The World's Banks Risk Becoming ‘Dumb Pipes’
Just like the telecoms a generation ago, big financial institutions are spending huge sums of money on their core businesses, but the real gains are likely to be made by more nimble entrants.
Is this what your bank will soon resemble?
Photographer: Sean Gallup/Getty Europe
The most recent earnings season showed no slowdown in spending by banks on new technology. The reality is that much of this investment will not show up as superior profits, but rather as waste unless banks undertake a fundamental change in their approach to implementing new technology.
Most banks have the wrong strategy, the wrong structure and usually too much legacy baggage to develop new technology that would benefit their businesses. As a result, many are making the same mistakes as the major telecommunications providers almost a generation ago in that they risk becoming “dumb pipes,” where huge sums of money are spent on core infrastructure, but the real gains are likely to be made by more nimble entrants.