Technology companies like Amazon, Google, Facebook, Apple have raised the bar on customer expectations leaving other industries scrambling to keep up. Increasing pressure by FinTech firms is forcing all financial institutions to adopt digital and rethink their business models.
What does the future of financial services look like? The World Economic Forum (WEF) recently released a report – How disruptive innovations are reshaping the way financial services are structured, provisioned and consumed.
Here are a few trends that I see shaping up across Wealth/Asset management firms – I believe these are a few simple measures that firms must take first, before embarking on big-picture challenges that WEF outlines in their report.
- Greater emphasis on “Data Analysis” to derive Customer Insights: Customer-centricity has been the theme for many financial institution off late. Although firms have taken certain steps, a lot of customer insights is hidden in data gathered across plethora of systems – not just in internal systems, but also across external systems like social media platforms, etc. The key is using data-driven insights to improve the consumer experience, operational efficiencies and build better business models. Getting a 360 degree view of customer will definitely provide firms a competitive advantage.
- Welcome “Chief Data Officer”: To uncover customer data, bank must create a new role – Chief Data Officer (CDO), whose primary responsibility will be data governance and operational management of data like –
- data governance
- data analytics
- understanding the quality and completeness of data that is received and sent across systems
- security of data
- privacy controls during data exchanges
- audit and archival of data to meet regulatory needs
- Middle-Office/Back-Office Process Digitization: We have seen a lot of disruption on front-office and customer facing side of things, thereby helping asset managers, sales people, traders with great tools and applications. However, middle-office and back-office functions has largely remained the same. Firms will have to rethink newer ways to engage legal, compliance and research teams in this new digital age. In terms of back-office, creation of real time reports, data visualizations, and providing tools for clients to tinker with their data will be must-haves in few years.
- Legacy Technology upgrades: Replacement of mainframe with new systems, API generation for better collaboration and partnerships with other entities, faster development and testing cycles, essentially building systems that will enable real business transformation.
- Investments in Blockchain: Nearly every transaction on an exchange, processed by a clearing firm or handled by a broker could be turned upside down by the blockchain, a decentralized network of transaction records. Financial institutions will need to embrace bitcoin and blockchain.
- Larger focus on Millennials (people born after 1980, also called Gen-Y): As of today, millennials control $2 trillion in liquid assets (out of est. $70 trillion in wealth). Given the changing demographics, 50% of workforce in US will be millennials by 2020, and financial advisors will be forced to create products and services that engage empowered investors like millennials. (Credit: Millennial Impact report)
- Proactive Engagement across Social Media Platforms: Some trends we may foresee could be – all the employees of financial institutions having LinkedIn profile to provide transparency and build trust, all financial advisors blogging on investment strategies, firms taking to platforms like Twitter or YouTube to showcase thought leaderships, rolling out new products on Pinterest or Twitter (vs. what is happening now i.e. in conference to limited group of people) active investment in blogs, discussion forums and polls for customer engagements, etc
- Supporting Digitally-Connected-Clients everywhere: Customers are always connected – either on their devices, on TVs, on radios, wearables etc. Firms must come up with innovative ideas to reach customers real-time everywhere to offer new strategies, advise, new products, portfolio reallocation need, etc — all of which could be based of several factors like customers credit score goes higher, interest rate fluctuations, geopolitical changes, regulation impact, etc. (Financial Firms could take a lesson from retail firms here!)
Some of the above measures if done correctly could help firms service their end-customers better, create top line growth and reduce cost. This is not a comprehensive list but just my thoughts that I see shaping up. What do you think? Please chime in with your thoughts.