Financial institution executives identify volatility in the consumer lending
market and mounting compliance regulations as their top business concerns,
according to results of a survey released today by CGI Group Inc. (TSX: GIB.A;
NYSE: GIB), and TowerGroup.
In a CGI commissioned survey of top IT and
operations executives in the consumer credit granting industry, TowerGroup
examined business drivers, strategic responses and technology initiatives of
companies across the U.S. and global financial services market.
More
than two-thirds (71%) of the respondents identified the volatile consumer market
– most recently affected by rising interest rates, flat to slightly declining
loan demand, and the sub-prime mortgage dilemma – as one of the top challenges
they face today. In addition, 43% of respondents said that increasing compliance
regulations are a concern, adding cost and complexity to daily operations.
“Many of our clients tell us that their business is facing a headwind in
the next several years,” said Jame Cofran, Senior Vice-President, Banking &
Investments with CGI. “Revenue is impacted by reduced demand for loans, while
regulatory pressures and rising defaults increase costs, resulting in a profit
squeeze.”
“Financial services organizations have significant challenges
ahead of them, coping with a much less friendly consumer credit market,” said
Bobbie Britting, senior research analyst for TowerGroup’s consumer lending
practice. “The key to success for these institutions will be their ability to
adapt to this changing market by innovating processes and products to best meet
customer needs and expectations.”
Respondents indicated that their
strategies will be focused on innovation and automation. According to the study,
57% of the respondents said they will concentrate on product, channel, and
service innovation, while 50% said that Business Process automation will be a
top strategic direction. Participants ranked cross-selling (55%), product and
market expansion (38%) and service quality initiatives (63%) as top strategies
for growth.
Resultant IT priorities cited by respondents included core
system transformation (79%) and automated workflow and Business Process
Management adoption (50%). Many financial service organizations are moving
toward “consumer credit groups” and away from product silos. This requires a
shift from traditional, product-oriented systems and processes for core
operations such as originations and collections, to an enterprise-wide,
customer-focused approach.
“Core system transformation will be
increasingly important over the next two to five years as organizations respond
to evolving customer needs while reducing ongoing IT and operations costs,” said
Mr. Cofran. “In our experience, major IT initiatives typically bite off too much
at one time, resulting in failed or cancelled projects. Transformation should be
built on the premise of evolution rather than revolution – prioritizing
investments, adding achievable pieces in a phased approach, and reusing systems
whenever possible rather than developing new ones. Service Oriented Architecture
(SOA) provides a technology to allow for a progressive approach to
transformation. Companies that can transform their systems and processes into a
cost-efficient growth engine will gain greater market share and increase top
line revenue.”
The results of the study are being presented today at
CGI’s Innovations 2007 Conference, held in Austin, Texas, at the
Hyatt Regency Lost Pines Resort & Spa. Innovations is the premier networking
and education event for senior executives and managers working in credit and
trade worldwide. Over 175 of the top global financial credit and trade
executives will attend Innovations 2007.
Methodology
CGI
commissioned the survey to better understand the business, strategic and
technology objectives of leading financial institutions and identify innovative
revenue generation strategies, leading-edge best practices, and actionable
insights on how credit granting organizations can enhance top line revenue.
Participating institutions rank among the top 40 consumer credit granting
institutions in the United States and leading institutions in other advanced
credit markets including Canada, UK and Ireland. The survey was performed for
CGI by TowerGroup during March and April 2007.
About
CGI
Founded in 1976, CGI Group Inc. is one of the largest independent
information technology and business process services firms in the world. CGI and
its affiliated companies employ approximately 25,000 professionals. CGI provides
end-to-end IT and business process services to clients worldwide from offices in
Canada, the United States, Europe, Asia Pacific as well as from centers of
excellence in North America, Europe and India. CGI's annualized revenue run rate
stands at $3.6 billion (US$3.1 billion) and at December 31st, 2006, CGI's order
backlog was $12.6 billion (US$10.9 billion). CGI shares are listed on the TSX
(GIB.A) and the NYSE (GIB) and are included in the S&P/TSX Composite Index
as well as the S&P/TSX Capped Information Technology and MidCap Indices.
Website: www.cgi.com.
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For more information:
CGI
Lee
Lopriore
Executive Consultant, Credit
Solutions
770-335-4606
lee.lopriore@cgi.com
Philippe
Beauregard
Director, Corporate Communications and
Public Affairs
(514)
841-3218
philippe.beauregard@cgi.com
