Formula One and Banks

As an Italian living in Monza, Formula One is sort of a lifestyle. The Italian Grand Prix is one of the longest running and most important racing events of the kind, having been held at the course of Monza ever since 1922. The Autodromo Nazionale Monza is located near the eclectic city of Milan, the most populous city in Italy.

Milan is also the most important financial center in Italy; therefore, the country’s largest national banks are headquartered here, as well as the Borsa Italiana, the main stock exchange. Being home to the best in the business, it becomes obvious that the city drives both banks and Formula One (F1) teams on a competitive edge.

Technology is one of the most important weapons in the competition towards winning, but how banks and F1 teams use this weapon differs significantly. Actually, banks and F1 teams have many things in common. First of all, they both move large amounts of money around. Second, they are both subject to tight regulatory constraints. Third, and most importantly, they are both technology-intensive.

As aforementioned, their use of technology differs, though. Banks use technology investments as a competitive weapon, thinking their advanced software and internet banking systems gives them an advantage over the competition. They spend large amounts of money on the back-office core banking software, either developing or buying it.

F1 is an area where there is definitely a lot of technology, too. However, even in such a tough competitive environment, it is not infrequent that different teams use the same technology for many parts of the car. For instance, several teams all use engines made by Ferrari, Renault, Mercedes, or breaks produced by Brembo, or Michelin tires.

What this means is that, although being part of a highly technology-driven and competitive space, F1 teams do not compete when it comes to the technology used "under the hood". Instead, they rely more on creating synergies and co-engineering with technology providers as allies in the race towards the first prize.

 This comparison on how banks and F1 teams use technology draws the conclusion that banks should think about competing less in this regard. Instead of investing time, money and resources on buying or developing different software “engines”, they should look past what’s “under the hood” and become more customer-oriented.

It would be recommended for banks to realize that even though technology is important, they should consider consolidating their “under the hood” core banking with the help of large players such as Misys, Temenos or SunGard, and focus on competing on services that will allow faster access to finance for their corporate clients.