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Traditional financial institutions have one choice: transform or die

By , ITWeb
25 Jan 2019

Traditional financial institutions have one choice: transform or die

With FinTechs, big-techs and start-ups already eating into traditional financial institutions' market share, banking and insurance company chief executives need to identify their organisations' strengths and build on them – or they will quickly flounder and die.

According to Gartner's CIO Agenda 2018, digital transformation is now more important to the traditional financial services sector than any other industry.

We are all aware that banking's elevated historical status won't last long. Rising costs and continuous threats from competitors will adversely affect the profitability of financial organizations if they don't re-think their business strategies.

Financial institutions must adopt flexible platforms for new business models and partner with FinTechs to boost innovation. I am not surprised, therefore, that according to a recent PwC report, 74 percent of Russian financial services companies plan to increase FinTech partnerships in the next 3 - 5 years.

A holistic mobility and cloud strategy is key

An overarching mobile and cloud strategy is paramount for financial institutions in empowering employees, rolling out innovative and convenient services for customers and driving business growth.

To truly differentiate mobile banking offerings on the customer side, financial institutions must tap into new ideas to identify opportunities enabled by cloud and AI, such as robo advisors.

From an internal point of view, financial institutions need to support a growing mobile workforce in terms of sales, collaboration and productivity applications. Today's employees want the same mobility and ease-of-use at work as they get on the devices they have become accustomed to in their personal lives. Millennials expect a mobile work experience. Mobility is fast becoming central to retaining staff.

Financial institutions need to master mobility as a matter of urgency to keep both employees and customers happy.

Getting value from data

In the past, financial institutions have focused on products and straightforward sales. But with big-techs using data sources to better understand their customers, customer service and experience are taking their place centre stage.

Financial institutions are adopting digitisation to provide intuitive websites and apps and are looking at technologies such as chatbots to address customer queries faster. But many financial institutions have yet to fully grasp the concept of the frictionless customer journey across multiple channels and touchpoints.

Financial institutions have a huge advantage over their new competitors in the troves of valuable data they are sitting on. By leveraging this data, they can gain remarkable insight into each and every one of their customers. Customer monitoring through advanced data analytics will enable financial institutions to spot opportunities and better up-sell and cross-sell the right products to customers at the right time – and strengthen the bond between themselves and their customers.

Cyber threats: a ticking time bomb

Financial institutions must face up to a growing security dilemma. Customers' money and personal data are prime targets for cyber criminals. Last year, hackers stole 960 million rubles from individuals – and tried to steal 1.5 billion rubles from organizations across Russia, according to Russian Central Bank. Digitisation requires enhanced security measures. The global cost of cybercrime may have cost as much as $600 billion last year alone, according to the Centre for Strategic and International Studies (CSIS). The financial industry makes up a significant part of this.

Yet many banks have unsustainable security infrastructures incapable of dealing with new and ever more sophisticated cyber threats. True, they have a complex arsenal of security tools, but they lack the threat automation and deep analytics capabilities necessary to protect themselves and their customers. According to EY's Global Banking Forecast 2018, 89 percent of banks see enhancing data security as a major business challenge.

Financial institutions need a new mindset when it comes to cybersecurity. They should embed security into the whole organisation and work with a partner that understands their industry via an intelligence lead approach.

And the outcome ...

The traditional financial institutions that can transform, push beyond their boundaries, transform, digitise and diversify will survive.

By Richard Van Wageningen, Vice President, IMEAR, Orange Business Services.

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