Perfect storm of change demands innovative and agile response

Financial services is facing a perfect storm of change. The combination of advanced digital technologies, regulatory reform, mounting consumer expectation and rising competition from both incumbents and disruptors is accelerating change across the financial services landscape. To succeed, both established and challenger brands need to identify risks and opportunities and […]

Financial services is facing a perfect storm of change. The combination of advanced digital technologies, regulatory reform, mounting consumer expectation and rising competition from both incumbents and disruptors is accelerating change across the financial services landscape.

To succeed, both established and challenger brands need to identify risks and opportunities and be able to respond in a nimble and agile fashion.

According to McKinsey & Co, in a post-pandemic world; “Businesses that once mapped digital strategy in one- to three-year phases must now scale their initiatives in a matter of days or weeks.”

Andrew Todd, chief technology officer of financial software firm Iress, does not believe that daily shifts will be required in financial services – but he does expect that speed and agility will be the secret to sustained success.

According to Todd; “History is composed of ‘black swan’ events, events that were never seen before and never predicted to happen. Yet, they occur with regularity and there is continuous volatility. With each ‘unprecedented’ event, a wave of innovation follows as economies and businesses rush to both take advantage of opportunities following the event, or to provide protection in case it happens again. 

“What is clearly missed in these examples by many – but not all – is that there’s an opportunity to build a business of resilience, one that benefits in times of upheaval. 

“Building a culture of real innovation, self-testing and resilience can help move from an outcome of needing to respond to leveraging a black-swan type event.” 

This, he says; “Takes critical thinking in relation to strategy, competition, courage and a willingness to be different. To not rest on past successes. To not be busy. It takes strong, bold leadership. It requires more than words – it requires investment in time and money and not following the status-quo.”

Iress Andrew Todd

In terms of planning horizons for strategy, he says; “Five years is too long and that has been the case for 10 or 15 years.” He recommends that organisations focus on two horizons – a middle ground around six months ahead and then also cast forward two or three years to consider whether the trajectory makes sense.

To be fleet of foot in terms of responding to market needs and expectations demands both business and technology agility. Lengthy transformation projects that span years are unlikely to end well, Todd warns. Instead business needs a more iterative approach to transformation. That means focusing on; “Meeting constant goals aligned to a vision and strategy. Then you review and adapt those actions and outcomes as necessary and think how the organisation works to adapt and flex.”

Todd notes that; “The emergence of COVID and flurry of activity as businesses worked frantically to continue operations demonstrated that – if only in a small way- those that focused on stability, rigidity and command-and-control management methods either struggled to respond, or had to divert focus from their customers to their own internal business operations. Change was forced.”

He says that a business needs to look at innovation with fresh eyes that don’t blink at the prospect of chaos.

“It’s sometimes said that technology is at its best when it’s not seen or heard about – though those who work in technology will know you only hear when things go wrong, not when they’re going well. Around a decade ago, Netflix invented a tool called the Chaos Monkey, the purpose of which was to intentionally try to break its technology environment – trying to simulate the worst that could happen. 

“The ability of businesses therefore to pre-empt both worst-case scenarios and changes in consumer behaviour and expectations is critical and at the heart of meaningful innovation.”

Leading financial services firms across Australia are considering these issues right now as they plan for the move to Open Banking. While the big four banks and two challenger brands are taking the first steps to more freely share customer data – it will affect the entire sector in 2021. This regulatory shift not only requires technology updates to allow secure data transfer between institutions, but also a rethink around business strategies, products, services – even marketing and branding.

Also, in the wake of the Royal Commission consumers are also demanding better service and support from their banks and financial advisors. If the incumbents cannot meet their needs there are neobanks in the wings that will.

Those new players in the market aren’t shackled by legacy technology, which can make it much easier for them to pivot in response to market expectations – and also to overlay emerging technologies such as artificial intelligence and machine learning to enhance the customer experience.

Increased automation is also being embraced for the additional efficiency and reduced risk that it promises for financial services providers.

Todd stresses that; “Consumerisation exists and is driving changes in expectations of technology. It is important to keep enhancing the user and client experience to make more intuitive engaging more frictionless – so they feel they are just using a nice piece of technology.”

In this new financial services world, where a new bank is just a click away, firms need to stay innovative, be agile and keep the customer front and centre.

Do you have what it takes to create an innovative, agile culture? 

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