Four trends fuelling digital transformation in financial services

Institutions in the financial services arena are spending billions on digital transformation programmes, but it doesn’t always turn out to be money well spent. In fact, according to one firm’s analysis, 80% of leaders feel that money they put toward technological advancements is going down the drain.

The drive for digital transformation is continuing apace, with no signs of slowing down any time soon. When considering what is said to be up for grabs, it is easy to see why. According to the IDC, digital transformation will generate $18 trillion in added business value for organisations, while research firm Gartner projects that digital transformation will support 36% of overall revenue by 2020.

However, for all the hype that technologies like Artificial Intelligence and Blockchain have inspired, and the plethora of proof-of-concepts and large investments from financial institutions they have prompted, only 19% of business leaders in financial services feel like they have the right technology in place now. At the same time, a similarly small 14% believe they have the right processes to execute their digital strategy, indicating that there is still a significant amount of ground to cover in approaching digital transformation.

The key question remains: how can firms be successful in digital transformation? A new report by global consultancy Synechron has provided a view into how banks, insurance companies, asset managers and other financial services can enhance their execution endeavours.

Faisal Husain, Co-founder and CEO at Synechron, explained, "2019 will really push forward the future of financial services and see immense change take place. We expect that this year will see the start of ecosystems that bring together some key technologies that aim to provide more effective methods of engaging with customers."

In the coming years, Synechron anticipates a host of sea changes, which financial services players will need to seize upon. By 2020, the firm believes that the sector will see 36% of all its overall revenue relate to digital transformation efforts. In order to prepare for this quickly approaching future, Synechron’s paper dives deep into four areas to make an impact; Ecosystems, Technology-led Transformation, Data as a Horizontal, and Culture Transformation.

Ecosystems

According to Synechron, ecosystems are set to reshape the future of the financial services sector as banks look to change the way they engage with and support customers. As FinTechs, InsurTechs, and even traditional technology companies like Amazon, become increasingly involved in the banking sector, financial service companies must provide value-added services that reinforce their underlying business ecosystem vision, if they are to keep up.

New business ecosystems will need to bring together digital platform strategy and the Internet of Things to maximise efficiency through the interconnectedness of both planning and implementation. They will also need access to powerful analytics mechanisms to help firms in the ecosystem to move beyond traditional banking services, and enabling a better customer experience. By complimenting this with a new enterprise cloud strategy, financial services companies can shift into a successful digital business. 

Data as a horizontal

Horizontal integration is the process of a company increasing production of goods or services at the same part of the supply chain. Digital transformation has been fuelling a massive growth in data available to banks, asset managers and insurance companies available for analysis and further business value. Given the vast amount of data created each day, it is considered one of the banks’ most valuable assets - but only if it is properly mined and the value is extracted.

While 2018 moved AI strategies beyond simple automation to more complex Data Science focused use cases, Synechron believes 2019 will set the stage for the push toward enterprise-scale Business Intelligence. Given the anticipated continued exponential growth of data, firms should also start to prepare for their five- to ten-year data strategies.

Technology-led transformation

Digital transformation efforts are often flummoxed by legacy IT systems. In the coming year, then, Synechron believes that firms are broadly expecting to update systems to become future-ready with modern, flexible technology architecture. This will include accelerating the move from monolithic business systems to micro-services architecture and adopting an Open API strategy to support “beyond banking” business models. 

In terms of front-end engineering, this means ramping up design thinking for more customer-optimised, usable user interfaces that shift to AngularJS. This full-stack technology transformation to more flexible technology architecture will require a hard look at cloud strategy.

Culture Transformation

Finally, organisations will need to manage their cultural priorities moving forward. This means focusing on moving employee behaviours and assumptions from a run-the-bank way of thinking to change-the-bank modes. Agile workspaces and DevOps changes can help drive this.

Changing demographics in the global workforce mean that companies will have to adapt their offerings to attract talent, meanwhile. Ultimately, as a huge portion of society moves toward retirement, firms will need to support remote workers from anywhere and invest in diversity and inclusion initiatives to tap into previously marginalised parts of the labour pool, particularly in the majority white, male arena of finance. Sustainable finance will also be a key trend in 2019 as firms appeal to a new generation of customers with different priorities.