Large and recent shifts in consumer attitudes and behavior are forcing Financial Services Institutions (FSI) to accelerate toward a digital frontier. Emerging markets in Asia, in particular, have recently seen a spike of 60% increase in contactless payments, with an eightfold growth in paperless B2B payment flows.
Like many end users, I now expect immediacy and seamlessness. I want all the necessary information in one place – usually on my smartphone or tablet – so I can make informed decisions and get things done.
In the past, the financial sector was able to benefit from earlier technology adoption. Now, there is an indisputable need to build business resilience.
McKinsey says this physical-to-digital shift is set to accelerate even more this year. And FSI organizations need to ride the wave, or risk being left behind.
We need to answer the call: What can we do to transform our businesses?
Financial services leaders are evolving and transforming quickly
Thankfully, the FSI sector is well-placed for innovation. Its services are innately digital and change leaders have already been innovating over the last five years. In fact, more than 60% of FSI organizations have already begun accelerating their pace of digitalization in response to the pandemic.
Organizations like Standard Chartered and Manulife are among several FSI big hitters that doubled down on digitization priorities. By doing so they were able to provide customers with improved services when the pandemic hit.
Bankwest, previously known as The Bank of Western Australia, also pivoted toward an online self-serve appointment system to cope with the changes triggered by COVID-19. It now offers customers the option of phone meetings based on pandemic regulations at any given time.
Banks are increasingly realizing the value of the cloud. For instance, New Zealand’s BNZ recently announced its largest technology migration in company’s history onto Azure. The company will eventually migrate its core operations to Microsoft’s forthcoming New Zealand datacenter, which will assist with compliance and drive the creation of better products and services.
Fundamentally, I see four areas of change that FSI firms need to embrace: technology, data, customer centricity supported by processes, as well as people and culture to drive systemic innovation.
Leverage technology as an ally and embrace data
National Australia Bank and Microsoft recently signed a five-year partnership to architect a multi-cloud ecosystem that will host 1,000 of the bank’s applications to Microsoft Azure as the primary cloud.
FSI firms like NAB, are embracing the cloud to ensure the resilience of banking services. This is reducing development timelines for system changes from weeks to only days.
According to IDC’s Worldwide Public Cloud Services Spending Guide (January 2021 Release), Asia/Pacific (excluding Japan) (APEJ) public cloud spend of FSIs will grow over three times from US$4.9 billion in 2019 to US$18.1 billion in 2024 at a compound annual growth rate (CAGR) of 29.9%.
While cloud is the foundation, I believe integrating data, particularly unstructured data, is key. Moreover, translating data into hyper-personalized offerings via services and apps should be a high priority for FSIs to drive value-creation for its digital customers.
According to Deloitte, technical debt in the form of legacy infrastructure and data fragmentation across the enterprise continues to impede banks’ digital transformation initiatives. In response, finance leaders expect to increase cloud investments, with more than half saying that their firms will increase spending on data analytics.
Microsoft’s Culture of Innovation study revealed that they were doing more futureproofing, including developing contingency plans, leveraging information using data analytics, and incorporating risk management.
It is promising that we are starting to see firms like China Asset Management Co. Ltd (China AMC) helping market traders make more informed decisions by tapping into mountains of financial data with AI.
AwareSuper, is the Australian Industry Superannuation Fund that manages the retirement savings of more than 1 million Australians, while Neobank Volt creates differentiated experiences for customers and employees. Both firms are similarly speeding up reporting times, increasing enterprise transparency and ultimately laying robust yet flexible digital foundations for the future by harnessing data.
While most FSIs face the challenge of integrating insights from unstructured data and external sources, AI tools can optimize the process by analyzing up to 100% of data — an untapped resource for firms.
Risk analytics and personalization are other examples of where FSIs need to integrate and process huge amount of data.
In June 2020, we announced our strategic partnership with SAS to further shape the future of analytics and AI. Since then, we have seen early success in customers adopting the SAS solutions on Azure.
In a recent virtual conversation. Microsoft CEO Satya Nadella and SAS CEO Jim Goodnight announced SAS Viya on Azure which will seek to empower organizations by illuminating the complexity of and increasing the power of analytics for decision making.
As large batches of data are updated and analyzed, FSIs would only need to rely on a few accurate and credible data points to serve their customers better.
Serve customers better in the new normal
With customers seeking personalized intelligent services, the attention is no longer solely on “engagement with customers”, but “engagement with impact.”
Time-starved customers are now able to quickly distinguish great experiences from mediocre ones and will continue to demand seamless experiences across various touch points, from call centers to in-app services.
We all know how tedious it can be to repeat our issues to different service officers each time we reach out. We want intuitive, empathetic customer service that can pick up right where we left off at the last enquiry, while also being able to trust that all our information remains secure.
FSIs are already taking the lead in reshaping customer experiences, leveraging efficient, reliable and cost-effective data infrastructure and the cloud.
When COVID-19 hit, India’s Paisabazaar.com stepped in to mitigate an unprecedented credit freeze by introducing a new solution built on Azure. It helped banks and non-banking financial corporations disburse loans in a completely digital manner, ensuring that loan applications and approvals could continue.
Union Bank, one of Philippines’ largest and most profitable banks, introduced automation to its Treasury & Investments Channel Management (TICM) workflows to manage efficient transactions remotely. The bank was able to simplify the entire remitting process and improve online client transactions. Customers can now receive copies of their statements, proof of investments and remittances with e-signatures that can be easily accessed remotely—anytime, anywhere.
Australia’s Westpac is also setting new standards in digital banking. Its Data Driven Experience Platform (DDEP) acts as the foundation for real-time data analytics across the bank and increasingly uses machine learning and other Azure cognitive services. This supports decision-making with the goal of delivering more personalized services based on greater understanding of customer behaviors and preferences.
It is promising to see how FSI firms are increasingly embracing fully digital strategies and are deriving value that ultimately impacts customer success.
Address the cultural shifts between remote workforces, customers, and technology
Ultimately, technology must be developed in tandem with culture and people if FSIs want to accelerate recovery and do so sustainably.
The front, middle and back offices in a financial service business must collaborate to break barriers across these previously siloed departments to streamline data transparency and processes.
This begins with culture and prioritizing collaboration within the organization.
Yet, this responsibility does not lie solely with the CEO or CIO, but across the organization, with department leads and experience managers. Great culture does not just boost internal operations, employee morale and loyalty; a company with departments that work in tandem and share information also translates into better customer service and engagement.
If technology is the enabler for change, culture is its key driver. My biggest takeaway from the last year has been that innovation does not need to be perfect right away to start. It just needs to be better than before. Innovation is a journey in which we need to embrace incremental change with the courage to fail and learn.
As FSI leaders embrace digital adoption, innovative customer solutions, and more efficient big-data utilization through AI, I am confident the industry will grow from strength to strength.