading the global banking infrastructure to modern technology is estimated to cost up to $1 trillion, but it is a necessary investment to ensure future stability, security, and competitiveness. For banks, this upgrade is not just about keeping up with technology, but also about survival in an increasingly digital world.
Its is time your small business became a community bank for your own customers, as already seen other countries, these Community guided banks are the future, some countries have been using them with considerable benefits for the people that they serve .
Consultancy Services; The areas shaping the future ( Remember being number one in a declining market place doesn't mean you are the best )
In today's rapidly evolving business landscape, organisations across various sectors face complex challenges and opportunities that require strategic insights and expertise. Navigating the dynamic worlds of Energy, Information Technology (IT), Banking, Food Security, Healthcare and monetising the Intellectual Property (IP), demands a deep understanding of industry-specific nuances and an initiative-taking approach to addressing critical issues. This is where consultancy and advisory services play a pivotal role.
The Information Technology sector relies on consultancy and advisory services to harness the power of technology for improved efficiency, innovation, and security. IT advisory professionals assist businesses in optimizing their IT infrastructure, adopting emerging technologies like artificial intelligence and blockchain, and ensuring data protection and cybersecurity a real dawn is approaching when the existence of companies who have not embraced the new technology will be left behind.
I.T consultancy and advisory work closely with clients to secure IP development and monetisation, manage IP portfolios, and navigate the complex legal and regulatory aspects of IP protection. Whether it is steering energy, healthcare, banking, legal services companies toward sustainable practices, empowering IT-driven innovation, ensuring the financial health of banks, or optimizing intellectual property strategies, consultancy or advisory services in Energy, IT, Banking, Healthcare Food security and IP monetisation are the compass that guides organizations toward achieving their objectives in an ever-evolving business environment.
In this era of unprecedented change and opportunity, embracing the right consultancy services in these sectors is not just a strategic choice but a necessity for organizations aiming to thrive and lead in their respective industries. The journey begins with a partnership that combines industry expertise, innovation, and a commitment to excellence to navigate the challenges and seize the opportunities that lie ahead.