Steve Wright explores how financial services businesses need to meet head-on the inevitable disruption facing the market, making the most of available technology to add real business value
For the financial services and insurance sector, it would seem that the dust is finally settling following the cataclysmic financial crisis of the last few years. Newly formed regulatory frameworks appear to be bedding in nicely and financial services organizations have been adjusting business models to best suit the emerging market conditions in which we’re all operating. However, let’s not be under any illusion that it’s all going to be plain sailing from here on in. In fact, when you consider the ever-accelerating speed at which technology is developing, technology itself could very well prove to be the most disruptive force the financial services sector has seen.
That’s not to say that disruption is necessarily a bad thing. In reality, it’s often only an unwillingness to embrace technological change that has a negative effect on a business, with the adoption of advances in technology frequently a real catalyst for major business change, increasing efficiencies, improving business agility and putting businesses in a prime position to capitalise on growth opportunities.
The biggest threat to traditional financial services organisations is not only an unwillingness to embrace technology but their inability to see beyond what they already have. Sector start-ups, who are unencumbered by ageing, legacy systems, and who are implementing customer-friendly solutions from day one, are stealing a hasty march on the old guard. By recognizing that customers are demanding better service and more value for money, and that one of the key ways to achieve both of these aims is by having the right solutions in place, new tech-savvy players are giving customers just what they need.
And, such is the customer-led nature of the financial services sector, businesses can’t pay enough attention to not only gathering accurate, insightful customer intelligence, but also making sense of this data to themselves become more intelligent about their customers’ needs. It’s only with this information that financial services organisations can ensure that their products and services are the exact fit for what their customers are looking for. With this is mind, some larger businesses have already joined forces with other organisations, confident that they’re joining with partners for whom technological innovation is a must, opening up new services and reaching new customer segments. For example, we’ve already seen some banks partnering with Alibaba to provide payments to Chinese customers.
When it comes to digital transformation, one of the most talked about processes of the last few years, it’s simply not enough for financial services organisations to digitally transform the customer-facing part of the business. Without the necessary digital infrastructure underpinning the entire business, a fully digitalized ‘shop window and front counter’ can fall at the first hurdle, without the necessary end-to-end systems and solutions in place throughout the business to smooth the flow of information and make sense of the ever-increasing amounts of data that financial services organisations are seeing on a daily basis.
Many business leaders still look to the IT department to achieve more for less, asking them to innovate while improving efficiencies, cutting costs and supporting a whole host of disparate legacy systems. This ‘strategy’ just isn’t workable any longer, with the need to update legacy systems, investing in comprehensive back office processes and people, more pressing than ever. Systems and skillsets of old are no longer fit for purpose and simply aren’t able to support the level of business-wide digital transformation that’s needed if financial services organisations are to stay relevant and competitive in a rapidly developing marketplace.
The digital economy in which we all find ourselves is not going away any time soon, if anything it is ramping up. Advances in digital technology have opened up the financial services landscape to billions of previously financially disenfranchised consumers, facilitating digital financial engagement, lowering delivery costs but ultimately dramatically increasing customer expectations. This is a real opportunity for financial services businesses to seize the opportunity and transform while the time is right. With disruptive concepts and changes such as block chain, integrated AI and new open banking EU regulations on the horizon, if not already here in some shape or form, not to mention the need to focus more resource on the issue of cyber security and the likelihood that the public cloud will become one of the most, if not the most dominant infrastructure model for the sector, you can see why now is the time to get in digital shape.
To date, the rate at which the financial services sector has undergone a whole host of changes has been anything but slow and steady. The foot isn’t destined to come off the throttle anytime soon, with the rise in digital innovations seeing exponential growth in customer expectations. Those financial services organisations which aren’t digitally ready to embrace these technological advances will be at a severe disadvantage. The chasm between those who are getting their digital house in order and those who aren’t is growing wider by the day. If left too late, some businesses might find that they simply don’t have a business to transform having been outpaced, outmanoeuvred and outperformed by those who have willingly embraced the raft of disruptive technologies that we can longer choose to ignore.
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