We’ve seen that traditional ways of doing business can be rapidly overhauled. An example is the speed with which banks responded to the government coronavirus lending schemes. Business Interruption Loans and Bounce Back Loans were set up within several weeks. Organisations demonstrated they could make decisions quickly and act fast, while still operating in a controlled and structured way.
The organisations out in front now have springboarded from this. They’ve decided where and how their business is going to compete in the future. And they’re pushing ahead with the operational reconfiguration needed to create an agile business that can adapt quickly to ongoing disruption.
However, simply being agile in the ‘old ways of doing business’ is not enough. Organisations also need to be willing to fundamentally rethink their business model to stay relevant in this fast-changing landscape.
“The use of cash in the UK halved during the COVID-19 pandemic. Customers have moved forward, with changes to the old ways of doing business accelerating at superspeed. Organisations have to move along with customers or be left behind.”
The businesses leading the way have the customer firmly in their sights. And they are integrating systems and functions to ensure they can continue to innovate and keep pace with changing customer demands.
Our 24th Annual CEO Survey shows that 56% of CEOs in financial services are planning to significantly increase investment in digital transformation. This shows the industry recognises the need to develop the technology, skills, new ways of working and cyber safeguards to deliver rapid change
“Interest rates have remained low for a very long time. Trying to make money on the net margin on interest may not be a realistic model anymore. It’s time to rethink business models and unlock potential for innovation through partnerships.”
Acceleration in digitisation and the increase in API connectivity have paved the way to develop collaborative platform delivery models across the evolving financial services ecosystem. The days of one financial organisation owning the customer journey from start to finish are gone. With access to new capabilities and innovations, organisations now need to form partnerships that can add value to the customer experience.
Leading fintechs and challengers are setting the standard for agility and speed to market. To be flexible enough to work in collaboration, incumbent organisations need to move beyond the legacy systems they are running now. While the landscape is complex and increasingly crowded, there is significant value to be had from the careful curation of fintech partnerships.
“Supporting the demands of new digitally savvy customers presents a huge challenge for established organisations. Legacy financial services organisations are often using 40-year-old technology infrastructure. It wasn't designed, it evolved. Migrating onto something new is incredibly difficult and complex. It requires a vision and a progressive plan for modernisation.”
Radical changes in technology might, at first, seem expensive and risky. However, such changes are an opportunity to do what organisations have long discussed but delayed – cutting costs by finding new and better ways to do things.
Migrating to the cloud is critical for breaking the silos that cause friction within an organisation. Better access to customer data enables greater customer understanding. This will help improve what can be offered to customers, making possible more options for growth as well as potential expansion into adjacent markets.
Fully replacing internal legacy systems might not be immediately possible. But organisations can innovate where it can matter most – by improving the customer experience and offering new ways of servicing those customers.
The pandemic has accelerated the move to digital channels and it’s important to maintain that momentum with continual innovation.
It’s important to remember that acceleration in digital transformation and converting customer insight into innovative solutions is as much about people, culture and organisational design as it is about systems and technology.
The organisations out in front are developing the skills and fostering the buy-in of their workforce to make the most of new tools and technology. They’re articulating a clear vision where technology can also free up time spent on more mundane tasks to instead focus on new areas and drive innovation, leading to more fulfilling careers.
Our CEO Survey shows that 43% of CEOs in financial services plan to improve their organisation’s competitiveness by focusing on productivity gains through automation (vs. a global average of 36%). In doing so, they’re creating an optimised and operationally resilient workforce equipped to deal with future challenges and opportunities.
“Attracting a diverse talent pool, developing their skills and fostering workforce buy-in will be a make-or-break challenge for organisational transformation. Embracing new ways of working, including the move to hybrid working models, will make an organisation more attractive as a place to work.”
To make the most of new technologies and partnerships, it’s important to renew focus on trust and transparency. Customers – whether in banking, capital markets, asset management, wealth management or insurance – are looking for organisations they have confidence in. Values, culture, robust underlying tech systems and transparent decision-making processes alongside regulatory compliance are all part of the equation.
Repeated trustworthy behaviour is what solidifies a brand as trustworthy in the mind of customers. And trustworthiness extends beyond customer experience in products and services. Customers expect financial services organisations to be good corporate citizens, with a clearly defined purpose – as the UK looks to recover from the pandemic, there is an opportunity for the financial services industry to prove its commitment to sustainable growth.
“ESG within financial services has flipped from being a conversation that people have because it’s the right thing to do, to becoming a serious business issue. Pressure from customers, investors and society to deliver change presents a real opportunity to drive sustainable finance into the mainstream and establish the industry as a positive force.”
ESG (environmental, social and governance) considerations are central to the new emphasis on purpose in financial services. Many financial services organisations find their ESG record is coming under as much scrutiny as their financial performance. While there are challenges and no agreed-upon standard yet for reporting, organisations can’t let this stop them.
ESG has to exist throughout the business and act as a lens for all strategic decisions, from the c-suite through to customer-facing and back-office support functions. Those that commit to tackling environmental and societal issues while fostering economic growth are likely to gain a competitive advantage as they align their strategy and purpose with the expectations of their stakeholders and society. One tangible way of demonstrating this is meeting your Net Zero targets. This involves looking not just at the organisation, but at the supply chain and partner network.
But ESG isn’t just about reducing carbon or recycling. It’s about helping build a sustainable financial services network for the rest of the world. The financial services industry has the opportunity, post-Brexit, to work with the government and other stakeholders to develop ESG initiatives that not only equal those of the EU but, potentially, make the UK a leader in responsible finance and investing.
This also provides an opportunity to act as the bridge between investors and other industry sectors, driving sustainable finance into the mainstream and creating positive change more widely in society.
The opportunities for financial services to innovate and transform are significant. Organisations have many decisions to make, from rethinking ways of working, to forming new partnerships, to creating ESG-based products and services that speak to the concerns of a new generation. Now is the time for organisations to take control of how they transform to best position themselves for future growth.