The financial services industry is a market in disruption. The rapid pace of change and multitude of technology solutions, competitors and new entrants joining the market are shaking up the status quo and setting new rules.
We have seen how consumerisation will continue to change appetites in direct banking and digitalisation of payments has already led to shifts in how we use cash and credit cards, which has implications on points of transactions. Similarly, the increase in platforms for raising and lending capital has changed not just the process but also the players in the sector.
In response to this, the industry has developed relationships with start-ups through investments in innovation hubs as well as internal programmes. More specifically we have seen a rapid increase and continued major investment in artificial intelligence and other forms of automation in the industry. Of course, investment in technology is important, but taking a more targeted approach, where organizations define their specific digital transformation challenges in the context of their own business, can help drive better outcomes. For example, Fujitsu’s Digital Annealer technology is being used by Natwest to solve some of its most complex, challenging and time-consuming financial investment problems by optimizing its mix of high-quality liquid assets including bonds, cash and government securities .
Reaching deeper inside your own organisation and looking outside to other partners is essential for developing innovative concepts. This helps bring together people who understand the Financial Services industry and experts from across other industries who have a broader perspective of technology to work effectively and meet these challenges. That’s where co-creation comes into play.
From my experience, there are three key challenges that financial service institutions must address before they can unlock the full potential of their digital transformation investment and focus. Here they are:
1. Openness as an innovation tool
The introduction of new digital financial technology is changing how banking and insurance customers access services. Today, there’s a new generation of digital natives who have very different expectations of their banking and insurance customer experience based in part with their fast, consumer-responsive interactions in other industries. They are more restless in their behaviors and decision making and this restlessness needs to be matched by the organisations they are interacting with. As consequence organisations need to become open, in the pursuit of more diverse thinking within and outside their own business in order to address the dynamic change in their customer base.
In addition, regulatory changes in financial services mean the market is now more fluid, with more favorable conditions for disruptive new entrants, meaning the clock is ticking for bigger players to innovate or risk losing market share and becoming less relevant. Calling on insights and experience from their eco-system of partners, drawing on ideas from other parts of the financial services industry, or even completely other industries makes sense. They can bring bright ideas on how to innovate standard (and rarely questioned) work processes as well as proven technologies that can be adopted more rapidly.
Recent reports emphasise that technology is a major change agent, with nearly 50% of financial services leaders admitting that the industry will change radically. For organisations to accelerate their digital transformation, process leaders within the industry need to encourage their employees to be more open and explore ideas and resources outside of their teams to really harness the power that technology can bring.
2. Building an agile working culture
Working within a proven pool of industry expertise, whilst understandable, can actually inhibit the pace of digital transformation. Many organisations can become instinctively resistant to external ideas, reverting to what they know. This can be particularly true in a fast-moving market, such as the financial services industry, where there is pressure to change but also the need to address day to day demands. Add to this a workforce that is steeped in the traditions and long-standing norms of the business and we can begin to understand the challenges that need to be addressed.
The best way to stay open to new ideas is to be brave enough to go beyond the usual suspects and seek the opinion of people on the outer edges of your eco-system. Working with colleagues deep in the lines of business as well as partners and third party agencies is a sure fire way to build a more diverse ideas pool and accelerate the digital innovation process. Couple this wider reach outside the organisation with a deeper embrace within your own lines of business leads to real co-creation.
A deeper internal embrace can represent cultural shift whereby, for example, we celebrate rather than mistrust people who try to shake things up as well as those people with a quiet voice but a big idea. This requires active demonstrations of leadership where teams are incentivised to get involved, not just in generating ideas (often a solitary endeavor) but in collaborating with colleagues to turn ideas into practical and deliverable solutions. More importantly, people need to be given space and time to test their thinking. Methods like design thinking for concept development can enable diverse teams to share insights and perspectives to ensure digital solutions are truly human centered.
Lastly, agile working needs to be supported and underpinned by the right infrastructure to empower people up and down the organisation in the same way that many organisations talk about empowering their customers. A good example is ING, who in recent years switched to agile working. This was no minor decision, as it applied not only to IT departments but to the bank as a whole. As a consequence, they had to rethink workplace and infrastructure services and collaborating with Fujitsu they adjusted the operating model to an agile way of working.
When organisations get this right, employees really see their contribution to changes in the business as a personal goal rather than a management edict.
3.Working at pace
With the current pace of change, the market and customers aren’t willing to wait.
Take a look at the insurance market for instance. Domestic customers have access today to comparison sites where they can pick the best deals and move across providers quickly. It’s only a matter of time until these principles are applied across many aspects of the industry.
What will happen next is that many organisations will be forced to move quicker, and to do that they need to try new solutions? That’s when more organisations will realize agile projects that incrementally demonstrate the change can make a material difference. Experimentation will be key.
Looking at the ING case study again, they have historically struggled with implementing innovation in a timely manner. That’s because waterfall implementation cycles can take years.
As a result, shortening the time to market and improving employee engagement was a core motivator behind ING embracing agile working. This once again shows that whether it’s a B2B or consumer market, consumer appetite is creeping into the workplace. And consumers not only expect greater personalisation and flexibility but are also increasingly aware and knowledgeable of trust and privacy issues.
What we are seeing in the Financial Services industry is a storm of consumer unrest, aggressive new entrants and rapidly implementable technologies. Whilst the day job remains critical, carving out time for people to work at pace is paramount – and you can create that by working with a trusted partner.
We work with our network to build more than just technology. We’re an integrator of ideas.