Financial services have for the most part weathered the storm of 2019/2020 fairly well, but the past couple of years have not been without their challenges and opportunities. In banking there was a large rise in e-commerce transactions as customers shopped from home, especially for more mundane items. But this rise was tempered with a loss of direct customer interaction and the realization that functions such as compliance are not ready for remote working. Other financial services sectors have been equally impacted. For example, insurance has seen fewer motoring and medical claims, but reinsurers are likely to take the brunt of claims for COVID-19 related losses. In the fintech industry, especially in exchanges/execution and payments, there was some initial paralysis but overall growth opportunity. Cryptocurrency startups have seen a spike in interest; electronic currencies are the exciting investment of the year. It’s fair to say, though, that despite the opportunities, it has been a challenging time, with an uncertain future still ahead.
It’s obvious that the engagements and services offered to customers will have to transform. Brick and mortar branches will certainly decline, especially as distancing measures and remote working remain high. Customers are also rapidly adopting mobile technologies for their key financial services and taking advantage of a range of exciting new apps for investing, saving, and transacting. The use of cash has taken a dramatic decline. In the UK, the Open Banking initiative is opening the doors to a plethora of new startup opportunities based on a standardised cross-institution banking API. In order to capitalise on these opportunities, digital transformation is an essential strategy. But what does this actually mean?
Broadly, digital transformation is the use of technology and data, combined with a social mind shift to achieve an accelerated and enriched outcome for both a business and its customers. Customer engagement and experience is obviously even more key than ever to retaining, protecting, and driving new business, especially because this is more often than not a remote engagement. Not to be too pessimistic, but those financial services companies that fail to transform rapidly will lose business to those that do.
For mature financial services companies, the challenge to transforming rapidly is partly their legacy technical debt, which slows their ability to be as agile as new fintech companies are. And the challenge is also partly due to their lack of new technology skills and a corresponding reluctance to embrace innovations. Some financial institutions are splitting their IT functions into legacy and agile to try to deal with these challenges; or they are purchasing startups to gain a competitive leap forward. In the data centre, though, the legacy still remains of siloed data and cost-impacting infrastructure.
Grant Caley is the Chief Technologist for NetApp UK’s Enterprise business, helping customers build their hybrid cloud data fabric.
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