New Chapter in U.S. Core Banking
The proposal to revive the Glass-Steagall Act to once again separate commercial and investment banking interests clearly indicates that concerns of risk management and governance are top of mind for banking regulators. In general, banks should expect to face more heat on the regulatory front, and not just in the form of tighter KYC norms. Guidelines on improving financial and social inclusion or green banking will put more pressure from the compliance perspective.
Customer behavior, along with profile is also undergoing a shift. The once debt-dependent American is now putting away for a rainy day! Although the overall savings rate is still in single digits, it has improved a 100% in the last year. Should the trend gain momentum, U.S. banks could suddenly find a huge amount of retail deposits and a consequent asset-liability management challenge on their hands.
Although American banks are not new to customer diversity, the widening gap between the expectations of different segments comprising seniors, Hispanics, Gen Y and so on is stretching their ability to meet individual needs.
Hence, these banks must be at their innovative best to meet the challenges and manage the risks posed by these trends; what’s more, they must do so with fewer human resources. The challenges are compounded by the legacy systems that are still very much in use at several U.S. banks. Clearly, the best way out is to revamp the core banking technology infrastructure to render it robust enough to drive innovation in any form.
This means that a big opportunity awaits those core banking solution vendors that can fulfill new expectations. As U.S. banks take an enterprise-wide approach to their operations, they will need a banking platform that can enable both core and non-core banking transactions through a single front-end. Hence, the current integrated banking platform must morph into an enterprise banking platform soon. And yes, this platform must be able to handle emerging technologies such as web 3.0 / 4.0, mobile payments and convergence and their accompanying risks, as well.
