AKG’s Guy Vanner looks at the challenges surrounding technology in the financial services sector for 2019
It is easy to see that the world today is full of questions. Questions that need answers, but for which either coming to an answer or enacting that answer is anything but easy.
This is true in many spheres of life; the political, the environmental and the social to name but a few. And it has been true of late in the financial services world.
Throughout 2018 and in fact for some time before, the financial services sector has writhed and wrestled with questions of technological change. For example:
- What is coming down the track?
- What is emerging from new developments elsewhere and from new entrants?
- What do customers now expect?
- What are the best and most appropriate ways to engage and maintain contact with different groups of customers?
- Is trust being enabled or destroyed by smarter tech and use of data?
- What is robust and what/where are new threats?
- What can be automated?
- Which is better? staff or algorithms, or a combination of both? And then:
- When could technology costs be matched or surpassed by scale wins?
- When is the payback (return on investment)? Some of these tensions or unanswered questions are manifest in the process – or perhaps better put another way, in the ‘pain’ – of re-platforming, which we have witnessed during the last year and beforehand.
To invest or not?
The question of whether to re-platform or not, or more broadly to invest (often heavily) in new technology has been a key consideration for so many financial services businesses during the past few years.
Digital capability is prevalent both in opportunity and in expectation, making it a pivotal aspect in both longer-term strategic and more immediate operational terms.
Digital capability is prevalent both in opportunity and in expectation, making it a pivotal aspect in both longer-term strategic and more immediate operational terms
A question that AKG asked in adviser market research back in 2018 is illustrative of this. Albeit asked specifically in the context of the pensions/retirement market post-pension freedoms, the principal learnings can be considered more widely.
The top three areas (all relatively close) are perhaps not too surprising – service, solutions themselves, and strength – as they have been longstanding must-haves and key due diligence requirements.
But together with the fourth ranked element, the ‘digital/technology’ component, what is most striking is their level of interconnection or indeed interdependent nature.
The appropriate use of digital technology or rather getting its use right will be key to: (1) quality of service; (2) attractiveness of product solutions; and (3) the ability and strength to maintain operational sustainability.
Getting it wrong, either through not doing enough or doing it too slowly, or backing the wrong technology or direction, can similarly be a key detriment and similarly common to all.
This is particularly true as most companies have now moved away from ‘waterfront’ product provision and, notwithstanding some spread across the value chain by way of vertical integration for a number, the need to be at or near the forefront of proposition innovation and capability, in the specific niche areas in which each company now focuses, is heightened.
So, while we all face tough questions in our own lives and we witness them all around us, perhaps some of the most challenging questions in financial services sector terms in 2019 remain those in relation to technology and the big calls that are having to be made.
This dynamic will be key for AKG in our assessment work as we look at the position of companies and look forward in terms of their sustainability – something that is relevant in each of our sectors of focus: providers, platform DFMs and offshore life companies. All of which face technological questions for the success of their service offering, proposition and indeed long-term strength and sustainability.
Guy Vanner is managing director at AKG