Opening New Horizons – 4 Themes for 2018

#1 – ‘Tech-Enabled Financial Products’ (or how to achieve ‘frictionless’ client experience)

We believe the journey to a ‘frictionless’ client experience is far from over.

More and more banks pitch themselves as ‘Tech companies with a banking license’ (ING CEO Ralph Hamers – August 2017, DNB CEO Rune Bjerke – March 2017) or more simply as a ‘Tech company’ (Goldman Sachs CEO Lloyd Blankfein – 2015): in 2018 and forward,  #1. Banks are tech companies.

Meanwhile,  #2. Risk Management remains core to Financial Services and, #3. Large operators are offering services platforms on most of the Financial Services value chain.

Combining those three statements you end up with a bank looking something like this:

Tech-Enabled Financial Products

Or: a bank as a company designing ‘Tech-Enabled Financial Products’, leveraging technology and service platforms while never compromising on risk management.

Looking at this model gives a pretty good indication on the priorities financial institutions can set for themselves:

1/Invest in the right tech (the one that can be leveraged on the business side),

2/ Excel at risk management (the one competency Fintech can’t build overnight),

and 3/ Optimize their “services platforms” portfolio (define the one to keep vs. the one to rent or buy).

Applying this model to financial products is a good way to design and build “frictionless client experiences”. What Goldman Sachs achieved with its individual loan offering ‘Marcus’ is telling: with superior client experience powered by technology and savvy risk management, it took just over 12 months for the offering to reach 2bn$ in lending and disrupt the market.

More on this to come, with case studies ranging from Trade Finance to Asset Management.

#2 – ‘Services Platforms’ and ‘Assets Monetization’ (or how to develop new stream of revenue?)

Beyond financial products, we also expect financial institutions to develop more and more additional streams of revenues: starting with the tech components we discussed above (white labeling solutions), but also offering entire services and processing platforms (alongside large BPO operators, financial institutions are the best positioned to develop best-in-class platforms that could push for a consolidation of some components of the value chain), and finally, starting monetizing assets such as data or distribution networks.

We are engaged with clients to identify opportunities and bring new ideas to the market.

#3 – RegTechs (or how to cope with Compliance and Regulation)

On the cost side, Banks have paid more that € 250Bn in fines since the beginning of 2008 financial crisis; often because they were neither able to monitor a great amount of data nor in a position to set up a proper compliance framework to ensure the respect of regulations.

RegTech are startup promising to addresses regulatory challenges and facilitates the delivery of compliance requirements.

Headlink Research has mapped 230+ RegTechs. Most of them are currently in the building phase, the most mature being on the Identity Management & Control and Regulatory reporting segments; the most promising aiming at automating the compliance processes.

Could it be Magic? We pulled on our experience and research to chart the path to a ‘RegTech strategy’.

#4 – Management Models Reboot (or how to ‘re-capture’ motivation?)

Lastly we believe 2018 might be the year for truly experimenting with management models and implementing new ways of working to re-capture the motivation of the talents who work within financial services firms. And, in turn, achieve and deliver more.

The ’agile way of working’, promoted by ING and inspired from companies like Spotify, is a good example of innovative model. We strongly believe it is time to test and deploy new ways of working for people, projects, departments and organizations: expectations from employees and from clients are shifting at a fast pace and technology-induced changes in day to day life at work has not been translated yet into the way organizations are operating.

We advocate testing new models and rules of the game at project, entity or business unit level first, achieving and demonstrating results that can then be deployed at a larger scale.