By Sudhir Pai, Chief Technology & Innovation Officer – Financial Services Capgemini
As we begin to emerge from the most unprecedented time in our generation, financial businesses across the world are looking for ways to recover, innovate and differentiate. Amongst the uncertainty of the last 12+ months, one thing is crystal clear – technological transformation, data and connectivity are all central to achieving competitive advantage and customer satisfaction. However, getting it right depends on a healthy balance of systems and people – two things that work in tandem. By understanding the needs and behaviors of the people we serve, we can implement and maximize the potential of emerging technologies.
The digital customer
While the financial services (FS) sector was already well acquainted to digital transformation pre-pandemic, the level of transformation experienced in the last year has been exponential. Undoubtedly, we can attribute this acceleration to COVID-19, however, it’s fair to say that future acceleration will be fueled by the digital consumer. These already-digitally-savvy customers have quickly acclimatized to an online world and now expect digital only services that are convenient and instantaneous. This uptick of digitally versed consumers has enabled previously slow adopting technologies to roll out in speeds never seen before.
So, what does this mean for FS players? We’ll quickly see a very clear divide between innovators and laggards. Institutions that place innovation and emerging technology at the very core of their transformation are most likely to triumph in customer engagement and competitive edge. Those that don’t will fall behind. To avoid the latter, FS players must take a fluid approach to modernization.
The digital sector
BigTechs and Fintechs have a clear advantage as they often have the infrastructure and investment to remain agile; enabling them to embrace new areas of development like open banking, intelligent insurance, super apps and DevSecOps. Meanwhile, incumbents often struggle to respond to changing needs quickly as they rely on fragmented legacy IT systems that come with high maintenance and operational costs.
However, for those with ambition, there are a multitude of ways that incumbents can address challenges holding them back to transform their operations. This includes adopting technology company behaviors, for instance, DBS bank is an example of a traditional bank providing experiences like BigTechs and FinTechs. DBS is digital to the core and has reimagined the customer journey by incorporating design principles into its customer service strategy with the aim to optimize time spent interacting with the bank. DBS also prepares for future needs by anticipating and investing in technology and talent. DBS has successfully demonstrated that it’s possible to harness available resources to provide the type of seamless experience that consumers expect.
Embracing the digital journey can also ease the burden of adapting to shifting regulations. For instance, compliance automation can help FS players stay ahead of changing regulation, which is as important for building and maintaining client trust as it is for maintaining operational capability. FS organizations can learn a lot about opportunities on the horizon from looking at digital players. For instance, ‘as-a-service’ partnerships between incumbents and BigTechs are creating dynamic new offerings, like the ‘Apple Card’ from Apple and Goldman Sachs. Unconventional partnerships can also benefit businesses by driving production and distribution layers to create new ways of working.
In the same breath, moving towards a platform-based business model can also benefit traditional organizations, as digital banking continues to become the norm. Cross-industry collaboration can expand traditional organisations audiences, for example integrated insurance offerings with certain auto companies based on telematics data, such as LV in the UK.
FS businesses must contend with the new reality that their business relies on technology demands. Application services must be built and delivered at speed and in various incarnations, as close to the business as possible, while being responsive to every demand. This is no easy feat and requires a component list that includes blockchain, cryptocurrencies, IoT devices, AI technology and edge computing, to name a few. In short, FS players must have the ability to deliver services across multiple consumer-driven locations, capture and analyze data at the point of creation and utilize that data to learn, modify and deliver functionality as required.
The transformation roadmap
Regardless of size, FS companies know they need to quickly jump aboard the change train if they’re going to compete with BigTechs and digital-only players. They need to assess and address the aspects of their organization that can be transformed to meet the shifting needs of their company, employees, and customers alike. Agility and speed are the main ingredients to this, according to Capgemini’s latest TechnoVision report ‘Be Like Water’ outlines the technology business trends that will help FS players become digital enterprises. Alongside this, there are three key areas that FS businesses must consider to kickstart their technology transformation.
Assessing potential and readiness
Before instilling any kind of roadmap it’s first important to understand potential and validate enterprise readiness. While it might be tempting to jump straight to the exciting realization of computing at the edge, it’s vital to ensure new technologies are built on strong foundations. This requires full operational visibility and an honest awareness.
