Innovation and Growth in the Financial Services Industry

After several years of emphasis on cost containment, the financial services industry is beginning to re-focus on innovation and business growth. In order to build and then sustain a competitive advantage, a financial services organisation needs a business model that enables it to adapt quickly to changing customer needs and market conditions.

A flexible business model is no longer just a theoretical concept. Today’s financial services organisations have the opportunity to transform into what HP terms the ‘instant-on enterprise’. In a world where everything is becoming mobile, connected, interactive and immediate, it takes an instant-on enterprise to compete.

Constant connectivity means customers expect immediate results. To accelerate growth and produce higher-quality products and services, financial service quality through the innovative application of technology must be achieved. A recent study shows that 83% of financial services organisations surveyed believe businesses and governments must rapidly adapt the enterprise to meet changes in consumer expectations.1

The instant-on enterprise adapts easily and innovates rapidly by using flexible sourcing strategies, including in-house technology, outsourced services and cloud computing. It also leverages usage-based pricing models, providing on-demand capacity and services whenever and wherever required.

Changing Customer Dynamics

The consumerisation of technology and the explosion of social media have made transforming the customer experience a business imperative. Customers expect to be able to interact with their financial services provider from anywhere and at any time of day or night, as well as reach the information or resource they need instantly.

In order to deliver a world-class customer experience consistently, financial services organisations need to innovate across branch, telephone, internet and mobile banking channels, and embrace emerging technologies, such as social networking. Banks, for example, need core banking systems that deliver the real-time information that customers now expect and enable them to bring new products to market quickly and efficiently. The same is true of all financial services organisations – speed to market is an imperative for competitiveness in today’s post-crisis reality.

Being responsive to customers’ needs is no longer enough to remain competitive in the marketplace. A financial services organisation must not only respond, but more importantly, be able to anticipate its customers’ needs. Building loyalty and market share requires a deep understanding of each and every customer.

Business Intelligence

Arguably, the greatest asset your organisation possesses is data. How your organisation leverages its data assets and transforms them into usable business intelligence for decision-making, not just reporting, is the key to a sustainable competitive advantage. However, it is also a reality that every financial services organisation is facing a number of challenges from rapidly expanding data.

Managing growing legal and compliance requirements together with customer and management demands for quicker and better information are placing further strain on budgets. Today, exabytes of digital information are created, captured and replicated, and it is complex and time-consuming to manage and exploit information at this massive scale. This complexity is further impacted by the isolation between data and information sources, both internal and external, and the increasing complexity of unstructured data.

Whether it’s for customer insight, product development, real-time portfolio risk analysis or other management decision-making purposes, financial services organisations are missing out on business opportunities, and potentially exposing themselves to unnecessary risks, by not optimising how they use information. An integrated, enterprise-wide approach to business intelligence and risk management is required.

Constrained by the Past

The challenge for many financial services organisations is that they are constrained by the technology decisions they made several years or, in some cases, decades ago. Aging technology systems, which have become increasingly complicated as a result of mergers, acquisitions and years of changing business requirements, prevent most organisations from responding quickly enough to both business challenges and opportunities. Research has found that 73% of financial services organisations feel that technology is the key to business and government innovation.2

Legacy systems are not just inflexible, they are also a primary reason why maintenance and operation costs can consume up to 70% of IT budgets, leaving too small a percentage available for investment in innovation and business growth.

Financial services organisations are facing tougher competition in the marketplace from both traditional players as well as non-traditional competitors such as supermarkets, internet comparison sites, alternative trading platforms and other Internet-only financial services providers. Improvements in technology have lowered barriers to entry which makes competition from non-traditional players that much steeper. Established financial institutions are also facing competition from new regional and international entrants.

Becoming an instant-on enterprise gives financial services organisations the opportunity to fundamentally transform their customer’s expectations. This involves embedding technology into everything it does to make products, services and information faster, more reliable and valuable to every touch point.

The Path to the Instant-on Enterprise

The instant-on enterprise serves customers, employees, partners, and citizens with whatever they want and need, instantly, at any point in time and through any channel. It uses technology to integrate and automate the value chain. Behind the scenes, the instant-on enterprise streamlines everything that is required to deliver a service.

A financial services organisation can build its own instant-on enterprise through a gradual but methodical transformation of its technology environment and business processes:

  • Application transformation: By transforming business applications such as core banking and payments applications, your organisation can gain control over ageing applications and inflexible processes that constrain enterprise growth, agility and innovation.
  • Converged infrastructure: By breaking through rigid technology silos and IT sprawl with a converged infrastructure, your organisation can drive out cost and build the foundation for agile service delivery, integrating server, storage, networking and management resources to deliver the data centre of the future.
  • Enterprise security: By securing the whole enterprise with a holistic approach that addresses people, processes, technology and content, your organisation can protect assets without constricting the flow information within the business or across customer channels.
  • Information optimisation: By improving the management of information, your organisation can leverage data assets to ensure regulatory compliance, improve business intelligence and mitigate risks in real time.
  • Hybrid delivery: By optimising the mix between in-house technology, outsourced services and cloud services, and integrating them, your organisation can rid itself of the associated complexity and cost of managing these functions separately.

A rethink of technology architecture and business processes is required to become an instant-on enterprise capable of adapting quickly to changing customer needs. This approach enables financial services organisations to transform their infrastructure, improve process efficiency, risk mitigation and regulatory compliance, enhance customer loyalty and implement sustainable business models for long-term competitive advantage.

1 HP Research: ‘The Instant-On Enterprise’, Coleman Parkes Research, October 2010.

2ibid.

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