Arto Sorvoja: Banking IT Strategy 2030 – Maximizing the Return on your Digital Investment 

The European banking ecosystem is a study in contrasts. On one end, approximately 20 large-scale financial institutions dominate the market. Conversely, 200 to 300 small-to-medium-sized banks contribute to a fragmented landscape. This fragmentation, coupled with structural differences and regulations, has led European banks to underperform compared to their U.S. counterparts for quite some time.  

Despite current, possibly short-lived, improvements in financial performance, these banks still need to address fundamental issues. There is a broad consensus over the need for modernization, with the European Central Bank agreeing and advocating for streamlining core banking platforms. 

These core platforms are not inherently flawed. However, many financial institutions point to their high operational costs, business continuity, and lack of flexibility as barriers to innovation. What people in the sector often characterize as ‘inertia’ stems from a cautious attitude towards changing existing profit models, exacerbated by overarching economic uncertainties. 

Nevertheless, the escalating pace of technological advancements leaves no room for complacency. The impact of these changes on the banking industry is not just imminent but transformative. Below are crucial focal points to consider in shaping your bank’s IT strategy on the way to 2030:

1. AI changes everything – almost

First, AI will not change banking. Banks will continue offering deposits, accounts, loans, and a broad range of other financial instruments – just like for hundreds of years. Artificial Intelligence will, however, irreversibly change how banks operate, from the back-office and support to being an integral part of every aspect of banks’ operations and end-customer experience.  

The essence of digital transformation lies in understanding the data you have. The cloud is the enabler here – not because it’s inherently superior, but because it gives you initial access to the latest AI technologies. 

One advantage of AI is that it levels the playing field, with companies generally at the same starting point. Given the recency of significant breakthroughs in the area, no organization is more than 6–12 months ahead of its competitors. Additionally, the pace of AI development is unprecedented. 

With hyperscalers investing billions into AI, a bank’s million-euro investments are fractional. Let’s prepare. Innovation is unlikely to come from banks or traditional IT providers. While Kyndryl has the capacity for innovation, achieving it becomes more challenging when collaborating with smaller players. In this context, Samlink occupies a unique and advantageous position.

With the advent of AI-driven communication tools such as Microsoft’s Copilot of Google Duet, a portion of communication can be standardized and optimized. These AI frameworks can provide a foundational structure for messaging, enabling a more explicit and precise touch.  

AI is a significant contributor to revenue growth in the IT industry. For banks, the question arises: how can AI similarly impact their top line? Current use cases primarily target bottom-line improvements through increased productivity and efficiency. But, there is a growing shift toward exploring revenue-generating opportunities.  

After all, cost optimization has its limits, whereas the potential for revenue growth is nearly boundless.

2. ESG is everywhere

The global investment capital pool is approximately $100 trillion, with BlackRock managing around $8 trillion. BlackRock CEO Larry Fink has stated, “Climate policies are about profits, not being woke.” Irrespective of the political nuances surrounding ESG (Environmental, Social, and Governance), it is poised to become a key profit differentiator for banks in the latter half of the 2020s. 

Driven by EU policies that favor green financing, traditional funding models for projects like oil extraction or peatland development are becoming prohibitively expensive and complicated for banks. Regulatory mandates require substantial balance sheet reserves for financing non-green initiatives.  

The European Central Bank (ECB) aims to steer financial institutions towards exclusively green investments. This trend could gain momentum globally, depending on policy directions in America and Asia. By 2025, stringent ESG reporting will be in full effect, altering the financial landscape significantly.  

Any IT strategy looking forward to 2030 will consider the ESG process a major operational force.

3. Future-proofing bank IT

Adapting to new operational landscapes has never been more pressing in banking. Three primary factors drive this necessity.  

First, technological development is evolving at an unprecedented pace. To remain competitive, banks must adapt to new technologies and have a foundational infrastructure built on cloud and digital transformation. The shift entails formulating policies that facilitate technological adaptation, implementing security controls to avert unintended consequences, and integrating new with old systems without compromising business continuity. 

Second, regulatory shifts, spearheaded by initiatives like the Digital Operational Resilience Act (DORA), force banks to redefine their operations. DORA brings with it a range of security implications and process-related improvements. However, its fundamental premise is that banks must be more open and transparent in operating internally and with external stakeholders. This departure differs from traditional banking practices – historically insular – despite being a very homogenous industry. 

Lastly, the talent landscape is growing increasingly competitive, especially in specialized fields like Artificial Intelligence and Machine Learning. There are around 30 million software developers worldwide, of whom only 100,000 to 200,000 are AI and ML experts.  

All banks scramble to set up dedicated AI teams and practices, creating a talent demand that far outstrips supply. In this scenario, upskilling existing teams and attracting new talent have become critical success factors. And as we know, the expectations of new generations regarding organizational culture are shifting, adding another layer of complexity to talent management. 

The formula for success is straightforward: assemble a skilled team and tackle achievable objectives to ensure that transformation remains within control. 

New horizons

Over the past year, Samlink has undergone significant changes, having seen that the banking sector’s decade-long quest for disruptive ‘big bang’ solutions has mostly been unfruitful. In contrast, our approach of ‘progressive modernization’ is increasingly finding resonance within the industry as a manageable and effective path to digital transformation. 

The formula for success is straightforward: assemble a skilled team and tackle achievable objectives to ensure that transformation remains within control. 

This strategy aligns with emerging regulatory directions advocating for an open, innovative culture. Consequently, banks seek our expertise. As a Kyndryl subsidiary, Samlink is expanding its service offerings beyond the existing portfolio. 

Considering the transformative role of AI and ESG in the banking industry, it’s worth reflecting on the Kyndryl Way. It is a testament to our value of trust, empathy for diverse viewpoints, and transparency in achieving mutual success. These cornerstone principles coincide with the ethos of modern banking.  

By aligning operational changes with values emphasizing bottom-line efficiencies and top-line growth, banks can navigate the complexities of the digital age more effectively. On the horizon lies a blueprint for sustainable, responsible business development. 

There is evidence of successful strategies quickly becoming the de facto solutions for the banking industry. The focus is not only on implementing new technologies but also on fostering a culture that is agile, customer-centric, and responsive to the evolving financial landscape.

Arto Sorvoja
Vice President & Senior Partner

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