While banks globally are adjusting their IT strategies to optimize costs, a survey by Infosys reveals that only about 25% are seeing the expected results from these initiatives.

The survey covered banks in North America, Europe, and Asia Pacific, focusing on their digital transformation efforts in the context of cost optimization. More than half (52%) of senior technology executives identified artificial intelligence (AI) and machine learning (ML) as top investment priorities for the coming year. Other significant areas of investment include transforming legacy systems, end-to-end process digitization, and enhancing data and analytics. Notably, over 60% of executives reported success in modernizing outdated tech infrastructure through their cost optimization strategies. Additionally, 47% noted benefits such as increased automation and improved personalized customer service.

However, the benefits of cost optimization efforts are not uniformly realized across banks. Our survey highlighted three primary challenges impeding sustained cost optimization:

1. Reluctance to Address Systemic Change

Cost inefficiencies often arise from complex legacy systems. As banks expand, they tend to add new systems without removing outdated ones, exacerbating complexity. Efforts to transform costs often address symptoms rather than the root causes. With the right expertise, leaders can undertake comprehensive transformations to break this cycle and achieve more effective cost optimization.

2. Balancing Growth and Efficiency

Cost optimization can be challenging due to fluctuating goals and timelines, influenced by macroeconomic conditions. This challenge is magnified during periods of strong growth. Simplifying processes and leveraging cloud and AI technologies to enhance resilience and agility are essential for sustainable cost optimization.

3. Cultural Resistance to Change

Cost optimization efforts often focus narrowly on cost reduction. A critical initial step is to discuss the broader benefits of change and the cultural shifts required for successful transformation. Gaining industry perspective is valuable for understanding the measurable return on investment (ROI) from these changes.

Effective cost optimization can lead to improved efficiency, employee satisfaction, and better service for customers. This includes not just refining products and services, but also ensuring access to timely information that helps customers make informed decisions and enhance their financial well-being.

As industry disruption accelerates, banks are moving away from fragmented approaches. Our survey indicates that a structured, committed approach to cost transformation, supported by experienced partners, can help banks achieve significant returns. By leveraging AI and other emerging technologies, banks can deliver innovative products and services, maintaining competitiveness now and in the future.

The Infosys report, “Banking on Continuous Improvement,” provides detailed survey data and additional insights.