New business models, big opportunity: financial services

More motivated than ever, organizations across industries are poised to cut expenses that lack a clear return on investment. It’s no surprise, then, that survey respondents highlight IT projects – all highly measurable – as priorities in their 2021 plans. Among financial services institutions, 62% are looking to increase their technology investments, and 62% plan to move IT and business functions to the cloud, up from 46% across all industries. In a recent report, Nucleus Research found that cloud deployments offer four times the return on investment than on-premises deployments.

Planning beyond the pandemic

One example of the gradual adoption of the cloud is the Guardian Life Insurance Company of America, which is now moving many of its major financial systems to the cloud. The insurer was motivated to do so – an internal study found several opportunities, including insufficient data management, a need for lower-level data for better analysis, a lack of system integration, and problems with manual reconciliation. “These issues have helped create the need for a new system,” says Marcel Esqueu, assistant vice president for financial systems transformation at Guardian. “We considered moving to the cloud about five years ago, but we didn’t think it was ready.” The company now considers cloud services to be mature enough to support the advanced features they need.

Financial institutions are also looking at mergers and acquisitions as a path beyond surviving a pandemic. In fact, according to a Reuters report, these transactions increased 80% in July, August and September 2020 from the previous fiscal quarter to reach a whopping $ 1 trillion in transactions. In the MIT Technology Review Insights survey, 41% of financial services executives say their organization has acted in a business merger or acquisition or will do so in the coming year.

“People realized that they had to consolidate themselves to create companies that are stronger and better equipped to face what the world will look like in the future,” says Alison Harding-Jones, CEO of Citigroup, in the report from Reuters.

Mergers and acquisitions have long been a way for an organization to expand its core business or even gain expertise in emerging technologies. For example, while many financial institutions are purchasing enterprise software with built-in artificial intelligence (AI) capabilities, Mastercard acquired a Canadian AI platform company called Brighterion in 2017 to provide “critical intelligence for business intelligence. mission from any data source, ”says Gautam Aggarwal, regional chief technology officer (CTO) at Mastercard Asia Pacific. The company first used Brighterion’s technology for fraud detection, but now uses it for the company’s credit reporting, anti-money laundering and marketing efforts. “We really took Brighterion and applied it not just for the payment use case, but beyond,” Aggarwal says.

Change of company, outside and inside

Indeed, organizations have had to innovate and react quickly to survive in the covid economy. In the survey, 81% of organizations across all industries have evaluated new business models in 2020 or plan to launch them within the next year. Among financial services institutions, improving the customer experience is paramount, with 55% indicating that they improve the experience they provide to their customers, compared to 35% across all industries.

That’s true for Jimmy Ng, Group Chief Information Officer (CIO) at Singapore-based DBS Bank. When physical branches closed during lockdowns, DBS customers – like other bank customers around the world – did their banking online. But some of them only did it because they had to. “The question is whether this group of people will continue to stay on the digital channel.” DBS is therefore exploring ways to retain customers who prefer in-person service, exploring technologies such as augmented and virtual reality and the 5G mobile network, which enables lightning-fast connections. “How can we enable a happy customer journey through this way of remote engagement?”

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This content was produced by Insights, the personalized content arm of MIT Technology Review. It was not written by the editorial staff of MIT Technology Review.

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