Time to strategise

At last, the rate of financial sector regulatory change is slowing. Players now have the time and resources to streamline procedures and give full focus to customer service, as well as seeking to be more competitive. It is important to consider the wider strategic opportunities first.

Anthony Wtterwulghe, Consultant – Alpha FMC

Deploying a range of FinTech solutions to meet specific challenges has helped CIOs meet tight regulatory deadlines. This has been an understandable approach, as getting over the line to be compliant on time with new laws has been vitally important. At the same time market changes such as the rise of passive investing and the end of retrocession fees has required financial services businesses to do more for less.

Cost and complexity by stealth

Deploying targeted IT tools to solve short term problems has helped. However, the end result is a proliferation of often incompatible solutions, and this has added to complexity and the cost of managing these relationships. This can add up to a substantial commitment of time and money. “Deploying FinTech solutions on a piecemeal basis brings clear quick wins, but often there’s a one-shot benefit that doesn’t take the firm to the next level of permanently greater efficiency and client servicing,” commented Anthony Wtterwulghe, a consultant with Alpha FMC.

There is also the perverse effect of fund services firms, private banks, insurance firms, CSDs and the rest investing substantial resources educating FinTechs in the technicalities of their businesses. This might be necessary to achieve the AI and machine learning tool businesses need to meet a looming deadline. Yet ultimately these firms are expending considerable effort to give away valuable market expertise they have built up over decades.

Straighten out with strategy

A more long term, strategic approach could help. Firms could work individually or with others to consider the bigger picture. These groups could be of peers or players in the value chain and wider financial service community. “It’s important to get market players around a table to discuss how they might work together, to reimagine tomorrow’s financial services industries in terms of what strategies could be envisaged and then what technology needs to be deployed to achieve this,” Mr Wtterwulghe added. For example, the time consuming and costly challenge of AML and KYC procedures cries out for a collaborative approach. The consolidation of information and the related cross-checks results in better quality data and lower cost.

Working together with other industry players helps spread the cost and risk of innovative IT investment projects. This diversity of input can also ensure that the approach remains focused on achieving the strategic rather than one-off breakthroughs. As these overarching innovations are the ultimate key to improving efficiency and client experience.

Helping incumbents thrive

Mr Wtterwulghe believes it is unhelpful to talk of “disruption” when FinTechs are mentioned. The history of technology in the financial sector has generally been one of assimilation and industrialisation by legacy players adopting new tools to boost capabilities. This remains the most likely outcome now, rather than digital native firms blowing incumbents away.

Similarly, he believes individual staff and teams do not need to fear the deployment of technology. “Automation and robotics tools help existing staff add value, which is ultimately more interesting and rewarding work,” he said. The labour market is very tight, so employers want to keep hold of their people, and help them to work smarter. The goal is to help employees put the client at the heart of the business by streamlining routine work, and by unlocking the value in databases. First a clear, practical strategy is required.