Banking » Microsoft and BNY Mellon CEOs: The need for continuous change is on us

“Resilience requires digital tech,” said Satya Nadella, CEO of Microsoft, on a Sibos 2020 panel.

“That realisation is now widely understood but it’s also digital tech leading to transformation. You’re rethinking how you think about your clients, client interaction, how you manage those relationships and how you deliver your product.”

Bank of New York Mellon CEO Todd Gibbons said financial institutions were seeing the need to change course.

“Scale is more critical than ever and clients are recognising that they need to outsource to take advantage of that scale,” said Gibbons. “We’re seeing that across financial services. Some of that is infrastructure, but beyond that it’s applications and it’s the management of data.

As a result of the fallout of the pandemic Nadella said financial services is in a good position to accelerate their digitalisation initiatives.

“I think each of us is using tech to fundamentally build in more resilience into our core enterprise. In that context, financial services is both advanced but also has challenges. Most financial services firms have been big investors in tech.”

He added that once a corporate starts to neglect investment in tech, it becomes increasingly harder to dig out of that hole and return to technology’s ‘efficient frontier’.

“If you start in the cloud, you will start with a very different footprint than if you start with a mainframe. The idea is that you need to be pushing forward, in spite of having all the IT spend. I would claim that financial services needs to use this opportunity to move much more quickly to the efficient frontier.”

For banks the need for digitalisation is not just reduce costs per transaction but also that their own clients are demanding better digital services.

“Client expectations around reliability, transparency and client experience, they’ve been higher than we are used to,” Gibbons said. “[The services] institutional clients have been getting from us, oftentimes it’s pretty clunky stuff. They want to look into a field that consumers now get and are used to getting in more modern times.”

While there is a push to digitalise more of BNY Mellon’s banking services, Gibbons added the amount of legacy tech ‘baggage’ that many financial service firms have doesn’t make this transition easy.

“Fintechs have the advantage, they get to start day one in the cloud, [banks] don’t. Large banks have clearly been exploring and now we’re taking advantage of cloud services more than ever. But we still have a lot of a lot of legacy technology and technology debt that we’re going to have to deal with.

“It’s forcing us to maintain the discipline and ultimately, make sure that we put set aside the investments that are needed now to make us more efficient and more relevant as we go forward”.

For Nadella, the lesson he has taken from this crisis is the importance of business flexibility.

“The key word for me is flexibility.”

“One thing that we have learned is [no] dogma of any form. Everybody needs to be in the workplace or everybody needs to be remote is probably not going to work. We will really need more flexibility and some of these digital tools for sure are going to give us that.”

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