By Michael Chalmers, MD EMEA, Contino
By necessity, COVID-19 has upped the pace of technological change in the financial services industry. However, there is a longer-term goal to revolutionise the way individuals and businesses manage money day-to-day. As digitisation booms, every player in this sector is determined to innovate.
While the climate for innovation is at its most accommodating today, organisations must have the right groundwork in place in order to be successful.
According to PwC, the rapid pace of change “is the most creative force – and also, the most destructive one – in the financial services ecosystem today”. Disruption is achievable for every financial services organisation–but it won’t come overnight. Effective disruption results from long-term, effective collaboration between your people: market experts, strategists, product design teams, IT teams, and those who deliver to customers.
Organisations must be prepared to support the weight of a disruptive idea at every level of the business in order to innovate successfully. Failing to do so is a costly mistake that can set you back in a market that’s surging forward.
The answer to effective disruption in financial services lies in an interconnected web of people, technologies and company culture.
What are the most disruptive trends in financial services?
As we enter another year of uncertainty, financial services organisations–and their customers–are looking for technology solutions that promise, above all, flexibility.
Partnerships between retailers and payments companies that can deliver greater flexibility for consumers and increased reliability for retailers will boom in 2021. Even before the pandemic, we saw the flourishing of partnerships between retailers and Klarna, the ‘buy-now-pay-later’ online payment processing firm. With the downturn’s impact likely to continue well into 2021, add-on services that offer more options to support merchant resilience will be essential.
Many companies have embraced ‘fluid’ payment ecosystems capable of handling multiple digital payment solutions. Still, only those capable of capturing data insights to drive their product innovation and sales strategies will reap the full benefits. Real-time user profiles, fraud anomaly detection and personalisation, enable marginal gains for payment providers that will differentiate them from competitors in 2021.
Plant the seeds of innovation in teams prepared to nurture them
Before businesses can jump on new technology trends, however, it’s critical to ensure they have an innovative culture in place. This will form the foundation for effective disruption. Here are my four tips for building a solid foundation.
- Use data to solve customer problems at every turn
Customer experience is the central element to all disruption in financial services today. Respond in real-time to customer queries. Better still, anticipate the customers’ next need before they’re even aware of it. All of this is made possible through a connected view of data.
Businesses should continue to embrace technologies such as Artificial Intelligence (AI) and Machine Learning (ML) to harness customer insights and respond to customer needs–whether that’s approving a loan, using AI chatbots to respond to customer queries, or recommending a new offer.
As well as being key to improving customer experience and minimising customer churn, data is no doubt the biggest source of untapped competitive advantage today. By harnessing customer data and making use of advanced data capabilities, organisations can look to carve out new opportunities in a tight marketplace.
From answering customer queries and personalising banking experiences, to revenue accounting and trade settlement dashboards, the focus should be on your data.
- Know your team’s abilities, and don’t be afraid to seek outsourced help
In my work, I’ve seen that digital transformation is most effective when it factors in the abilities of the existing team–but that doesn’t mean leaving them on their own.
First, collaboration across teams is key. IT and data teams must form internal partnerships to get plugged into the business side of things. Critically, they must be present in the boardroom. For many years, those with technical skills have been left out of planning meetings. But their knowledge is critical, especially when choosing the right tech stack to enable innovation.
If it becomes apparent that the team lacks the necessary tech capabilities, outsourcing is extremely valuable. But beware: it is essential to focus on building up internal capability to create long-lasting change–and scrimping on the upskilling for cost reasons will only result in more significant expense. Bring in fully trained teams to both implement tech and upskill to nurture stronger teams internally.
- Foster innovation through an experimental cloud environment
To remain competitive in the modern marketplace and ensure long-term survivability, financial services organisations must transform their business models to focus on digital innovation and customer expectations.
It’s no secret that the cloud enables organisations to innovate at speed and scale. However, before teams can get stuck in, it’s crucial to ensure they have safe cloud environments to explore and innovate.
Developers must be given the freedom to evaluate new technologies and make any necessary changes to enable the rapid creation of business value. Having this flexibility and foresight when implementing and rolling out your public cloud solutions means that ideas can indeed come from anywhere in the organisation.
- Roll out cloud across the entire organisation to enable cloud-native agility
The adoption of cloud is now widespread, but those who can optimise it will be reaping the rewards in speed, efficiency and, ultimately, customer satisfaction. Cloud shouldn’t just be a platform to build in–it should help to inform decisions and facilitate new ways of working, eventually producing something more significant than the sum of its parts. Building out cloud-native engineering, culture and operating models will future-proof the capability of financial services organisations.
Finally, cloud capabilities should be rolled out right across the organisation. Contino research shows that, while 77% of organisations have adopted the public cloud, only a tiny proportion have scaled this out across the organisation. To do so means you’re able to share data across every department, to every person, creating a data-driven culture that will hugely benefit all decision-making going forward.
A disruptive idea can only flourish in a well-prepared team
Every organisation is capable of disruption, regardless of size, industry or history. Even those struggling to recover from the effects of the pandemic can soon make waves in their industry once again as consumer confidence rises and the economy springs back to life, primed for new technologies and fresh ideas. But the saving grace of financial services companies won’t be the disruptive idea in itself; it will be a strong, collaborative culture primed to nurture creative ideas.
Within the financial services industry, the time is ripe to engage with the cutting edge of technology and bring something exciting to a market willing to embrace change. But financial organisations must avoid the hurdles which keep so many of these projects from fruition: lack of data, risk of disrupting normal operations, restrictively structured teams, or simply the belief that the organisation is not ready to disrupt. If teams are supported by advanced technologies, experimental cloud environments and outsourced expertise, they have laid the groundwork for building truly disruptive products before watching them disrupt the market.