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Achieving tech leadership in private banking

Deloitte and FNZ assess how the current private banking industry would benefit from new operating models that embrace outsourcing strategies.

Luxembourg, 14 December 2023 – In a joint research, Deloitte and FNZ have analyzed the current (mainly European) private banking industry with the aim to determine how the implementation of outsourcing techniques, such as end-to-end platforms can positively impact the banks’ operating models.

Private banks faced with inevitable operational changes

Emerging technological advancements, coupled with shifting client expectations in digital banking services, are pushing private banks to evolve their operational models. A notable challenge in this adaptation stems from the rigidity of their operational cost structure. Between 70-75% of these costs are fixed, indicating a pressing need to introduce more adaptability into their frameworks. This inflexibility, combined with significantly high Cost-Income-Ratios, underscores the importance of reducing costs and boosting efficiency. Persistent challenges have led to a growing supply and demand for outsourcing strategies. Numerous institutions are now implementing outsourcing into their value chain to effectively address these issues.

Outsourcing increases efficiency and scalability

Outsourcing today is not merely about reduced costs. Rather, it serves as a catalyst for driving greater agility, security, and innovation in the banking sector. Modern approaches align technology, processes, and talent, allowing banks to:

  • Deepen client relationships and refocus on revenue-generating activities
  • Accelerate product and market access by reducing time-to-market
  • Harness continuous innovations while ensuring better regulatory coverage
  • Exploit strategic opportunities without being hampered by restrictive fixed costs

Technological advancements as driving force

As the technological transformation in the private banking industry proceeds, institutions need to adapt moving forward. Implementing end-to-end platforms into their value chain, banks can leverage new technologies such as AI, cloud computing, advanced data analytics and open data APIs for their advantage. To meet clients’ changing expectations and demands and to be able to transform and expand their business models, private banks are advised to consider mentioned platforms as strategic partners.

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