The financial services industry is going through significant transformation, as the COVID-19 pandemic triggers a move away from the mindset that physical channels are of prime importance to customers.
Digital channels have seen a surge in use across the world. Perhaps the most ubiquitous example is the rapid growth in digital payments and online transactions for banking, asset management and other financial activities. At the same time, the function of physical channels has also shifted towards enabling omnichannel transactions to offer more options to consumers.
There is a growing focus on improving customer experience through personalisation. As banks and financial institutions seek a better understanding of their customer, they are realising that data is one of their most crucial assets. Personalised dashboards, for example, have become a norm with spending insights and gamification modes to encourage the habit of saving and wealth planning. In Asia, governments are also working towards creating platforms to encourage data sharing to take place under regulated conditions.
In this interview with Asian Banking & Finance, Anton Ruddenklau, Partner, Head of Financial Services, KPMG in Singapore, identifies four trends that will define the financial services industry:
- Environmental, Social, and Governance (ESG) aspects will be pervasive throughout value chains and will significantly change the allocation of capital across our economies.
- Governance, risk and compliance (GRC) factors will continue to expand as the industry remains trusted by our communities, regulators and customers, eventually becoming data-led.
- Data will drive the transformation of functions, services and business models. In particular, the rise of low-cost data-driven platform businesses (challenger fintech companies) offering differentiated banking and financial services could threaten the cost lines of banks. Legacy firms may have to halve their cost base to remain commercially viable. They will also challenge cycle times with real-time service provision becoming a table stake, only adding to already rising consumer expectations.
- Financial institutions' operating models will too become digitally connected and more adaptable. For the industry to remain viable, large pools of talent will need to be injected from other industries into financial services.
Ruddenklau also discusses how banks and financial institutions may effectively leverage technology to gain a competitive edge, while identifying new opportunities that are emerging in the turbulent wake of the COVID-19 pandemic. The biggest among these opportunities are embedded finance and its platform variants. This requires rethinking journeys and ensuring they are about the lifestyle activities or business processes that generate demand for any type of financial service.