On the surface, the financial services industry appears to be in good shape, surviving the impact of the pandemic and moving forward with digital banking transformation initiatives. Offsetting that, an inverted yield curve, rising interest rates, high inflation and uncertainties surrounding Russia’s invasion of Ukraine threaten the industry’s stability and growth prospects. An extended downturn or recession could disrupt all sectors, including traditional banks, fintech firms, payment players and even big tech competitors.
When the economy faced headwinds in the past, the response across all industries was often to improve productivity, primarily by reducing costs. The question is whether this remains the best strategy at a time when the banking industry is in the middle of extensive digital banking transformation efforts.
During uncertain times, executives often make short-term decisions that negatively impact long-term strategy. This includes broad-based reductions in investments in technology, innovation, talent, back-office modernization, and customer experiences. With many financial institutions in the midst of major business model changes, cost cutting must be much more strategic – with some savings reinvested in areas of greatest long-term value. Below are five of the most important priorities.
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