“Challenges and Trends of Digital Transformation for the Financial Services Industry,” by Ernst & Young (EY), analyzes digital transformation, technologies that drive innovation, FinTech as a driver of transformation in the banking value chain, and cybersecurity.
- 71% of customers globally, and 80% in Latin America, believe that technology facilitates having products with several financial institutions
- The pace of evolution in the market is so intense that staying static is equal to staying behind
- The FinTech industry will transform banking as we know it; it will be the collaboration – not the competition – that is the catalyst of that transformation
- The three priorities related to cybersecurity are: prevention of data leakage or loss, business continuity with computer support, and user access and identification management
Digital Transformation
According to EY, digital technology has become so important for financial services customers that they consider it essential for an “excellent” experience. The firm encourages financial services providers to optimize the variety of communication channels, so as to serve both the younger, digitally-oriented consumers, as well as the older generations that value physical relationships.
The Global Consumer Banking Survey (EY 2016) revealed that 71% of customers globally and more than 80% in Latin America believe technology eases working with financial institutions. However, surveys also show that 36% of clients are willing to share more personal information if that helps banks anticipate their needs more accurately.
As customers gradually replace the use of traditional channels with digital ones, EY believes branches will not disappear, but will facilitate more specialized services to be offered to the client, and thus the concept of the “traditional channel” will be renewed.
The white paper suggests corporations should consider alliances to offer a broader ecosystem of services, seeking a balance that would allow them to own some products or services, with FinTechs to offer others, and both to benefit from alliances. Finally, organizations must promote an innovative culture within their organization, cultivating multifaceted teams that seek collaboration and always offer the best possible service to the client, regardless of the channel.
Technologies that Drive Innovation
As EY will explain in the launch of this study exclusively design for CL@B, firms in the financial industry can benefit from using robots and artificial intelligence machines that can perform tasks of different complexities quicker and without errors.
Robotic Process Automation (RPA), one of the most prominent technologies in financial innovation, can be integrated into existing interfaces without requiring changes to systems and can reduce the cost of manual high frequency operations by 40% or more. At the same time, RPA improves the quality of service. “It is important to note that RPA technology is self-financing, the immediate savings obtained with RPA can be reinvested in other measures of profitability,” says the document.
“There is growing recognition that analytics can be applied across all areas of the business, and if not, reinvent it,” said Chris Mazzei, EY Chief Analytics Officer and Emerging Technology Leader. “And while many companies started analytics to improve today’s processes, they are now expanding to rethink what they sell, how they sell it, who they sell it to, and how to differentiate themselves from their competition.”
Technologies driving financial innovation are in different stages of maturity and “without a doubt, many have the potential to significantly change the industry in the coming years.” Competition, technology, big data, regulations, and advanced analytics based on machine learning are forcing a new focus on organizations, and – according to EY – the speed of change in the market is so intense that staying static is equal to staying behind.
EY thinks Financial Institutions “need to understand the technology in order to make informed decisions about how and when to respond to technological advances and changes in processes and models of business that this will bring.”
FinTech as a Driver of Transformation in the Banking Value Chain
The first EY Fintech Adoption Index study, conducted in 2015, wanted to know how many of the digitally active consumers already used a FinTech regularly. The answer was that 16% of them had used two or more FinTech services in the previous 6 months. This study also indicated that adoption could double in the near future, but the recent 2017 study reveals that this has happened in as little as 18 months. The growth of the industry has strengthened the common thinking that FinTech will transform banking. However, it will be collaboration – and not competition – that is the main catalyst of that transformation.
Building this ecosystem will also require substantial commitment to regulators, who increasingly expect banks to be able to ensure that providers and third parties can offer the same level of capability and security of processes as banks themselves.
FinTech’s global industry is growing rapidly, driven by a powerful mix of start-ups and technology players. Banks that want to tap into this potential must act now to find ways to engage with these innovative organizations and build value-creating partnerships. Unless Banks and FinTech improve their work together, they will not receive all the benefits of innovation.
Cybersecurity: Who is responsible?
Lastly, EY´s White Paper for CL@B notes that the customer who uses the service channels of a financial institution must understand how each channel works, including the security aspects of information to be able to use them correctly. On the one hand, it is the responsibility of the user to learn, but it is also the responsibility of the financial institution to provide the means for this learning to be effective. Knowledge and understanding of the client about information security will allow him/her to recognize situations that do not seem normal and take appropriate action.
According to the EY Global Information Security Survey, at security level, the three priorities for banking companies are: Preventing data leakage or loss; The continuity of the business with computer support; and Access management and user identification.