We are in the middle of a revolution. There’s no doubt. It came fast, and many didn’t see it coming, but here we are.
The financial services industry is experiencing a tsunami of change – regulatory, political, technology and customer-driven demands are all challenging the market with new expectations.
Organisations in the industry now, more than ever, are focussed on customer needs and how to deliver services to them in this rapidly changing world, and digital allows an entirely level of responsiveness to these needs. But this response needs to be far broader, reaching beyond customer experience. It has to be an entire transformation across the business.
The term 'FinX' can best be used to describe the fusion of Fintech and digital customer experience – together these are the engine of the revolution.
The revolution is complex with many parties, from the incumbents to new entrants, jostling for position – a new model of cooperation, networks and partnerships is emerging it will herald a significant shift in strategies for those currently operating in the financial markets.
The continued rise of Fintech is now widely acknowledged and has been aided by a perfect storm, enabled by rising customer expectations for a more personalised and digital experience, increased access to VC funding, reduced barriers to entry and accelerated advancements in technology.
The Capgemini World Fintech Report 2017 offers a fascinating insight into the industry as it transforms. Customers are embracing Fintech, with accelerated adoption. With rising expectations for a more personalised and digital experience we see the smartphone as the primary battleground going forward, and the need to focus on a spectacular, frictionless mobile experience.
However, increasing regulation and cyber security concerns mean that rather than conflict, established banks and Fintechs are looking to work more in partnership to bring change to the market.
Open banking and innovation
Platforms like Amazon have led the way in transformation of online services and customers now expect the same from their banks and insurers. Business models are shifting quickly and partnerships with the Fintech community - rather than outright competition - work best.
Many banks see the benefit and possibility in Fintech but find innovation a challenge – less than 3% have managed to embed innovation in their culture – increasingly collaborative spaces are being used which encourage design thinking, in which mixed functional groups from within organisations can experiment, test and learn, disrupt and unlock creativity, innovative thinking and a new culture.
Providing an open platform and leveraging APIs will allow new banking to adapt quickly where both partners thrive.
Core banking hosted on the cloud? True digital banking delivered at scale? Yes. It’s only a matter of time and we will see this in the coming years as a natural move away from the legacy physical systems, onto more nimble, scalable cloud solutions, but with the associated strict cybersecurity features necessary to protect the customer. Securing both customer money and data is now the critical determinant of ongoing trust in a brand.
And as the likes of Apple, Facebook, Amazon and Google enter the market, expect more radical change and challenge to the incumbents.
Meeting rapidly evolving customer needs by innovating and embracing new technology will determine those who succeed against those who will inevitably fail.
Blockchain, the distributed ledger, will develop quickly this year beyond the experimental and lab-based work to date and into more embedded and wide applications. Smart contracts, payments and a variety of other uses which provide new value to the customer are likely to be the differentiator – open API assists this transition as it allows fintechs to supply innovation easily to the more established organisations.
In an agile world, it is key to help align your clients to new ways of working and adopt new technology quickly. Innovation is balanced by the need to increase efficiency and productivity - adopting robotic process automation or RPA will develop and be a major trend as institutions grapple with the realities of the new world.
New biometric authentication tools help combat identity theft and fraud with the process of logging in and frictionless transactions, but executed without human intervention and of course as secure as possible – the customer is delighted rather than frustrated.
Augmented reality is being tested to enhance the experience and cognitive banking is developing at pace to provide the edge in personalisation and response to customer need. Combined, we will see unprecedented interaction and increased service levels.
FinX holds the key for future success.
Colin Payne is a principal consultant and the FinX Centre of Excellence Lead for Capgemini Consulting UK. With over twenty years at the leading edge of technology and change management, Colin has helped numerous global clients to embrace the challenge of multichannel, customer-led delivery of value and to complete significant, high impact programmes.