Braving the tectonic shift: how financial services CIOs can lead in a period of rapid change and disruption

Nikhil LeleNikhil Lele, Principal – Financial Services, EY, on how CIOs can drive transformation and reimagine business models with Fintech

Financial technology firms (Fintechs) and hi-tech start-ups have ushered in a new era of technology-driven innovation to the financial sector; innovation that is enabling, enhancing and disrupting virtually every aspect of the financial services value chain. For example, wealth managers now have to contend with “robo-advisor” platforms that have automated and created new levels of fee transparency for investment advice. Peer-to-peer lenders are able to provide credit and liquidity to individuals and small businesses that are difficult for the large banks to serve profitably. “Mobile-only” banks are evolving the fundamental business model of banking by enabling truly personalized client experiences across different life stages and financial needs.

Due to this wave of continual innovation and change ushered in by more than 5,000 Fintech firms globally, incumbent financial services companies are increasingly under pressure to adapt their business models, or risk being left behind. Fintech firms are operating in ways that bring more transparency, more digital capability and more personalization to the end customer. This is reshaping the way in which financial services companies need to serve their customers, meaning they may have to raise their game to match the pace, level of personalization and digitization capabilities that Fintechs can bring.

The playbook for the CIO’s role in continual innovation

The transition to becoming technology-driven and customer-led demands a new set of capabilities and ecosystems that financial CIOs need to adopt. CIOs seeking to lead in this era of rapid change and disruption can benefit from the following:

    • Reimagining the business requires a holistic venturing playbook. Each part of the value chain requires a potentially different approach to innovation and transformation. In some instances, acquiring a Fintech can help to create a sustainable competitive position, while in others, partnering, alliances, white labeling or JVs could present more advantageous strategic opportunities. CIOs can support by helping identify and evaluating options and approaches for evolving the business model across the entire value chain.
    • Digital delivery is about ecosystems, not just processes. Traditional software development processes have typically been linear and internally focused. While adoption of methods such as Agile, DevOps and Continuous Integration make this equation more dynamic and iterative, they can also require the CIO to look at development as a community- and customer-driven process. This means creating ecosystems that allow customers to develop their own customized capabilities on the platform, which implies that the new way forward will be about integration of customer-driven development, Fintech platforms, internal development, and underlying architecture and engineering stacks. This helps create a next-generation digital delivery strategy that puts development and innovation in the hands of customers.
    • A continuous view of the horizon is critical to stay ahead of trends. Over 5,000 Fintech firms are innovating rapidly, and dozens of new firms are entering the market every week. Keeping abreast of these allows CIOs to gain foresight and insight into emerging disruptions or competitive opportunities. Establishing a formal digital intelligence capability allows continuous scanning of the horizon, identification of meaningful indicators and pre-emptive disruption.
    • Innovation culture sits at the core of transformation. Digital transformation and innovation cannot achieve its intended purpose or be sustainable unless there is equal focus on evolving the culture of innovation as organizations do on actually innovating. Culture sits at the heart of enabling a shared sense of purpose, passion and customer-focused thinking. CIOs who champion a culture of innovation that enables the organization to drive the required speed, pace, focus and risk-taking posture can help develop world-class innovation organizations.
    • Talent is both the biggest scarcity and the biggest opportunity. Generational shifts toward the millennials, as well as the war for talent between incumbent firms and start-ups, is creating an environment where the “right” talent is a very scarce resource for most financial firms. People who are capable of harnessing the true power of digital innovation and emerging technologies are looking for environments that provide ability to take risk, see and earn the impact of their work, and work on the cutting edge of the industry. Skills such as engineering, digital design and applied analytics are in high demand, and financial firms must compete to win in this talent war. Creating this type of environment has posed a significant challenge for most financial institutions. CIOs that look strategically at their current talent models, roles, operating structures, and incentives systems will be better placed to drive sustainable results through digital transformation.

Financial services organizations, now more than ever, look to their CIOs to act as agents of change, continuously innovate and drive business model transformation. IT sits at the epicenter of how financial services firms seek to create sustainable, profitable businesses of the future. Now is the time for CIOs to help their organizations reimagine the business of tomorrow and drive the transformational change required to sustain advantage for many years to come.

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