Says rapidly changing financial services landscape
requires relentless innovation from the banking sector
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>> See position on digitisation
Thank you all for joining us for the two-day WSBI Innovation Conference.
We are pleased to have you here today. Our theme for this conference on innovation is: Gearing up for Digitisation: Adapting Retail Banking to the Digital Age.
I would like to take a few moments for us to think a bit deeper into what "Gearing up for Innovation" means.
Building out a digital world – digitisation – will in due course affect, and likely transform, all levels of society.
Digitisation can be defined as the mass adoption of connected digital services within society complemented by the transformation of sourcing, manufacturing and production, delivery, and the related processes.
It must be stressed that digitisation comes hand-in-hand with the expectation of, and growing demand for, immediacy: the need for "now". That means shorter response times, faster transaction completion and payment. Speed matters most. Meeting such expectation and demand has, and will continue to have, a deep impact far beyond the systems and firms striving to provide always on, real-time results. In parallel, digitisation – mainly due to the spread of mobile devices – boosts participation by all, both at political and economic levels. That means people are more connected, engaged in the world around them – from expressing their choice at election time to what shoes they will buy.
Banks are not immune to the digital wave now sweeping the sector. In fact, digitisation in the financial sector is nothing new. For example, the dematerialization of trading instruments has existed for some time. That said, the digital journey remains.
A high level of digitisation has been reached in infrastructure. One example is straight through processing – STP. Yet these infrastructures are now ripe for a new round of investment to fully support transaction immediacy.
Digitisation has also been achieved in back office areas too. Yet here again, these are ripe for re-investment, in order to, among other things, to migrate platforms to new technology. Re-investing can also transform quickly new types of interfaces. More critically, re-investment can deploy processes that take full use of data mining and cope efficiently with a wave of regulatory compliance burden. A 2012 report highlights the opportunity to raise levels of automation in banks' back offices. That can be done by preventing customers from using paper, by digitising work flows, by automating or supporting decision making. Automation in the back office also means using IT solutions to manage residual operations that must be carried out manually. The payoff is real. Boosting productivity and customer service levels by more than 50% is well within reach.
The customer-facing area is probably the one where the digital impact is more visible. Banks have for many years harnessed digital channels to "outsource" routine tasks to customers. With wide access to mobile tools like apps – the trend started with PC banking – has sped up and client visits to bank branches is a rare, precious moment. As branches and related staff costs make up about two-thirds of the total retail cost base of larger banks, their senior leaders are casting a careful eye on branches numbers and staff functions.
So in this rapidly changing financial services landscape, relentless innovation is the needed response from the banking sector. On the provider side, incumbents like banks – regulated and supervised – compete with start-ups, who carry a lot less baggage, and who usually focus on providing a single service or set of services. Another type of provider falls under the "mature companies" category. Sometimes large in size and from outside the financial sector, they too are hopping on board the financial services train or through intermediation services through what they offer. The GAFAs – anchored by American tech giants Google, Apple, Facebook, and Amazon – are good examples.
Innovation is applied by these three categories of providers – banks, start-ups and mature companies – to customer relationships, the "back office", and infrastructures such as clearing and settlement. Financial technology can be launched in two modes in any of the just mentioned segments. The first is "incremental" mode, where essentially new technology is applied to enhance the convenience or streamline existing products and services without changing two things. It does not alter (most of) the value chain nor the business model (at least in the short term). The second mode is "transformational", where the application of new technology radically changes how a product or service is defined, produced and/or distributed. The application mode of financial technology – either incremental or transformational – is not the appanage of any single category of providers. Incumbents do take at times a transformational approach to areas like processes and infrastructures whilst start-ups, for example, may take just a step-by-step approach. Step by step means making and bringing to market slightly evolved products and services.
Sometimes the best way to tackle innovation is by first asking questions. Today's event will try to do that. First, we should try to answer the question: " How does innovation disrupt the banking and other economic sectors?" The second question we should answer is: "What is the best strategy to bring new retail banking services and products to the market?" And third, "How well have banks adapted to the clients' needs?, whilst constantly asking ourselves "What more can be done?"
Answers don't come easy. They come from insight. They come from the courage to think critically about the future of banking. Answers come when we open up and exchange our views and listen to those around us who bring their experience to the table.
WSBI members started the quest for answers just yesterday during first-ever WSBI Innovation workshop here in Brussels. More than 30 representatives from WSBI were on hand, with banking experts from all over the world took part. Members from Thailand, Malaysia, France, Spain, Austria and Sweden showcased their innovation know-how.
Topics discussed were based on case studies and focused on a handful of topics:
It was a great example of how members come together and learn from each other how they approach innovation.
That said, there is room for more exchange…a wider set of voices and expertise. Today's innovation conference hopefully does just that.
To start, we come together today with our own thoughts what the future of banking will look like. At its core, the future is about who is going to innovate best. To use Steve Jobs of Apple's ice hockey analogy, "skate to where the puck is going to be, not to where it has been." That means bringing ideas and research to market creatively, anticipating the future. It's not easy. It costs money. It creates severe time pressure. It takes brains. It takes vision. But when it works, there is reward. It moves banking towards better connected clients, more efficient banking operations and better products and services.
Innovation is a mindset. To help share and re-enforce that mindset, WSBI decided to convene this event. It's a chance to exchange ideas among leading industry experts, top finntechs, and learn from each other. We also want to enter into dialogue with policymakers on hand today as they can have an important role to create a framework that helps, not hinders innovation. We intend to do just that.
We are pleased to have put together four panels for today. All approach innovation and banking from different angles.
To kick things off, our first panel called "Looking over the hedge: how innovation disrupts other economic sectors" will look at how the digital 'New Normal' first took hold in other sectors like music, news and travel and what can be learned. What legal protections are in place of for incumbents like banks and new entrants? It also will look at how cities manage the digital 'New Normal'.
We welcome moderator Laura Sanguinetti, from Mobey Forum in Finland and panel members to the stage. The floor is yours.