Financial services ‘big beasts’ must harness power of IT to scare off upstart challengers.
Sungard Availability Services’ research into corporate attitudes towards IT reveals the rise of new, digitally-native fintech organisations is challenging the established order of the financial services industry. Traditional institutions are now being forced to confront the power of technology or risk losing market share to these upstarts.
Investment in technologies that can help them meet rapidly changing market demands is crucial to the survival of the financial services industry’s old guard. This means the big beasts of the financial services sector are being forced to fight a battle on two fronts: maintaining their ageing legacy systems while, at the same time, implementing the latest digital technology to compete against cub challengers.
The survey, conducted by specialist IT research agency Vanson Bourne, questioned 700 IT decision-makers and 1,400 office workers from businesses in the UK, Ireland, France, Sweden and the US. It found that digital transformation is a priority for 92% of financial services businesses with a further 86% claiming it to be a critical factor in remaining competitive. The expected benefits are huge and include increased productivity (87%), improved customer satisfaction (51%) and opening new revenue streams (41%).
However, despite recognising the importance of digital transformation, there appears to be a disconnect when it comes to implementation. Nearly half (45%) of those working in financial services believe their current employer is behind competitors when it comes to adopting the latest digital tools and technologies.
Yet having access to the latest digital tools is considered crucial by 90% of financial services employees with well over a third (39%) admitting they would be embarrassed to work in a company without them. In fact, nearly a quarter (21%) of employees have actually left a job as the company did not enable digital working practices while a further 34% claim they would leave their current employer to join a more digitally progressive company.
With the sector already feeling the heat from digitally-native competition – such as the emergence of innovative UK start-ups Atom Bank and Mondo – this dissatisfaction with technology implementation could not only cause a competitive disadvantage but also lead to a staff retention crisis.
The banking industry has long struggled with the challenge of maintaining archaic mainframe systems, not always successfully. This year, Tesco Bank suffered huge reputational damage and loss of trust following a cyberattack in November that led to the bank refunding £2.5m to the 90,000 customers affected by the breach. The cause of the breach has not yet been revealed but the bank admits it has been ‘subject to criminal activity’.
All these factors are creating enormous pressure for the IT department. As well as the challenge of meeting staff demands, over half (57%) of IT decision-makers fear that the IT team cannot drive digital transformation at the speed their management team expects.
More than half (52%) of survey respondents consider integrating new applications into existing technologies is a missing skill, which is hindering their progress. This was a more acute problem for financial services organisations than any other industry surveyed in the study, which also included retail, manufacturing and the public sector. Each of these industries face their own unique challenges, which we will cover in a future edition of AVAIL.
Commenting on the findings, Keith Tilley, Executive Vice President, Global Sales & Customer Services Management, said, “The rise of new, innovative and digital-native fintech organisations is challenging the established order of the industry, with traditional institutions now being forced to confront the power of technology or risk losing market share to what they might regard as upstart competitors. Adopting the old maxim of “If you can’t beat ‘em, join ‘em”, investment in the technologies that can better enable the financial services industry’s ‘old guard’ to meet rapidly changing market demands is going to be crucial to their survival.”