Technology in financial services: You snooze, you lose
07 June 2016
For years, any financial services report that predicted life in 2020 seemed ridiculously futuristic. But not anymore. 2020 is knocking at the door and the journey there is likely going to be paved with technology-driven change and breakthroughs. 70% of financial services leaders told us in our Global CEO survey that the speed of technology change was a concern for the future. The future doesn’t seem that far away, does it?
That’s one of the alarming things about our new report, Financial Services Technology 2020 and Beyond, which looks at the pace and scale of technological change in financial services, its impact on the sector and what institutions need to do to survive the transformation. The report points out what technology can do for financial institutions and how new entrants are already making full use of its potential. The emergence of a “Super” FinTech bank is already possible – a truly global, small footprint, multi service digital bank which prototypes new services quickly, uses artificial intelligence to limit fraud losses and manages regulation transparently.
FinTech looks and feels nothing like the established banks we know today. And that’s the problem. Financial institutions have to change if they’re going to compete with this, and they need to do it now. Technology is a limited-time offer and the momentum driving FinTechs is growing – there are around 20 licenses to operate under consideration in the UK alone. This is a race – blink, and you’ll lose.
In the report we outline what needs to be done, and none of it is easy. To give just three examples from our report, firms need to simplify their legacy systems, update their IT operating model and make sure that their talent strategy will deliver the skills they’ll need. These are all sizeable, difficult and lengthy projects in their own right – three to five year projects, in fact. In other words, if you haven’t started yet, you’re already late.
This is, of course, on financial institutions’ radar, but they aren’t tackling the issue in a coordinated way and most are still at a very early stage in the transition. This is understandable – since 2008 they’ve been dealing with a huge amount of change and have little capacity for any more. The focus has been on short-term IT priorities. But 2020 is fast becoming the short term.
What needs to be done is achievable, but the serious work has to start right now. And it can’t be piecemeal; firms need to take a serious look at where they are, where they need to be, and form an organisation-wide plan to get from A to B. We’ve already worked with a number of clients to perform an IT Health check – assessing what firms have now against what they’ll need in 2020 – so institutions can understand where they are, the gaps that need to be filled, and what needs to happen.
Each institution will deal with this in their own way, the time it takes to move from technology breakthrough to mass market use is collapsing. It took 76 years for the telephone to be adopted by half of the US population; smartphones took just 10 years. We are now watching blockchain move from a notebook sketch to an established technology in a tiny fraction of the time it took for the Internet to be accepted as a standard tool. When things move this quickly you can’t afford to delay.
To read our report, Financial Services Technology 2020 and Beyond, visit fstech2020.