A host of new local and international regulatory frameworks have focussed on greater transparency and data protection
At the same time, new financial technologies (FinTech) continue to be a transformative and creative force. Emerging technologies from artificial intelligence (AI) and machine learning (ML), to blockchain, big data and digital payments are disrupting traditional processes – not to mention the heightened threat from cybercrime. It all adds up to a challenging market – but one full of opportunity. Reduced barriers to entry have also given rise to a host of new upstarts, with the likes of Atom and Metro to name just two in the banking sector alone, but also the tech-behemoths of Amazon and Apple. Everyone fighting for market-share.
This disruption has contributed to the unprecedented growth of the FinTech Industry, which saw global investment of $57.9bn in the first half of 2018 – more than the total investment for the whole of the previous year. This trend looks set to continue as organisations strive to respond faster to market changes and stay ahead of the competition. And, with a range of new upstarts joining the industry, established industry players are certainly getting a run for their money.
But despite this backdrop, our latest research The Future of Financial Services: Planning for Every Eventuality reveals that an astonishing 52% of business decision makers in US and UK financial services organisations feel their leadership teams aren’t maximising the opportunities afforded by technology disruption. This is a damning inditement of the world’s two biggest financial centres, as technology continues to transform and shape this industry’s future. Economic & political uncertainty surrounds us, which only feeds companies’ reluctance to embrace disruption. But, now more than ever, businesses need a fluid plan so they can better manage uncertainty, adapt quickly to change and transform business processes as required.
Learning to survive in the digital age
So, which technologies are expected to prove most disruptive to businesses over the next five years, whilst offering the greatest opportunities? Automation has already been transformative when it comes to streamlining back office processes. Now, it’s the turn of AI and ML to further accelerate this transformation – freeing up human workers from more mundane tasks whilst reducing costs. With nearly a third (30%) of UK and US financial leaders identifying it as a major disruptor for the next five years, it’s clearly at the forefront of developments, but should be approached with specific applications in mind, rather than jumping into new technologies without a clear strategy.
Payments technology also continues to be one of the most promising areas of FinTech with new entrants benefiting from government and regulators’ efforts to open-up the industry. The focus of new solutions, such as digital and cardless payments in addition to mobile deposits, is all about consumer convenience – innovation that financial services firms must embrace over the next few years if they’re going to keep customers happy and loyal.
Technologies expected to be less disruptive in the short-term are cryptocurrencies and blockchain. However, early adopters are already reaping the rewards from practical applications, with HSBC and ING having completed the world’s first commercially viable blockchain trade-finance transaction. This area is expected to ramp up quickly, so only those organisations with the right planning solutions in place will be ready to respond quickly as opportunities arise.
Disruption brings with it a wealth of opportunities but also increased threats, with any Fintech explosion having massive implications for system security and cybercrime. This is backed up by our research which found that business leaders feel this danger to be their biggest challenge and the second most disruptive force over the next few years. Business identity theft, for example, was up 46% year on year in 2017, according to the latest figures from Dun and Bradstreet, and research from KPMG Forensic reveals that business fraud rose by 78% in 2018, with most crimes perpetrated by employees and managers already inside the company.
Fending off cyberattacks has become part and parcel of modern life for many insurers and high street banks, so ensuring the right solutions and processes are in place is critical if businesses are going to be able to protect their organisations and customers from attack.
Companies should be continuously asking themselves if they’re truly getting the most out of their data and ensuring that they’re taking full advantage of the latest technologies to maximise its inherent power – especially when tackling high-profile disruptors like regulation and compliance. But most companies don’t have a Big Data plan in place, perhaps due in part to this type of data being accepted as part of modern business
A large proportion of organisations, it seems, are still trying to run their businesses without adequate planning tools and processes in place, with only half of UK and US business decision makers in our research reporting that “all departments work from one planning tool that’s updated in real time”. For an industry that’s constantly disrupted by rapidly evolving technology, this approach can never work effectively.
The financial services industry will face countless challenges from disruption over the next five years, and leadership teams must be ready to maximise opportunities afforded by technology disruption. Planning effectively and at speed is key in order to deliver instant access to precise information as needed. It’s survival of the fittest and businesses must turn to connected planning and forecasting across the business if they want to unlock opportunities that will set them ahead of competitors – using the latest technology to bring teams closer to plans and data so they can make better informed decisions at the speed of the digital age.
About the Author
Ian Stone is CEO, Vuealta. Vuealta is a consulting company that creates amazing and revolutionary solutions for business planning and performance management challenges within a range of industries and functions.