The need for efficient and streamlined processes to support everyday operations is now critical. 2020 lockdowns forced FS players to render an untested operating model as legacy infrastructures were overburdened, and remote operations were exacted. Subsequent disbursements by global governments through financial institutions noy only provided opportunities but, may have also revealed vulnerabilities in processes.
Financial institutions have been forced to reassess their operational resilience and ability to quickly adapt to crises and manage unpredictability in demand. By validating enterprise readiness, financial institutions can begin to address organizational bottlenecks and enable the digitization process of core operations while becoming nimble enough to needs customers much quicker, akin to a FinTech.
Maximizing cloud proficiency
Cloud infrastructure can often seem intimidating at first glance. It presents myriad options surrounding operational complexity, devices, connections, and security, that it often causes decision fatigue and becomes a decision that is left until the last moment.
Yet the benefits offered by cloud systems massively overshadow any initial hurdle. As businesses move away from legacy infrastructure and embrace cloud, they quickly realize that it enables on-demand scalability, faster time to market, hyper-personalised services and rapid scaling action.
HSBC is one such example of a firm, through choosing a long-term cloud provider the company is prioritizing companywide digital transformation and modernisation across the business. Despite the large initial investment in cloud acceleration, the push is part of a broader cost-cutting initiative. Through the utilization of serverless and analytical functions the bank plans to supercharge hyper-personalization, resulting in quick wins that will pay back into the company’s bottom line.
Approach data as a strategic asset to drive decision-making
Just as every business needs to become a ‘technology business’ to thrive, every company must also become a data-powered enterprise to avoid falling behind. Becoming data-powered requires an internal culture shift, where data is considered as an enterprise asset that acts as the enabler for technology and direct monetisation.
The good news is that many financial institutions are already viewing data as a strategic asset and the contribution of big data in financial services has been immense in enabling implementation of new technologies. Subsequently, this has led the industry to produce simple, tailored, and safe data-driven solutions. While there’s a need to consider ethical processing and consent managements, once these have been perfected the avenues to monetize are abundant.
Health Gorilla, a US-based company, moved into the health insurance arena through utilising data-powered technologies such as (FHIR)-based APIs, enabling more seamless data sharing between insurers, healthcare providers and consumers alike.
By embracing data interoperability, FS organizations can maintain user confidentiality, reduce costs, and can focus on drawing customers in through personalization. And because employee time is freed there is additional resource to focus on customers rather than administration, ultimately resulting in increased customer satisfaction.
Creating a seamless multi-channel experience
It’s important to remember that customers expect to receive the same experience and level of service regardless of the channel they use. A true multi-channel experience allows the customer to switch channels at any point in their journey without losing information. Alongside this, consumer behavior is changing, and FS institutions will see a correlation between how they manage new expectations vs customer loyalty.
Organizations must quickly identify the operations that have the highest impact on customer experience and then leverage the expertise of FinTech’s to derive competitive advantage from CX processes. FS players need to implement customer-led transformation, ensuring modern, resilient and compliance centric models can offer real-time responses to meet customer needs. For instance, Starling Bank, a UK FinTech, has implemented systems that actively reduce customer waiting time by categorizing the urgency and nature of a consumers’ issue, exponentially improving customer experience.
As consumers becomes more digitally confident, FS organisations will need to expand on their technological offering to create customer loyalty and retain trust. By utilizing emerging technologies, such as extended reality, conversational interfaces and intelligent banking and insurance systems, companies can provide consumers with a ‘human’ experience that stimulates brand loyalty.
Embrace the digital future
As the world continues down the path of technological transformation FS players across the globe will be eager to achieve competitive edge and sustained recovery. The complexity of emerging technologies may seem a daunting area to navigate. However, by first assessing potential and understanding company readiness, and then implementing a customer-led approach to transformation, it is possible for companies to respond and evolve to growing digital demands.
By placing people and data at the heart of digital transformation, FS firms will be able to embrace technological innovation and stand out from competitors. Emerging technologies that reflect a more digitally savvy consumer will provide the biggest opportunity for success.
 Data interoperability addresses the ability of systems and services that create, exchange, and consume data to have clear, shared expectations for the contents, context and meaning of that data.