The financial sector is immersed in a process of profound transformation motivated by at least three major elements (beyond the aforementioned consequences of the pandemic): i) the macroeconomic environment (in which low interest rates still persist, despite inflationary pressures), ii) regulation and supervision, and iii) digital transformation; which are having a direct impact on the profitability of financial institutions (lower margins, pressure on costs and ROE). According to the EBA, 30% of European financial institutions plan to make changes to their business model as a result of these factors.
The macro context is conditioned by the issues already discussed (pandemic, supply shock, etc.) which, although to a lesser extent than initially expected, put pressure on borrowing costs. With regard to regulation and supervision, the requirements are more numerous, more demanding and affect more areas (capital, provisions, balance sheet structure, liquidity, leverage, conduct, etc.), in exchange for greater security and solvency of the system as a whole, which structurally reduces the profitability of financial institutions and means they face very high direct costs to adapt to these requirements. But the expectation is for some stabilization in the medium term, as the process of regulatory and supervisory transformation draws to a close.
In relation to digital transformation, there is an unprecedented technological revolution with a profound impact on the business model of organizations. This transformation can be broken down even further into three constituent components: an exponential increase in data volume as well as in storage, processing and modeling capabilities, with lower associated costs; a change in customer behavior towards a more digital and informed profile; and the emergence of new competitors heavily leveraged in technology.
Finally, we should emphasize the active role that the banking sector is taking on in the area of sustainability (ESG), becoming a key player in the process towards changing the economy's production systems (greener and more socially responsible).
Financial institutions are responding to these challenges by transforming themselves in at least four areas: business models, transformation and efficiency, finance, and risk management.
Our practice
Management Solutions caters for all kind of entities within this market: banks, insurers, investment companies, financial institutions, etc.
Based on their in-depth knowledge of, and experience in, the industry, our professionals are more than prepared to meet any current challenge.
All our areas of specialty can be brought into play in this practice. Additionally, we have developed certain services that address industry-specific requirements. Especially noteworthy are our services in wholesale banking (Treasury, Capital Markets, Asset Management, Payment Methods, etc.), business and retail banking (distribution models, knowledge of customer, customer’s multi-channel behavior and experience, etc.), management of financial business risks (in any of its facets), optimization of equity, and regulatory compliance (Basel II, money laundering, etc.).
