To succeed in a car race, the team one must put together is every bit as important as getting a top-notch vehicle and devising a strategy. In the same vein, banks are racing to survive in the increasingly digital era. Rather than resist, as governments are, industry members are striving to adopt the right balance of planning, technology, and human resources.
Ray Ruga, co-founder of the regional conference Fintech Americas, recently released a white paper that provides guidelines for banks looking to adapt to the so-called age of fintech. By employing the racing analogy in Digital Transformation and the Race to the Future, he offers banking executives both a wake-up call and roadmap.
The race has already begun, and it is slowly starting to pick up pace, since the most transformative technologies—blockchain, machine learning, and robotic automation—are still in their early stages. The fear of the unknown and perceived risks—cyberattacks or information loss—can give decision-makers pause, but fintech solutions are here to stay, whether players want them or not.
They shouldn't forget that while banking is necessary, banks are not.
That's why the report stresses the need for banks to promote and develop an organizational culture that can respond to technological shifts. Are board members, executives, managers, and employees aware of fintech and on board with the vision? Identifying new tools to satisfy the needs of current and future clients must be constantly in their minds.
It also behooves top management to hire the right personnel and regularly train them. As stated in the paper, “without the right team, the best ideas and technologies will simply sit idly on the shelf and be useless to the organization.”
Fintech is disrupting the market not only because of its digital nature. It is ushering in a new business model centered around a very demanding customer. Banks’ efforts in this regard must focus on streamlining procedures to open up an account or request a loan, leaving corporate inertia behind and assisting digital natives used to nearly instant solutions. Registering with a cryptocurrency exchange takes minutes, not weeks.
It means not only stepping up the game in e-banking and live support, but also learning how to leverage data analytics and machine-learning tools to predict consumer trends and offer new services. "This requires moving away from traditional marketing options, such as print advertising, to more effective and dynamic digital marketing capabilities that allow for tailored, pinpoint customer engagement," Ruga notes.
According to a related report out this year from KPMG, subtitled "Digitize of Jeopardize," only 2 percent of financiers see business as usual over the coming 10 years. On the other hand, 10 percent see a complete overhaul, "full disruption."
“The breadth of opportunities created by advances in analytics is very significant via targeted investment insights and unprecedented speed. Advances in data analytics are combining the ‘science’ and the ‘art’ of investing.” So great is the interest that alternative-investment specialists now see digitization as the "North Star of the industry."
Banks, just like racing cars need “strong and dynamic suspension" to stay aligned on the road, must have compliance systems that make sure operations stay within the law. Traditionally, this is done through compliance officers who review applications, but increasing manpower can create bottlenecks, defeating the purpose of digital transformation. This is where RegTech comes in: tools that provide, for instance, risk assesment that flags names or transactions to avoid running afoul of money-laundering regulations.
There are plenty of newly available technologies and ideas on how banks, hedge funds, private equities, and other actors can boost their operations through digital solutions. Knowing which ones to pick and foreseeing their success, however, is much harder than driving a car.
Fintech innovations are entering the consciences of industry leaders, who have made moves to explore untapped potential. Designing a comprehensive strategy and selecting the right tools and its operators is a crucial step, yet there is no instruction manual on how to assemble all these components—or how to win a race.
As KPMG concludes, “execution is the magic bullet. It needs passion, persistence, and accountability.”