How IT Managed Services Help Reduce Costs in Banking

The banking industry’s appetite for digital innovation continues to accelerate — but do banks have the capital market technology needed to optimize cost savings?

Platforms play a pivotal role in today’s capital markets landscape for banks of all sizes.

On average, banks are deploying major platform solutions between four to 12 times per year, according to IBM’s 2023 Global Outlook for Banking and Financial Markets. Additionally, the adoption of a highly scalable and reliable Platform-as-a-Service solution is identified as the key to achieving a data-first architecture that can modernize applications, source real-time data, and more.

Yet, despite how interwoven platforms have become in the global banking sector, many banks are hitting a wall when it comes to balancing innovation with affordability.

With so many vendors offering platform solutions nowadays, it is easy for a bank to get wrapped up in a complex web of different platform products that ultimately offer an identical level of functionality. As a result, integrations are made harder due to complexity, and modernization can be inhibited, all while banks are draining their budgets on managing multiple platforms which are all doing the same things.

During my time at a leading international bank, this challenge of spending too much on technologies that all served similar or identical functions came up again and again.

Now working with Exadel, our advancements in IT managed services for banking platform technology and our focus on platform consolidation has brought me to the other side of this challenge, driving forward a vital solution to address platform and capital market challenges for banks of all sizes.

Four Key Capital Market Challenges Driving IT Costs for Banks

What makes capital markets technology such a challenging issue for banks?

The reality of the matter is complex in its own right.

On the one hand, having multiple platform solutions active simultaneously is not without its advantages. A multi-platform approach can help to establish redundancy in a system that protects banks from any unforeseen hurdles like software downtime or outages.

On the other hand, banks continue to run into the age-old problem of minimizing cost efficiency due to departmental silos. When talking about platforms, this often looks like different areas of business using either different platforms or different versions of the same platforms to perform identical functions.

The key here is to rationalize platform redundancy wherever possible by consolidating platforms into a centralized system that offers greater operational efficiency at a much lower cost.

To best understand how to achieve this rationalization, we must first take a closer look at the four main challenges banks face when dealing with capital market technologies and platforms:

Capital Market Challenge 1: Architecture

When your bank has multiple systems that all perform the same or similar tasks, you end up with an IT architecture with significant functional overlap.

Not only this, but by allowing multiple platform systems to exist at once with little to no centralization, your bank’s access to information can be greatly hindered.

This multi-system approach only really works when banks can clearly rationalize the necessity of maintaining more than one platform — otherwise, you can quickly end up with fragmented data sources that are difficult to draw real-time insights from regarding the current state of capital markets.

Moreover, this type of fragmented architecture makes it far more difficult to find internal capital that can be freed up for modernizing your IT infrastructure and building effective digital tools.

Capital Market Challenge 2: Costs

Today’s banking landscape is wrought with regulatory change, requiring banks to commit large portions of their operational budgets toward ensuring all regulatory standards are met. This ends up limiting the amount of discretionary spend available to banks for accelerating internal innovation.

On top of this, banks are facing high RTB (Run-the-Bank) costs while simultaneously dealing with smaller CTB (Change-the-Bank) budgets for evolving their capital market tech stacks.

Considering this in the context of rationalizing platform redundancy, banks need to take a serious look at how their current approach to platforms may be limiting budgetary resources even further.

Capital Market Challenge 3: IT Skills

Deploying capital market technologies can take significant manpower and talent — meaning that banks without adequate in-house talent are left with limited options for bridging this gap.

The challenge of sourcing talent from increasingly small talent pools has been a prevalent issue in the banking industry for some time now. This capital market challenge is further complicated when a bank has too many disjointed and fragmented platform systems in place, as banks need talented teams to dedicate to each of those platform solutions.

As a result of these limited talent pools — as well as the resource constraints that come from managing multiple redundant platforms — banks end up with a heavy dependency on vendor support and the independent contractor market.

Capital Market Challenge 4: Business Enablement

What all three of the above challenges ultimately lead to is a hindrance to business enablement.

With many disconnected platform systems and fragmented data siloed off by department (which oftentimes includes iterations of platforms performing the same functions, just in different areas), a bank’s overall business perception of IT service levels can be greatly reduced.

In turn, banks face a lower level of digital adoption, making it more difficult to leverage new technologies that can help enhance business growth and lower costs.

For example, to be at their most effective, platforms need continuous version upgrades. Without a centralized architecture, sufficient resourcing, and a large in-house talent pool, banks must focus heaps of energy on ensuring these upgrades are carried out correctly and in good time. This ends up limiting the amount of time, resources, and talent that can be spent on the digital modernization of the entire tech stack.

If you think about this capital market challenge from a more personal perspective, you wouldn’t buy two Ferraris with the same features and design. At a minimum, you would opt for a second Ferrari that at least had a different color or extra features that provided additional value — and even then, it makes little sense to buy two similar vehicles if one can do all the same things as the other.

Why? Because it’s neither cost-effective nor beneficial to have two identical versions of something, especially if you do not have the discretionary spend to do so in the first place.

Thinking about capital market technologies from this perspective helps shed light on the key issue at hand — that banks need to focus more on consolidation and centralization of their platform solutions, rather than allowing each sect of the organization to maintain individual yet nearly identical platforms.

So, how can banks optimize their approach to capital market technologies while still gaining the vital benefits that platform solutions offer? The answer is rooted in managed services.

How IT Managed Services are Modernizing the Future of Banking Platforms

IT Managed services for banking are a type of solution that involves outsourcing many of your essential platform needs to a third-party FinTech provider, like Exadel. Leveraging managed services allows your financial institution to enjoy end-to-end IT management that fits within your budget.

Plus, managed services for banking allow you to embrace digital platform innovation like never before.

Rather than bearing the weight of platform maintenance and consolidation all on your own, IT managed services allow your bank or credit union to save money, time, resources, and talent. All the while, managed services can help unlock capital value that can then be reinvested in modernizing your overall system architecture.

Other key benefits of IT managed services for banking platforms include:

Exadel’s IT Managed Services for Banking: Your Capital Markets Platforms are in Safe Hands

Whether it’s your platform, your banking applications, or your overall approach to IT management and maintenance, Exadel’s IT managed services for banking can help greatly enhance your business model.

At Exadel, our managed services for banking have a proven track record of success, and help our clients achieve new heights without sacrificing huge portions of their budgets.

Along with a full range of platform implementation, production, development, and customization services, Exadel also offers critical ongoing support to ensure your team always feels fully enabled to do their best work to keep customers satisfied and risk at bay.

Even if your institution is still in the early stages of digital transformation and development, our team can evaluate the technology and resources you currently have and help you build a roadmap to success, accelerated by our IT managed services for banking.

Get in touch with Exadel today to find out more about our highly tailored managed services.