What Lies in Store for Financial Services in 2020?

/ 3 December 2019

We all know that the changes seen in the financial services (FS) sector in recent years are being acutely felt across the industry – the rise of the API economy, the awarding of new banking licenses to tech disruptors, not to mention the ever increasing competition to acquire and retain good talent. Alongside this there have been sweeping changes in regulatory pressures such as the Royal Banking Commission Report in Australia and the introduction of GDPR in Europe. But no matter what the future holds, one constant we can be sure of is the rate and pace of change, which indeed shows no signs of slowing down anytime soon, and certainly not as we head into 2020.

The Next Chapter For Innovation Labs

While consumers seemingly adopt new technologies and roll with any regulatory change with ease, it is the organisations themselves that are scrambling to keep up. To address this, many major players have embraced the use of innovation labs where employees work with smaller more nimble start-up type ventures to develop programmes and implement technologies to address this gap and to help them keep pace with industry disruptors.

In 2020 the real challenge for those taking this approach will be how they take all these great ideas and initiatives, commercialise them, and roll them out at scale to their audience base, whether that be internal or external. It is this final hurdle where most programmes fail as what was once relatively easy to develop within the confines of an innovation lab becomes extremely difficult when the project processes and the risk and compliance gateways start to apply during the commercialisation phase. To mitigate this, rather than being the sole proprietary of group of creative individuals tucked away in a lab, organisations must look for ways to embed the innovation lab mindset across the organisation and empower their employees and decision makers to take a balanced approach to risk vs rewards when developing, assessing, and implementing such initiatives.

Working with smaller and more nimble external parties undoubtedly delivers great innovative ideas and solutions to age old problems and helps financial services organisations get the corresponding proof of concept (POC) rolled out quickly. However, typically these newer, smaller organisations are less able to help with the productisation and roll-out phase due to their lack of experience and understanding of the industry. Some FS providers have chosen to address this by adopting a strategy of in-sourcing, which in itself comes with the usual problems around resource availability and speed of implementation, the very things the innovation labs were designed to circumvent. Partnering with more established players in the market who fully understand the FS industry and the complexities of moving from POC to roll-out will help such programmes and initiatives succeed. Involving and appointing these established players earlier in the process will also help negate the risk of time and money being wasted, which also often has a huge and sometimes unseen negative impact on the morale of those working on the projects.

Helping Employees To Understand and Adopt New Technologies

It has been encouraging to see traditional FS organisations making some progress towards adopting new technologies such as cloud hosting, SaaS, and API integrations with external parties. However, progress on this remains slow in comparison with other industries. The main culprit behind this seems to be the lack of change with regards to internal processes and the lack of understanding of these relatively new technologies among key gatekeepers and decision makers.

While this is acknowledged and recognised by many of those working within FS organisations, there appears to be a certain amount of paralysis in terms of the organisations themselves making the required changes to upskill gatekeepers and decision makers and to empower them to make an informed decision. Understandably, risk avoidance is a crucial driver for these teams; indeed it’s what they’re paid to do. The potential to make the wrong decision is real and could cause a huge negative impact not just on the organisation itself but on its employees and customers. For these teams, working with legacy systems and navigating rigid and outdated processes makes it incredibly difficult for them to manage risks.

This is where the tech disruptors that are being granted banking licences will really impact the industry – they understand the technologies and the risks associated with them and they know how to manage those risks in a way that delivers a secure service to their customers, satisfies the regulators, and protects them as an FS provider. To keep pace, both in 2020 and beyond, the more established players in the industry will firstly need to embark on a process of educating and upskilling their people, not just within their tech teams, but in risk, compliance, programme management, marketing, HR and indeed all functions across the organisation. Through increased awareness and understanding of both risks and opportunities the new technologies pose, individuals can become empowered to make rational and informed choices about the vendors they appoint and the solutions they deliver. At the same time, with the policies and procedures currently in place reminiscent of how technology and systems used to function in the 1990s, have to be reviewed and updated to both empower and protect the organisation, its people and its customers.

Increasing Financial Literacy and Security Awareness Among Consumers

The third and final thing that I believe will become an increased focus in 2020 is the shift to responsible banking – encouraging financial literacy and security awareness among customers. While this has been on the agenda for a while now, and is recognised as a key factor in building trust and loyalty, getting it right is still proving to be challenging for some. At the same time, the push to drive digital adoption among customers is growing and this presents an opportunity for FS providers to support its customers in developing their understanding of financial products and personal security.

While customer needs have not significantly changed for decades, the way they fulfil those needs, the way they consume information, and their expectations as customers, have all changed beyond recognition. While content still remains king, new technologies allow greater flexibility and personalisation, allowing organisations to meet both the needs and expectations of their audiences. Typically FS organisations are drowning in content from both offline and online channels. In the area of security risk much of this content is for internal consumption, but with some small moderations it can provide a rich seam of information for customers. In 2020, we will see more FS organisations adapting their internal content to be externally facing while at the same time embracing new channels and technologies to reach their audiences on a more personal level. Techniques such as hyper-personalisation and gamification, that have been around for some time but whose value is just starting to be realised, will continue to rise to the fore as an increasing number of organisations start to get it right.

In addition, as restrictions and regulations in the area of personal data continue to tighten, the more savvy organisations will see digital technology and the ongoing education of consumers as an opportunity to drive the responsible collection and use of first-party data through a balanced and considered value exchange. This in turn will allow them to deliver a more engaging and rewarding educational experience for their audience that drives both engagement and loyalty.

In short, 2020 will likely see a continuation of the changes we have seen over the past few years. FS organisations will take the opportunity to add to the foundations they have built so far in order to deliver solutions that truly embrace new technologies, reduce risk, and deliver an overall better experience for both employees and customers. This will in turn better position existing players in the industry to withstand the impact of disruptors entering the industry by increasing the speed at which they can respond to and deal with change. But it all begins with the organisation’s own people, equipping them with both knowledge and understanding of these changes in technology, risk, and regulation, along with the tools they need to keep pace and succeed. This will help reduce fear and confusion, and help drive innovation and adoption, ultimately enabling FS organisations to deliver a superior customer experience and to find a competitive edge in this rapidly changing landscape.

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