New technologies are rapidly reshaping financial services. That’s no longer the headline, it’s now the industry reality. Banks, insurers and asset managers are knee-deep in the potential of such technologies as artificial intelligence (AI), the Internet of Things (IoT) and blockchain to transform their businesses and stay on top of ever-changing consumer expectations.
Financial services leaders need to be aware of that tension and plan ahead of it, rather than simply embracing the status quo.
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But what’s the right path? And what’s the best technology? That strategic view is where financial services executives need to focus, according to a comprehensive new report from KPMG, which surveyed more than 160 financial institutions from 36 countries and featured in-depth interviews with senior leaders. And while no magic “winning” plan emerged, it’s clear that a forward-thinking strategy that stays as agile as all of the new technology is the key to gaining a competitive edge.
To learn how institutions are adapting to the new world of fintech, access the full Forging the Future.
The fintech imperative
Strategic planning needs to start with the reckoning that nimble new financial technology (fintech) firms are here to stay. Indeed, emerging fintech was cited as the greatest source of disruption in the KPMG survey—ahead of even regulatory complexity.
Further, customer expectations are changing as quickly as the tech. Consumer’s best experiences quickly become their expectations and they are increasingly demanding financial services providers to respond quickly, and with products suited to their needs. But these consumer expectations can create competing priorities, leading to a cycle of constantly evolving goals that make it difficult to give fintech the focus and resources it requires. Financial services leaders need to be aware of that tension and plan ahead of it, rather than simply embracing the status quo.
Building the right foundation
Only about half of those organizations surveyed said their fintech strategy is well aligned with current challenges and disruptions. The good news is that most organizations are still early in their fintech journey. There's time and opportunity to build a strategy that works. Keep in mind these guiding principles:
- Know thyself: Start with a rapid assessment of current operations that identifies opportunities, challenges and roadblocks.
- Plan for change: Closely track technology trends so that you understand new opportunities, and when and how they will impact your operating model.
- Understand the long view: Define where you want to be in 3 and 5 years, and then map fintech to those big-picture goals.
- Pave the way: Establish buy-in from employees who will be affected by fintech, understand cultural barriers and tailor strategy accordingly.
- Align the goals: Ensure that your fintech strategy complements your overall business strategy—rather than distracting from it.
- Don’t get boxed in: Plan for both incremental change and big leaps forward—and evaluate them appropriately.
- Set priorities: Resist fintech’s call to try everything at once by establishing a clear process to evaluate and prioritize each new technology.
- Lead by example: A lack of C-suite guidance and leadership support is where fintech strategies go to die.
Integrating fintech
Whether the goal is to protect their turf or conquer new territory, success on fintech for financial services companies ultimately will mean integrating those new technologies into their operations. Here again, the KMPG survey found that there is no one true way to proceed, but four clear options are emerging:
- Building tailor-made solutions in-house.
- Sourcing or white-labeling technologies from fintech developers.
- Acquiring or investing in a fintech startup.
- Partnering or collaborating with an innovator.
The road ahead
The financial services digital infrastructure will look amazingly different in a decade—and even markedly transformed in just the next few years. Big Data, AI, automation, cloud computing, IoT and even augmented reality will reshape the near future of financial services companies, the products they offer and the way they engage their customers.
Leaders of financial institutions must be the catalyst for change. Start by defining a clear fintech strategy that aligns with business model goals. Those who are ready to manage innovation as an ongoing process will be positioned to not just survive disruption—they will thrive.
Read Forging the Future to learn more about the future of fintech.
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