Oct 29 2020

The Bank Tech Checklist for M&A, Part 3: Optimizing Operations

With merger details finalized, how do IT leaders ensure new operations set the stage for success?

Despite ongoing concerns about the state of the economy, mergers and acquisitions are making a comeback. As noted by S&P Global, July 2020 saw 14 deals announced — and while a year-over-year comparison shows a $35 billion slump since 2019, any boost in M&A activity is good news for financial firms.

How do banks effectively navigate current conditions and ensure they’re ready to meet customer expectations in the new normal? In particular, what do IT leaders within banks need to do to ensure they’re ready to integrate a potential acquisition target?

In the first part of our M&A tech checklist for banks, I explained the need to survey the existing IT stack and prepare key processes for eventual movement. In part two, I tackled the need for robust roadmaps. In this third and final part of the series, I’ll address the challenge of optimizing operations as newly merged banks open their doors.

A Newly Merged Bank Must Implement New Tech Solutions as Needed

While it makes sense to reuse existing infrastructure wherever possible, the fundamental nature of M&A makes complete solution cooperation possible only rarely. Acquired corporate systems may leverage legacy tools or proprietary applications that can’t coexist under new IT frameworks.

Banks must also consider the speed of technology adoption. As noted by PYMNTS, B2B fintech firms are experiencing an M&A boom even as traditional merger mandates suffer. With their IT infrastructures designed to support socially distanced banking initiatives, there’s no need to slow the pace of mergers and acquisitions.

As a result, it’s critical for firms to optimize operations with new solution implementation across key areas, including:

  • Data-related applications. Banks’ Big Data systems — especially those related to fraud or misuse — form a critical front line in effective functioning. However, implementing a new system networkwide to encompass the customer data of multiple financial firms is no easy task. Here, optimization starts (and never ends) with testing, testing and more testing. As analysis is completed, alerts are returned and issues are investigated, new systems benefit from ongoing IT oversight.
  • Managed service adoptions. Banks can’t do it all on their own. From managed security service providers to hosted network and cloud computing vendors, firms benefit from IT experience and industry expertise. But M&A moves often bring a need for new managed services capable of dealing with financial data at speed and scale. More important, banks need actionable, in-depth service-level agreements that ensure any day-one problems will be resolved ASAP by a trusted managed service provider.
  • Security framework additions. Information security now forms the core of consumer confidence. As noted by Forbes, “privacy has become a critical requirement for firms to earn and maintain the trust of their customers.” As a result, it’s critical for banks to deploy a security strategy that both identifies potential risks and delivers proactive incident response.

Banks Must Integrate Critical IT Systems When Possible

Integration also plays an essential role in getting banks ready for first-day operations. This includes updating and integrating services such as Microsoft’s Active Directory for authentication, along with ensuring that mission-critical apps effectively make the jump across IT environments.

While initial discussions of integration should happen during the roadmap phase of M&A, what works in theory doesn’t always translate in practice, meaning that even the best plans may not deliver integration as intended. A bank’s best bet are comprehensive assessments from trusted third parties that deliver unbiased evaluations of how banks can overcome current transition challenges and prepare merged networks for future functional frameworks.

Banks’ Key Tech Stakeholders Must be Involved in M&As

No matter how deep the technology stack, financial firms can’t operate effectively without the support of key stakeholders. As a result, banks must pursue the active involvement of three specific groups: 

  • IT vendors: M&A outcomes often lead to a mix of IT partnerships — some new, some old, but all requiring thorough evaluations and updates. This starts with a review of existing vendor contracts and agreements to identify both specific cost overruns and potential areas of improvement. For example, banks leveraging Disaster Recovery as a Service must ensure that providers have the capacity and capability to handle increased asset and application inventory without sacrificing recovery time objectives or outcomes.
  • Existing staff: Every M&A sees some staff kept on for their local expertise and experience. These staff members can make or break operational success. As a result, it’s critical for firms to onboard holdover staff with comprehensive training and clear directives.
  • Current customers: If new banking frameworks can’t keep up with previous process pacing, the result is inconvenienced customers and possible loyalty loss. As noted by American Banker, a recent survey found that 57 percent of customers said opening a bank account should take no more than one hour, and 47 percent want initial mortgage applications done in in day. As a result, customer-facing functions must be front of mind from the start for any successful M&A.

No M&A process is ever perfect, and combining complex finance firms is bound to create friction and potential fallout.

However, delivering for customers on day one is critical. When a newly merged bank opens its doors — physically or digitally — optimized operations separate strategy success from financial failure. Starting strong requires an approach that addresses solution implementation, assesses systems integration and actively involves stakeholders.




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