16.12.2016

Poland may lose its leading position in Central Europe in terms of the profitability of the banking sector. Deloitte’s forecasts show that simple methods of getting the results are becoming insufficient. One of the opportunities is to strengthen the strategic cooperation between financial institutions and technology and service companies.

In the opinion of the authors of the report "CE Banking Outlook. Winning in the Digital Arms Race" the year 2017 will be particularly difficult for banks in Poland. The return on equity is predicted to decrease within 3 years from 10% in 2014 to record-low 3-4% in the next year. We should look for the causes among others in the introduction of new regulations, e.g. the banking tax, and interest-rates which have stayed at a record-low level for some time now.
"Banks react to this situation by reducing the number of branches and employees and by transferring some costs to customers. In a short term such moves will allow them to maintain the profit level. However, we will quickly weaken customer loyalty. Some of them will go to the competition. The others will fall into the arms of fintechs, which are taking over the ever bigger portion of the cake", says Konrad Rochalski, the President of ArchiDoc SA, a company specialized in handling processes for the banking sector. "Analyzing the operational functioning of the organization and initiating deep restructuring projects which correspond to changes in the business environment is, however, more difficult".

Accelerated mass digitization
According to Deloitte 95% of banks in the Central Europe are implementing a business model based on a digital strategy. Personnel costs of the banks’ functioning grow systematically. The technology makes it possible to reduce these costs by automating simple and repetitive activities.
"Decisions related to risk analysis and evaluation require an employee’s participation, but the preparation of data needed to make these decisions does not. The receipt of mass correspondence and merging it into case files may be aided by the OCR technology. Data from documents which was transcribed by hand, in many cases several times in different systems, may be identified by the system and then sent from one application to another. The data may be checked in external bases and corroborated. Both the customer and the bank gain from this", explains Rochalski.

A step further: World as a Service
Customization of ready process management software is very time-consuming and risky for financial institutions and it generates costs which are disproportionate to the benefits. Recently new concepts have appeared which build on the SaaS (Software as a Service) model. They are called WaaS (World as a Service). A bank focuses on mapping the process and on establishing target indexes for its implementation. On the other hand specialized external partners are entrusted with both the handling of the process and the adaptation of software with a safe interface to the bank’s systems. Thus, it transfers the responsibility for the technical and implementation-related aspects of the service and for updating and adapting it to the needs of the customer.

A report by McKinsey & Company shows that financial institutions are willing to use the assistance of specialized business partners. 40-50% of operating expenses is allocated to outsourcing, among others increasingly in strategic and complicated areas of delegated activities.
"Banks in Poland are the most willing to delegate two types of processes: simple, but onerous ones and those that are too advanced for them to do quickly and well on their own. The latter are mainly related to technologies and IT. Banks work on numerous inflexible systems. Each change or an attempt at additional integration generates a risk of difficult-to-predict errors. It is also difficult to acquire from the market and maintain highly-specialized IT teams. Hence, the growing number of strategic partnerships based on the WaaS model, even in such a traditional industry as the financial sector", observes the president of ArchiDoc.