Remember me

Register  |   Lost password?

The Trading Mesh

Building bridges to the future

Wed, 13 Dec 2017 22:50:00 GMT           

Few industries have pivoted towards digital transformation like financial services. Capital market firms routinely deploy automated high frequency trading models, insurers are using advanced data analytics to provide more personalised policies, and established retail banks have embraced mobile technologies as a way to deliver better customer experiences and target new demographics.

This strategic shift has been driven by the threat of competition from non-traditional players including pure digital ‘neo banks’, new peer-to-peer lending platforms and ‘tech-first’ enterprises from Apple to Square that are encroaching onto functions that, historically, were the preserve of the big financial services firms.

Collaboration the key

Many incumbent firms recognise they need to source skills and expertise from outside their organisation in order to compete. FinTechs are highly adept at leveraging powerful digital technology innovations such as cloud computing, open APIs, artificial intelligence and big-data analytics to provide a flexible, responsive and personalised user experience. Rather than compete with these digital disrupters, established firms are collaborating with a global community of FinTech startups from San Francisco and London to Tel Aviv, Mumbai, Singapore and Sydney.

According to Connecting Capabilities, an Economist Intelligence Unit study commissioned by Telstra, more than half of financial services firms believe digital partnerships have “greatly” enabled their ability to achieve digital transformation in terms of innovative product development.

Yet there is still room to get more value from the FinTech ecosystem. Eighty per cent of finance sector respondents said their firms had to improve their ability to leverage such partnerships.

In part, incumbents have been held back from making the most of collaboration with FinTech startups by a number of organisational and external barriers. Firms have for many years grappled with the issue of data security. Banks, insurers and others with large personal data sets need to allow FinTech collaborators access to these valuable assets if they are to deliver better, more personalised services and products. However, there are significant risks in opening up access to third parties.

It is therefore no surprise that the greatest barrier to established firms’ cooperation with FinTech startups is IT security. Regulation, in many cases directly related to data protection, is listed as the second biggest challenge, while IT compatibility between potential partners is increasingly problematic [1]

Creating the conditions for transformative innovation

We are seeing growing demand for tools and capabilities that help firms overcome these challenges and collaborate with partners more effectively.

The capabilities start at the network. Secure connectivity to external cloud providers and colocation services are empowering firms to meet their compliance requirements, even across national borders. Software-defined, programmable networks enable firms to scale their capacity and latency on-demand, giving them the flexibility to spin up testing environments and experiment with new concepts and products in a low risk way.

Over the top of the network comes the range of enterprise-grade communication and collaboration applications that make global co-working more efficient and secure. IT and network managers can empower business units to become more productive by providing quick and easy access to these applications.

Each enterprise interacts with different ecosystems, and sometimes these different groups of partners, suppliers and customers require access to different applications. To make collaboration work firms should look for the solutions that best suit their specific needs. Increasingly, the most agile firms are considering self-provision of services through automated catalogues of approved applications. IT retains control but can offer teams the choice of tools they need to do their jobs better. This helps to avoid the risk of shadow IT in businesses and helps to maintain data security.

Once the platforms for secure, effective collaboration are in place, firms can stop thinking about how to keep pace with startups threatening to disrupt their business models, and change their approach from competition to cooperation. This way, established financial services firms can lead the transformation process and achieve long term success in the digital era.

PwC Global FinTech Report 2017