What a difference a few years makes.
In its 2016 survey of financial services firms, "Digital to the Core", NTT DATA found only 15% planned to invest in a modernization program in the next three years. Fast forward three years to a survey released here in 2019, and more than 80% thought digital innovation would be important in the next three to five years.
Everyone, keep moving back — this bandwagon is filling up!
The perceived threat isn’t so much from other financial services firms, but from companies that have built huge businesses on powerful technology platforms (companies like Amazon, Apple, and Google) — the usual big tech names that bring about handwringing when mentioned alongside “financial services” or “bank.”
NTT DATA says the key to future success is a Digital Business Platform (DBP).
Can Banks Really Do Digital?
Can financial firms make the shift? Michael Goodman, financial service and insurance vice president of data and analytics at NTT DATA, thinks only some leaders will initially — then the rest will follow in a pack, because that’s just the way the industry moves. (You may have heard rumors about a proliferation of “herd mentality” in finserv.)
The problem isn’t just old technology. It’s that firms are organized in stovepipes of technology, products, and people. Moving to a platform with apps linked by APIs changes all that.
Digital Can’t Tolerate Old Fiefdoms
A digital organization is flatter and more agile, and draws on partners and vendors rather than building everything in-house. (Pretty sure that sentence just made one of our C-Suite finserv friends fall off his chair.)
Customers should be made the center of all a firm does, IT offered a seat at the strategy table, responsibility decentralized, new talent recruited, and existing staff offered the training for the new environment.
“Employees and executives not comfortable with change need to be replaced,” the report says bluntly — “bluntly” possibly being an understatement.
Why Running Digital in Parallel Makes Sense
Although parallel systems are more costly than just one, NTT recommends that approach because of the high costs — and high risk — of core replacement.
To help migrate to a digital platform, NTT offers data as a service, said Goodman. It moves the data from individual apps to a common data lake that multiple apps can draw from.
FOFA — Fear of Facing Amazon?
Ben Robinson, who recently moved from a strategy role at banking tech firm Temenos to Pangea, writes, “As platform companies like Uber and Amazon have demonstrated, in the age of networks and ubiquitous computing, achieving scale no longer requires firms to manufacture all of their products and services. Instead, they can source some or all of these products and services from third parties.”
Will managers resist giving up headcount to become partner liaisons? Where are the bragging rights in that?
Finserv tech investment in the past has been primarily defensive — reducing costs, says the report. “But that stuck-in-neutral stance is starting to change, with new investment activity seeding digital transformation.”
Order a few things from Amazon. Then head over to your bank website and try signing up for new products or looking for financial advice. You might see some gaps in the experience.