I recently attended the Capgemini Financial Services Industry Conference in London, also meeting up with several banks to learn more about where they are spending their digital services money, what they are looking for from digital projects, and where the market is headed.

Bank demand for digital services has grown and matured over the past few years. In 2015 and 2016, IT services vendors expected strong growth in digital services engagements from European banks, only to have their hopes dashed. Since early 2017, demand from European banks has been strong. In fact, so far in 2018 European banks have demonstrated white-hot demand. Global banks have allocated budgets of $1bn to $2bn for digital transformation over the next two years, and are committing to spending an additional 4x or 5x that money over the ensuing five to eight years.

Rapidly scaling to meet digital demand

To meet BFSI digital goals, Capgemini believes it needs to deliver at scale globally with relevant market and domain skills. Capgemini’s BFSI group works with 70% of the top 100 global banks and BFSI accounts for ~27% of its revenues. It has~200K employees globally and 55k of those are focused on financial services, half of them based in delivery centers and around the world close to its clients’ operations. Capgemini has been rapidly growing staff to meet the demand for digital services, with ~70% of hires as lateral transfers, and it leverages an ecosystem of enterprise partners, fintechs, academia, and industry thought leaders to support this growth ambition. Of course, effective orchestration is the key enabler of a successful partner ecosystem.

Capgemini has built a reputation among its clients as a vendor who can fix troubled automation projects. Most of its engagements for enablement services, such as RPA, come to Capgemini from failed projects, estimated at one-third of all RPA engagements. RPA projects face challenges because although the POCs work well, the production environment does not match a POC’s conditions.  In a production environment, robots break as systems change and data flows shift. Capgemini has been able to rectify RPA projects because of its knowledge of the legacy environments the robots are operating in.  Capgemini sees RPA as a ‘band-aid’ to maintain systems until they can be transformed to digital platforms. It will maintain its RPA practice, but expand its digital platform replacement services capabilities.

BFSI platform transformation

Capgemini has focused its BFSI digital services business on platform transformation, which we estimate represents 85% of digital revenues. Client examples presented included:

• Cloud migration: a global bank with multiple markets requiring continental standardization and consolidation of data and analytics
• CX enhancement: a global retail bank needing to utilize best CX practices from other industries to improve financial services CSAT
• Data analytics: managing data and analytics across >150 applications and silos to develop improved insights for a client
• Designing a new client business model: an emerging Asian bank created a digital banking model to grow its business aggressively across the vast Asian markets.

Each of these engagements required a large-scale global rollout with local customization.

The broader picture

Tier one banks are changing their business models to address new industry cost structures and competitive challenges. And the change requires legacy platform renovation to deliver customer interaction capabilities at much lower cost. Hence, banks are:

• Shifting to omnichannel delivery: the number of physical branches will be reduced, and remaining branches will deliver complex services using AI-augmented humans. The scale of the distribution channel transformation will be massive
• Moving from ‘acting as a principal’ to ‘acting as a broker’: this will require coordinating large numbers of third-party specialist vendors to deliver a broad range of financial services to customers. Delivering this business model change requires legacy platforms to become open banking platforms. Opening legacy platforms, in turn, requires experience in both legacy and digital technologies and the scale to work on transformation across multiple geographies
• Improving CX with improved fulfillment: this requires creating STP using technologies which can draw data across legacy silos
• Increasing commitment to cyber security solutions to mitigate the increased risk exposures from moving workloads to omnichannel and cloud environments.     

Capgemini is maturing its digital BFSI business based on its engagements with several key clients, which are mostly tier one global banks. Previously, Capgemini had focused its engagements on European market requirements. Today, it has expanded its multi-decade, application-driven engagements to support global platform renovation at scale.

Opportunities for strong business growth come to ITS vendors only during periods of rapid technological change, and the digital banking revolution is such a period of change. Capgemini has recognized the opportunity, is committing the capital to building its delivery machine, and has the customer legacy platform experience to capitalize on the opportunity. It is pulling in a wide array of digital capabilities to serve a very focused set of clients, and its client case studies underline how each engagement is part of a very long-term development roadmap.