Digital transformation is more than a buzz phrase or trend, and certainly more than a singular point-in-time activity — it is a perpetual process, and the term is now ubiquitous in board rooms across all industries.
Financial services are no exception.
From lending to payments, transactions are being “vaporized,” a term coined by author Robert Tercek meaning anything physical that can be information will become information, at the same rate as other services, perhaps even faster. Money’s continued existence as a physical entity has been hotly debated in the last decade, with pundits arguing both for and against its possible extinction. The one thing everyone can agree on, however, is the rise of digital currency options, while financial services institutions are scrambling to stay current, innovative and ahead of their competition.
The faces of financial services
Last month’s Financial Brand Forum, a major conference for senior level banking executives, gave me an opportunity to sit down with several financial services executives to talk about their transformation strategies. I was curious about how they were preparing for the future and what changes they expected to see both near and long term.
Given the ongoing debate about the trajectory of cash, I wasn’t surprised to learn about a lack of consensus on emerging technologies, but there did appear to be two types of “personalities” among the banking set. There were those who viewed traditional brick-and-mortar banking and in-person white glove service as their core competency, with digital transformation working to automate tedious back-end processing. Their digital transformation strategies focused on leveraging analytics and data lakes for business process management and increased customer insights. Others viewed their digital strategies as the primary mechanism for change — considering artificial intelligence, blockchain, and Internet of Things as means to develop innovative new services.
Both groups, however, felt significant pressure to evolve, and were struggling to attract the right talent and skill sets to help their organizations get from here to there.
FinTech: friend or foe?
A recent article from FinTech Global revealed steady and impressive growth in financial technologies — with 2017 investments nearing $40 billion, double that of 2014. More than half of these investments were in lending and payments, a space that 10 years ago was almost entirely monopolized by traditional banks. Adding to the transformation of the financial services space is the entry of non-traditional providers — companies like Facebook, Apple and Samsung. This fierce competition and mind-boggling pace of change leaves many current providers unsure of how to retain existing wallet share, let alone how to extend into new markets.
For the consumer, additional choices mean increased levels of service and more ways of accessing funds, but it also forces banks to consider: “Do we compete? Can we compete? Should we collaborate instead?” Many traditional banks, such as JPMC, are shifting from the historical perspective of seeing FinTech as disruptive competition, to viewing them as value-added partnerships in their digital transformation strategies. Partnerships can help traditional banks innovate rapidly, quickly getting new services to market, and the startups benefit from guidance in a world replete with regulatory oversight and infusions of much needed capital.
Beyond offering competing services, institutions are in a race to incorporate the latest and greatest technologies to drive optimization and deliver differentiated experiences for customers. Traditional financial institutions grapple with maintaining behemoth legacy infrastructures while forging new ground in innovation labs or in partnership with FinTech.
Meanwhile, new cloud-born start-ups are furiously seeking out niche capabilities that will firmly establish their slot in the consumer wallet. Artificial intelligence is a cornerstone of the evolution, whether to drive automated processes or to power call centers and chat bots; and the flood of data collected and generated by the Financial Services ecosystem begs for analysis. Blockchain is poised to disrupt the current state of the global banking system, while bitcoin continues to drive investors and hackers alike into a frenzied love-hate relationship with cryptocurrency. The digital future of traditional institutions will hinge on how they leverage these new technologies.
The future is now – and it is digitized
There is no doubt we are facing a revolution in financial services, and to meet customer demand, institutions are driving the digitization of money through digital transformation strategies, whether their goal is to improve core processing capabilities or create new consumer services and insights. As part of that journey, providers are still discovering and defining their unique digital identities. Now is the time for providers to focus their strategies, and each must decide:
- Who are our customers and what do they expect from us in an increasingly digital age?
- Will we collaborate or compete with FinTech?
- Which emerging technologies will we include as part of our future services?
- How will we find or learn the skills we need?
Digital transformation is the daily reality of financial services. How are you transforming?
Take a look at our free cloud assessment tool to help determine your own digital transformation “personality” and to compare your company’s cloud journey to others. No matter where you are in your transformation journey, Rackspace has the expertise and solutions to help you accelerate your goals.