Business Leader recently spoke to Angus Panton, Head of Banking and Financial Services, at international technology and engineering company Expleo UK, to discuss what the future holds for the industry in the UK.
Can you give an overview of Expleo?
Expleo is an engineering, quality services and management consulting company. We work in technology-intensive sectors, helping to make business and society more connected, sustainable and secure. We operate across more than 30 countries, across the financial services, insurance, banking, aerospace, automotive and energy and utilities industries.
Can you take me through your day-to-day role?
I am responsible for leading strategic client relationships and driving business forward within Expleo’s financial services, banking & fintech and insurance portfolio. I develop deep, consultative partnerships with the executive and senior leadership teams of my portfolio of high profile clients, including global FTSE100 companies.
What are the current trends in the fintech sector?
In recent years, the fintech industry has evolved at an incredible rate. Rather than going away as traditional banks would have hoped, younger banks like Monzo and Starling have matured into formidable rivals for customers and their cash, putting pressure on the rest of the financial services sector to step outside its comfort zone, innovate rapidly and embrace a fail-fast culture.
In fact, according to the UK Department for International Trade’s UK Fintech State of the Nation Report last year, 56% of traditional financial institutions have now put digital disruption at the heart of their strategy. As part of this trend, we’re starting to seeing fintechs and traditional banks work more closely together. Lloyds’ Bank partnered with Thought Machine (TM) last year, for instance, to accelerate and ease the pain of digital transformation, migrating 500,000 customers onto Vault, TM’s cloud-native core banking technology. So it seems in today’s climate, fintech’s that can offer the golden combination of lower cost and reduced friction to banks will find a willing partner.
How has the industry evolved in recent years?
The first plastic £5 note was released just 4 years ago but already we’ve progressed way beyond that, to living and operating in a society that is fundamentally cashless and contactless.
The transformation has been seismic, and technology has obviously played a vital role in enabling it to happen – from upscaling the digital capabilities of legacy banks, to creating the infrastructure required across industries to enable seamless payment experiences, including Apple Pay and contactless card payments.
But, as with any digital transformation, the fewer mistakes you make, the smoother, and quicker, the transition. So whilst the shift did happen quickly, it was really the result of several, incremental digital changes, to many different things, each intended to make a better user experience for the consumer.
The result is a colossal evolution. At Expleo, we call this an ‘agile approach’ to digital transformation. It nearly always starts with the customer, or end-user experience – in the case of banking and financial services, the goal is usually to make it safer and easier for people to manage their finances.
What have been the main challenges for the industry?
The main challenges for the sector have hinged around partnerships between legacy banks and fintech’s, as there as several cultural and technical differences between the two.
Traditional banks tend to be slowed down by legacy systems and can lack the internal processes to fast track the embedding of new solutions. This can feel frustrating to Fintech’s, that are not used to operating at the scale of traditional banks. Fintech’s need to be able to adjust their pace to accommodate this.
Equally, Fintechs can run the risk of underestimating the need to demonstrate the right depth of due diligence, as they’re just not used to this way of working. It’s vital they continue to evidence their work and ensure their tech is fit for purpose or risk losing the confidence of both the regulator and the market.
Managing change with structure and agility – something traditional banks need to do, due to their scale and complexity – can also be a challenge for Fintech’s. Capability modelling, target operating models and process mapping can be low on a Fintech’s to-do list, but they provide valuable infrastructure for smoother progress. For example, a lack of governance of the ecosystem and processes can lead to poor visibility on the project.
Disciplines such as stakeholder management, compliance, quality management and change management are critical to a successful partnership with a bank. For Fintechs without expertise in these areas the right third-party support can save considerable time and effort.
Ultimately though, the right management consultants will be able to help both sides to prepare for the business change impacts from merging two very different cultures.
What is in store for the next decade?
The key trends are likely to be;
Marketing experts have promoted the benefits of personalisation to attract, and keep, customers. Big data – and artificial intelligence that helps us process, store, and drive insights from the data – means that personalisation will be possible on a scale never seen before. Banks now have information about their customers’ behaviour and social and browsing history. AI enables real-time multi-channel integration of these insights to deliver a personalised one-to-one marketing experience for their customers at the time when the information is most relevant and useful (e.g a car loan or credit card).
That said, sorting through torrents of unstructured data for useful information is no small undertaking. It requires powerful data analytics technology if institutions are to reap a benefit.
Already, financial firms have quietly introduced machines that think. Moving forward, robotic process automation (RPA) will continue to impact financial institutions to help them be more efficient and effective. This includes processes such as customer onboarding, verification, risk assessments, security checks, data analysis and reporting, compliance processes as well as most other repetitive administrative activities. This frees up a bank’s workforce to perform more complex, value add activities.
According to Gartner, by 2020, chatbots will interact with the customers of 85% of banks and businesses. According to one report, financial chatbots save over four minutes on every interaction, so it’s within a bank’s interest to use them. Customers of financial institutions have come to rely on the 24/7 service these conversational interfaces provide, as the possibility of an instant response and quick complaint resolution improves the experience of personal banking significantly. Conversational interfaces also provide an easy and economical way for organizations in the financial sector to receive customer feedback.
Blockchain will also continue to disrupt financial institutions, beyond just ensuring data security.
Cases across the globe are already proving the value of blockchain in a wide variety of banking and investment applications , such as solving challenges faced by investment banks, to helping customers make safer payment transactions.
Industry-wide adoption of blockchain is unlikely to occur until we reach a tipping point, however –when that time arises , the regulators will need to determine best practice and how to oversee its use.
Biometrics – especially around mobile payments
Mobile payment innovations could do away with traditional wallets entirely as global consumers become less reliant on cash. Google, Apple, Tencent, and Alibaba already have their own payment platforms and continue to roll out new features such as biometric access control, inducing fingerprint, and face recognition, which is likely to become the preferred route of access over the next decade.
Opportunity for innovation
While many financial institutions are continuing to adopt new technology to enhance operations and improve customer service, Fintechs provide exciting avenues for ongoing innovation. Already, financial institutions have realised they must learn how to use fintech to their competitive advantage, and this is only going to continue in the years ahead.