Adapting Faster: Transforming Regulatory Requirements into Opportunities in Banking and Financial Services

We’ve all encountered situations when we needed instant access to money—either our own or borrowed from our bank—and the experience was anything but instant. Processing delays, temporary holds, availability, withdrawal limits, and hefty transaction costs add friction and drive customers away.

Consumers know this story too well and are taking their wallets elsewhere. According to Rivel Banking Research’s 2023 Q3 data, 32% of retail banking customers nationwide are now open to switching their primary bank. Major pains that are driving customers to consider a move include high fees, poor rates on their deposits and loans, an antiquated digital experience, and the institution failing to support their financial well-being.

Banking and financial services are constantly evolving to mitigate the customer exodus by investing in new technology. FinTechs and disruptive concepts such as embedded banking, embedded finance, and banking-as-a-service are emerging as digital-first competitors to traditional banks. Most importantly, constant scrutiny and compliance frameworks from regulatory bodies around the world are also mounting pressure on banking and financial service enterprises to increase speed, security, and transparency while reducing costs.

All these pressures make adapting mission-critical processes more difficult due to their scale and the complexity of the business and technology they rely on. Yet they all seem to come into force at such a steady pace that it can feel like there’s no end in sight. Even the smallest regulatory change can trigger extensive, end-to-end updates from customer interactions to middle-office decision making—not just in back-office reporting.

Other times, the sheer complexity and scope of changes require a near-complete overhaul of the technologies, processes, and change management for the people impacted. Add together aging legacy systems, a growing zoo of technology, and a tight talent market and firms face an uphill battle to stay ahead of change.

Build the right solution, at the right time

Even with a clear vision of jobs-to-be-done, aligning business and IT teams is a challenge. The business and product teams know the desired outcome and experience. However, IT teams understand what’s truly feasible given the scope of changes in their technology landscape required to achieve the organization’s goals.

Take the example of the mandate by SEC to T+1 settlements. This process is incredibly complex and often hidden behind legacy code, various homegrown or third-party systems, and a mix of internal and external parties involved. The entire end-to-end process is complex and opaque. Pinpointing those bottlenecks and breakpoints is tough as so many processes rely on a collection of siloed automations. This isolated approach ultimately reduces a company’s ability to drive greater value from the technology and can even negatively impact customer experiences because point automation is brittle and prone to failure.

The disconnect between IT and business can be a challenge if they don’t have a common language they share. A recent report from Accenture showed that most firms underestimate the total cost and length of time it would take to modernize their trade lifecycle. The firm hypothesizes the estimations differ greatly because respondents are looking at costs isolated to their specific function instead of across the organization. This misalignment can wreak havoc with a regulatory change as massive as T+1—not just in terms of budget, but also customer experience and risk.

Knowing what needs to change to comply with the new settlement timeframe involves a long end-to-end journey and is crucial to creating the right solution.

Tame complexity, and maximize value

Simplicity is a lofty goal that’s hard to achieve in our increasingly complex world. It’s simply not a reality for most organizations. Even digital-first competitors who have more greenfield opportunities can quickly find themselves trapped behind point automation technologies and mounting technical debt.

This creates opposing forces behind any pressure to adapt. Firms need to both run the business today—to continue delivering excellent customer experiences—and change the business for the future. With those two forces working against each other, it’s even more imperative to have flexible tools to efficiently change and modify processes—and even create completely new ones.

The cure comes from composability and openness. Both offer ways to maximize resources and have become essential to stay ahead so that firms can maximize the technology already in place and replace whatever isn’t serving their needs long term.

It also allows your development teams to continue using the languages and tools they are familiar with, eliminating the need to hire specialized roles whose expertise in proprietary technology is limited to specific projects and not widely applicable. This further reduces the teams’ cognitive load, which gives them more space to find innovative solutions to complex problems and a strong pool of talent to call on.

Innovate at scale

As trends like open banking with and corresponding regulatory rules, such as one from CFPB in the U.S. continue to grow, there’s even more pressure on the technology infrastructure powering everything. The sheer volume of transactions flowing through mission-critical systems can put them at risk of slowing down or faltering altogether, leading to business disruption and unhappy customers.

However, these trends provide a wealth of new growth opportunities that firms are just starting to innovate around. For example, with the upcoming ISO 20022 messaging standard, organizations will have a wealth of new payment-related data they can use to improve efficiency or offer new value-added services.

Generative AI is another business-transforming technology that’s risen to the top of boardroom priorities. The firms that are strategic and quick to implement AI in a value-driven way seize a first-mover advantage. At the same time, there’s additional risk placed on deployments. With new AI regulations in discussion, any of these products—whether customer or employee-facing—are under increased scrutiny, and they may face strict guardrails that would require rework or pulling them offline altogether. This means firms need an effective way to prioritize, deploy, monitor, optimize, and govern their generative AI use cases.

With each innovation, organizations need the proper infrastructure to scale to meet customer demands and built-in resilience to overcome potential disruption. Processes locked behind proprietary systems or aging legacy infrastructure make improving or changing them increasingly risky and expensive. Some technology may lack the ability altogether without specialized services or other add-ons.

Open architecture and truly cloud-native capabilities are needed to give organizations the ability to scale up as demand increases and stay resilient against disruption. Scalability is also essential for certain time-sensitive processes to run at very low latencies to ensure everything continues running smoothly which is difficult to achieve without the right technology.

Take advantage of the next disruption

With the constant flow of change, banking and financial services executives are looking to process orchestration to weave together their disconnected business processes across a complex web of people, systems, and devices.

With process orchestration, organizations create a foundation for faster response to market changes and disruptors. It enables organizations to maximize their current technology, customize solutions to their unique requirements, and ultimately respond quicker to changing customer demands, technologies, and regulations.