A recent report by Nasdaq and BCG, titled “The New Growth Imperative: Cutting through Complexity in the Financial System,” outlines the potential for significant efficiency gains in the banking sector.
It suggests that banks can realize between $25bn and $50bn in efficiency improvements by streamlining their risk and compliance functions. This enhancement does not compromise effectiveness and could even release up to $1tn in additional lending capacity.
Nasdaq Chair and CEO Adena Friedman highlighted the increasing external complexities and internal complications facing financial institutions, stating, “Financial institutions are particularly exposed to the exponential growth in complexity across the global economy, from the evolution of technology paradigms to the expectation of real-time finance and the explosion of data.
“The good news is that as both external complexity and internal complicatedness have grown, so have the solutions to help manage them. By leveraging modern technology and embracing a systems-based approach, we can unlock significant efficiencies and foster a more resilient and innovative ecosystem towards the dual goal of resilience and growth. At a time where the demand for long-term capital is exploding and political mandates are geared toward change, this report provides novel perspectives on how we can better tackle complexity without adding to the mounting body of complicatedness.”
BCG CEO Christoph Schweizer further emphasized the cost implications of rising business complexities, stating, “We are at an inflection point. The dramatic increase in complexity in business operating environments, furthered by advances in technology over the past decade, is adding cost and friction to our financial system.
“Our research highlights significant opportunities for efficiency gains with equal or greater effectiveness and improved performance outcomes that could unlock up to $1tn of lending capacity.”
The report advocates for a recalibration of people, processes, and systems to harness the benefits of technology. Nasdaq President Tal Cohen emphasized this transformation, explaining, “The most effective solutions will require a comprehensive recalibration of people, processes, and systems. By shifting from lengthy manual processes to systems-based and people-led processes, human capital can be unlocked to focus on decision-making, risk management, oversight, analysis, and innovation. Getting this right can unlock significant value through efficiency gains. But that only tells part of the story.
“The transformative potential of AI will redefine every industry – including the financial industry – in the years ahead. The very same solutions that sit at the core of the complicatedness challenge, will serve as the foundation for success in tomorrow’s AI-enabled world. As such, effectively addressing these issues today could protect and reinforce competitiveness well into the future.”
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