Dive Brief:
- Corporate and investment bank executives implementing technology innovation programs are experiencing lackluster results. More than 4 in 5 said in a Capgemini Research Institute report released Monday that new product implementations aren’t boosting revenue. Another 51% admitted that new products didn’t deliver on expected cost savings either.
- As consumer AI expectations rise, technology leaders are limited in how they can respond. Executives said only 29% of annual IT budgets are set aside for transformative technologies while a larger chunk — 43% — is devoted to maintaining legacy systems. Capgemini surveyed 150 senior leaders from corporate and investment banks and 600 senior executives from non-bank financial institutions and global corporations.
- “Client demands have shifted dramatically, and while CIBs have invested heavily in AI, many are struggling to move beyond the pilot stage,” Catherine Chedru-Refeuil, global head of corporate and investment banking at Capgemini, said in a press release.
Dive Insight:
CIOs and technology leaders will play a pivotal role in adapting to the structural headwinds corporate and investment banks are facing as customers push for new products and services.
More than half of corporate and investment bank customers expect real-time responsiveness, 49% want personalized engagement and 40% are looking for innovative products. However, fewer than 20% of customers find that banks are meeting those expectations, according to the Capgemini report.
The customer demand for a modern experience comes at a time when revenue is expected to decelerate. Over the next five years, the annual growth rate is expected to slow from 6.5% between 2022 and 2024 to 5.4%, due to competitive pressure, technology challenges and weakened customer relationships, the report found.
“Non-banks and fintechs are scaling at speed, and expectations continue to rise,” Kartik Ramakrishnan, CEO of Capgemini’s financial services strategic business unit and a member of the group executive board, said in the report. “For incumbent banks, aging technology, tougher cyber-resilience requirements, and expanding data and compliance demands are squeezing margins and crowding out investment capacity.”
Banks will need to assess how to modernize legacy infrastructure, redesign operating models and embed AI across business operations to pull ahead, Ramakrishnan said.
Getting there means technology leaders will need to introduce flexible operating models and enable accelerated change, as well as strengthen data and technology foundations with large language models that can support real-time interactions and elevate decision-making, the report said.
Growing an AI workforce through reskilling, rethinking roles and reinforcing behaviors that support AI-enabled work methods will also play a significant factor in business transformation. Yet Capgemini found 40% prioritized hiring outside AI talent while only 23% invested in internal reskilling.
Meanwhile, building governance into AI processes and platforms will enable banks to better scale the technology, particularly as almost two-thirds of executives cited high regulatory compliance costs as a business pain point, according to the report.
“To succeed, CIBs must adopt a disciplined approach: creating enterprise-grade platforms and cultivating an ecosystem of trusted partners,” said Chedru-Refeuil.
