Bridging the profitability gap
What can banks do to reduce the $300bn gap in banking sector profitability?
This research paper from Temenos, in association with Deloitte, finds that the implementation of modern banking platforms could close this gap by as much as 60% or $180 billion (USD). Over the past three years, banks using modern banking platforms have experienced, on average, 25 percent higher return on assets, and a 37 percent higher return on capital than banks running on legacy applications.
Bridging the Profitability Gap has identified four levers to raise banks’ return on equity (RoE):
- Move into more profitable markets and segments – modern banking systems give banks the flexibility to act quickly in response to changing market opportunities, such as the ability to launch products quickly reusing existing components.
- Raise asset yield within existing business – modern systems give banks the single, complete and real-time view of the customer and risk that is essential if banks are to lower the level of asset provisioning and increase the level of cross-selling.
- Identify sustainable cost cutting measures – cutting costs in a manner that is efficient and sustainable, long-term, is challenging, and requires the streamlining, automation and optimization of processes, rather than simply paring them back.
- Extracting economies of scale – banks have a poor track record of extracting IT economies of scale, with many running on complex, siloed systems which necessitate manual workarounds. Effective technology infrastructure is integrated and scalable, and allows banks to add increased levels of customer and processing volume, without experiencing a commensurate increase in software or labor costs – thus reducing IT costs relative to income.
Bridging the profitability gap webinar
Watch the related webinar from Temenos in association with Deloitte to learn how banks can close the profitability gap and improve return on equity (RoE).