Blockchain, bitcoin, mobile banking…brilliant innovation is at the heart of the thriving FinTech revolution. To share the spoils, your great ideas need to be coupled with strong digital foundations.
From contactless payment transforming the way we shop, to telematics providing insurers with our real-time driving behaviour; digitisation continues to reboot how the financial sector responds to ever-evolving market challenges. Banking, accountancy, investment, legal, insurance – all must adapt if they are to reap the rewards of this most disruptive of technological sea changes.
To some, it would seem the creatives are king.
Mobile apps, analytics and AI are front and centre: harnessing the seemingly limitless potential to wow and amaze customers with functionality, funkiness and fun. For SME’s, it’s an empowering new world where the availability of computing on demand in the cloud offers cost-effective opportunities to compete with the big boys. Add the boundless scope for IoT to further fuel the fire and it’s easy to see how the paradigm has changed.
Staggering stats suggests the network will be made up of 20 billion connected devices by 2020, with a nearly £1 trillion global economic benefit. No surprise then that, in his autumn statement last year, Chancellor Philip Hammond committed an extra £1 billion to investment in 5G and fibre broadband, helping to connect up all those extra things.
Financial institutions, especially retail banks, have invested increasing amounts of resource into developing their consumer-facing technology capabilities.
According to PWC’s 6th annual digital IQ survey, financial services is one of the top 10 industries that has been investing in sensors for potential IoT innovations. But, whilst front-end functionality is driving user experience, success in our digital, data-driven world depends more and more on the back-end nuts and bolts. Put simply, infrastructure is back.
Nathan Marke, Chief Digital Officer at Daisy Group – the UK’s largest independent providers of B2B IT and telecoms – eats, sleeps and breathes it. He says today’s fast-moving technological advancement presents the kind of opportunities for FinTech SMEs that once only applied to large scale enterprises.
And he claims that if those businesses get their digital foundations right, their customers’ voracious appetite for a better and slicker experience will turbo-charge their fortunes. “It’s about being always on; being connected and protected; and being agile,” says Marke.
“They are the three digital foundations. If you get them right, your ability to innovate and best serve your customers can be unleashed. Wherever your innovation is taking you, executing your idea relies on three basic tenets – having an agile and rock-solid infrastructure so that you can develop and experiment quickly and run production applications reliably, all the time, 24×7; ensuring your network is seamless and secure, end-to-end from cloud to smartphone; and your team being tooled up to be effective in an increasingly global and mobile business landscape. Get these fundamentals right and exploiting your brilliant ideas is far more achievable. Lots of SMEs have not yet woken up to just how accessible enormous computing power is to them, on demand. But if you’re spending all your time running your infrastructure, you don’t have time to develop the next atom bank or the next mobile payment gateway or the next thing which completely transforms the way people access your product or service. To do that, trust your foundations to the experts, so your IT guys can get on and innovate and drive your bottom line. We recently worked closely with a start-up in the financial services sector which had spotted a huge opportunity and needed to act fast in order to capitalise on it. They had to be first to market but at the same time they had to comply with all of the governance and legislation involved. The digital foundations – the infrastructure, the back-end nuts and bolts – were vital to that success.”
But what about all the data this kind of innovation creates? In the past, businesses would have had to have had their own expensive data centre and equipment in which to house and process it. Teams of analysts and managers would have been needed to run it.
Now, though, there is the cloud.
“Digital is democratising the whole process,” says Marke. “You can build a data warehouse with the click of a button and pay for it in the public cloud by the hour. You can perform analytics on your data for a month, or six months, or a year, and then put the output to good use and forget you ever did it. It is dramatically more affordable to do that than it ever used to be. The big objection to the public cloud is security. How do I secure it? And where is my data? But with the opening by Amazon and Microsoft of public clouds hosted here in the UK, those issues largely go away, if you are willing to forego the risk of US Government snooping. There is so much more security baked in to these public clouds that you are probably more secure there than anywhere. Most SMEs are still very worried about it, but they shouldn’t be. They just need to work with the right experts so that it is architected appropriately. It’s like everything in life: when you suddenly have access to something you didn’t think you needed, it quickly becomes massively important. That access is denied to you if you don’t have your digital foundations in place.”
So, just imagine: a car buyer walks into a showroom and you are able to send a message to his smartphone telling him how much finance he is already authorised for; or information about your mortgage product goes direct to house buyers browsing estate agents; or your customer’s laptop tells you when their home is occupied so you can provide them with insurance cover by the hour as opposed to by the year.
Recent research shows that consumers who receive personalized messages are nearly 20 times more likely to buy. You do the maths. “It’s no surprise that every major CEO survey of the last three years has had technological investment as one of the top three priorities,” adds Marke.
“That’s because technology is the biggest tool any CEO can use to drive, productivity, efficiency and innovation. In terms of efficiency, it’s about how a new challenger bank can provide lenders with easier access to its products, with a much lower cost base. In terms of productivity, it’s how brilliant customer service can be better delivered remotely to thousands of people a day via web chats, versus expensive branch-based face-to-face interactions. And in terms of innovation, it’s about freeing your own IT people from running your systems, in order for them to flex their creative muscle on developing new products and new ways of doing things.”
The opportunities, it seems, are myriad. After all, financial services make up a third of the UK economy. Retail banking, investment banking, insurance, legal – they are just the poster boys.
The sector as a whole is like a giant iceberg: below the surface there are hundreds of thousands of SMEs playing a vital supporting role. Part of the supply chain. Nibbling away at the big cheeses.
“Those are the businesses where the opportunities are greatest,” says Marke. “The big banks and financial institutions are burdened by unwieldy legacy IT infrastructures that do not lend themselves to swift innovation, or nimble responses to market changes, or profound shifts in customer behaviour brought about by developments such as IoT. The smaller businesses must now get ahead by ensuring they have the digital foundations needed to harness the technology. And once they get ahead, they won’t understand how they were ever content to be anywhere else.”