Without indulging in boring definitions, competition and technological innovation are intuitively interdependent elements of any dynamic production context. The goal of successfully emerging in a competitive environment stimulates innovation, innovation increases the competitive characteristics of the sector in which it originates. The positive link is measured by the increase in productivity of the factors used.
In more recent years, our country has been an infertile ground for this relationship, due to uncertain, if not absent, industrial policies and the few "enzymes" introduced by foreign investments. The theme of the country's digital transformation has now begun to attract the interest of important international operators, driven by a more determined policy of the current government and by the prospect that Italy too will be massively involved in this renewal process.
The Italian banking system also needs to adapt, as one is led to deduce from the recent ABILAB annual report, entitled "Scenario and trend of the ICT market for the banking sector". Giving a critical reading, the weaknesses that emerge are the fragmentation and indulging in autochthonous policies, which prevent us from grasping technological innovation in its full unfolding. Here are some elements in support of this thesis.
The annual Total Cost of Ownership (TCO) of information technology for the Italian banking system amounted to 2014 billion euros for 3,7, a figure which, although slightly up on the previous year, is still lower than that of 2011, year in which it was around 4 billion. Some positive signals come from the forward-looking analysis, which in any case highlights the lesser tendency of smaller banks to increase IT spending.
In the overall amount of ICT expenditure, consumption and investments are not easily distinguishable, because there is no industrial detection of the costs (and returns) of automation both in the financial statements and in reporting to the authorities.
The priorities are identified by the participants in the survey in as many as 38 different activities (an unequivocal sign of dispersion), with a prevalence for the dematerialisation of administrative processes, for CRM projects, multi-channel and the offer of services via the Internet. The initiatives, sorted according to the criterion of the presumed return on spending and the impact on the business, are almost entirely attributable to front-end applications, to make their use more appealing to users.
It is perplexing that the renewal of core banking applications does not attract too much neither banks nor service providers, although its high medium-term impact on business change is recognized.
Combining these findings with those of other surveys, there is also fragmentation in sourcing, with the large banks concentrated in "in-house" systems (but among these there are also those who opt for mixed systems) and the remaining part of the demand outsourced to seven outsourcers.
In some banking groups, the various components adopt IT systems from different outsourcers, renouncing unitary governance policies for technological resources. Even the first cases of digital banks are turning to autonomous technological solutions compared to those of the parent companies, whose platforms are considered to be unsuitable for managing this novelty.
Finally, there is no shortage of smaller banks that keep the governance of the systems within themselves, underestimating the beneficial effects of outsourcing. Coming to the outsourcers, the total annual turnover does not exceed one billion euros and, not even from a corporate point of view, a single governance model emerges, even if the consortium form prevails: three suppliers belong to the movement of cooperative banks, testifying that the fragmentation of IT services also concerns this homogeneous banking model.
Few outsourcers also offer additional professional services to those of ICT (such as consultancy, training, compliance and audit controls, payment services), deriving them from the managed information assets. The absence of a trade association is also a sign of fragmentation, to tackle common problems, discuss the guidelines of the technology and jointly present themselves to the sector authorities.
And this, despite the fact that since last year the latter have assumed powers of direct verification of their work, in the name of the supervision of operational risks and the quality of the data produced. This fragmentation mainly encourages competitive policies based on prices which, in the presence of depreciated IT systems, continue to ensure positive margins, but at the same time show little propensity for change. The financial statements of the outsourcers in recent years show a favorable financial condition as proof of the reduced aptitude for new investments, while the lack of aggregations as a function of greater economies of scale are presumably attributable to corporate governance issues.
Now, if this representation captures the essential points of the situation, the question moves on to the factors on which to act, for adequate IT support for the recovery of the banking business in Italy. The reduced push from endogenous factors directs attention towards the external drivers of change. These are, on the one hand, the supervisory regulations, on the other the interest of foreign operators who, from the relative backwardness of the Italian banking system, seize investment opportunities.
On the first point, the initiatives of the national authorities, on the basis of the European and international ones, mentioned below, must translate into other more clear-cut positions, with indications on the matter of governance of operational risks attributable to insufficient technological evolution, creating a normatively more dynamic context of incentives/disincentives.
Especially in the presence of mergers between banks, which will occur soon, the integration of the group's IT systems should become a sine qua non condition, with implementation methods, times and costs included in the relative merger industrial plans. The same line should be followed immediately with regard to the cooperative banking group, wanted by the recent reform.
The objective is to affect banking productivity which is reduced and with a high degree of dispersion around the average.
Just to give an idea of the situation, compared to the figure of 11 million euros of banking product per employee, there are more virtuous banks that show values even higher than 15 million and many that do not reach 5 million. It is unlikely that the latter have concrete chances of remaining on the market in such inefficient conditions. The most striking system data remains that of the number of bank branches per inhabitant (52 per 100.000), which sees us in first place in Europe.
Instead, the point represented by the interest of foreign operators in our system must resolve the issue of adapting the platforms to the specificities of the Italian regulatory and operational context, which has so far represented a real barrier to entry. This problem can be answered by choices of IT localization of technologically more advanced international systems (and therefore more performing and flexible) to the specificities represented, only by way of example, by tax complexities, by reporting obligations towards the sector authorities, or by some business methods present only in our country.
Forms of collaboration with large manufacturers of banking IT systems, to which we provide functional knowledge of our complex apparatus, can open the market to less native and consequently less expensive solutions, as well as technologically more advanced, as the so-called service oriented architectures are at the moment .
Some forms of partnership see the start, as in the case of the agreement, which has been disclosed in recent days, between Oracle and Cabel for a joint project of localization of the Oracle FLEXCUBE core banking, already in use by 600 banks worldwide . The goal is to prepare an innovative and flexible platform, already a leader on international markets, to contribute decisively to the challenge of digitalisation, renewing the main management applications, such as registry offices, current accounts, deposits, credits, payments, accounting and so on .
Co-investment can also represent a sustainable method from an economic/financial point of view, provided that the implications are understood also from an organizational point of view, adequately governing large projects such as those mentioned above for each outsourcer.
Beyond the advantages that the success of similar initiatives could bring to the parties directly involved, the option assumes value for the entire banking ICT market. We are in fact convinced that this novelty can help to distinguish more clearly the role that software houses must have, engaged in the constant technological renewal of platforms, from that of service providers, connoisseurs of functional requirements and, therefore, of the needs of the banking system .
The prospects will then be all the more solid the more national service providers will be able to exploit the information assets, produced and managed according to the best standards of the IT industry, moving on to a wider and more qualified offer of services, in terms of consultancy for the government of the banking business and the renewal of bank-customer relationships, in its ever more complex needs.
