The Changing Role of IT within Banking Sector
The Mediobanca Group is a mid-size, specialised financial group founded in 1946, offering Wealth Management, Consumer Banking, and Corporate & Investment Banking services. Mainly located in Italy but with asset management and corporate investment banking in the United Kingdom, France, and Switzerland, Mediobanca is the third bank in Italy by market capitalisation, with €80bn in assets and €2.5bn in revenues. Its range of products and services is comparable to that of much larger and global banking groups, and so is its IT functional complexity, albeit on a smaller scale. Mediobanca is one of the 14 Italian banks under the direct supervision of the European Central Bank (ECB).
From an organisational point of view, including IT, Mediobanca has structured itself based on a federal-type model to ensure that the business lines have sufficient flexibility to perform their specialised operations, under Group-wide governance arrangements that maintain adherence to the Group’s FY 2019-23 Strategic Plan and a co-ordinated view versus the ECB.
Technology is considered a great facilitator, and in some cases a driver, but our approach is highly pragmatic
The role of IT has undergone dramatic changes in the past ten years in all industries, including the financial services sector, with the role of banks is under constant pressure from new entrants aggressively exploiting new technologies (GAFA, Chinese operators, fintechs, neo-banks, and challenger banks). The Covid-19pandemic has, of course, also accelerated this call for change. Major and global banks are reacting by making monster budgets available for innovation and new technologies, spinning off or financing fintechs with private equity or direct investment. Smaller banks can only aggregate, merge with larger players, or in some cases head straight towards innovation, where agility and low legacy levels allow them to do so. Mid-size banks such as Mediobanca have to find their own way, with few benchmarks to refer to.
To respond to these challenges from an IT perspective, we have setup a very streamlined Innovation team focused on high-value initiatives and fostering an innovation culture within the Group. With reference to the Naji/Tuff Harvard Business Review Innovation Model that entails three kinds of innovation –Core Innovation (optimising existing products/services), Adjacent Innovation (expanding into “new to the Group” businesses), and Transformational Innovation (developing breakthroughs), our focus is definitely on Core plus Adjacent Innovation, with Transformational Innovation only considered if very specific opportunities arise. Technology is considered a great facilitator, and in some cases a driver, but our approach is highly pragmatic.
Given the increasing threat stemming from cybercrime, our innovation is closely linked with IT risk/cybersecurity, architecture, and IT compliance to ensure that new technologies are utilised in a secure way, in line with the laws and regulations in force right from the earliest design phases. Another pillar of our strategy is outsourcing infrastructure and operational security to a market leader to leverage on innovation and modernisation at scale and at a sustainable cost. This partner will also be a valuable companion on our journey to the Cloud.
We also consider being part of a co-operative ecosystem as being key to leveraging successfully on new technologies for business. The system of which we are part includes universities, research centres, incubators, large consulting firms, regulators, and financial services associations, allowing us to experiment with new ways of running the business and deploy the successful experimentations into production. This approach has proved successful and has allowed us to launch initiatives based on blockchain, artificial intelligence, process digitalisation, DevOps, and automation (RPA), all of which are bringing real value to the business.