We live in interesting times. Technology is disrupting every industry, and financial services is no exception. New business models and emerging technologies are making it more convenient for consumers to manage their finances, and harder for traditional firms to keep up with customer expectations.
Institutions must continuously innovate to stay ahead of new types of competitors. In PwC’s Global FinTech Report, 88 percent of executives surveyed reported that part of their business is at risk due to standalone fintech (financial technology) companies, and 77 percent of them will increase their internal innovation efforts over the next three to five years—choosing to become self-disruptors rather than the disrupted.
Financial institutions rely on customers’ share of wallet to generate revenue and thus strive to provide a great customer experience. So when it comes to innovation, many financial organizations focus solely on optimizing the customer experience.
Yet firms should be evaluating their internal systems with just as much scrutiny. For one, customer experiences are determined by all of their interactions with a company—not only its products and services but also its employees. IBM’s global study on financial services workers revealed that positive employee experiences can improve employee performance, discretionary effort, and retention. The study found the key driver of employee experience is meaningful work, in which their skills and talents are fully utilized and they feel aligned with the company’s core values.
“Firms need to be able to help employees align their goals with team and firm goals, and identify opportunities for career development.”
To improve the employee experience, a firm must be able to engage and enable its employees—both on the front lines of customer communications, and those working behind the scenes to keep the business running. That’s why consumer-grade technology experiences, both on mobile devices and the desktop, are just as important for the employee as they are for customers. Employees need easy access to the information they need to do their jobs, so they can focus more of their time on meaningful work and not get bogged down by outdated, error-prone systems that require manual processes and repetitive tasks.
As the IBM study notes, financial services workers must fully utilize their skills and talents to have a positive employee experience. To enable this, firms need to be able to help employees align their goals with team and firm goals, and identify opportunities for career development.
Outdated internal systems are not likely to have been designed with performance enablement in mind. As organizations shift from performance management to performance enablement—moving from performing top-down backward-looking reviews to enabling each employee’s ongoing performance and career—they’ll need an agile system that can adapt to support employee-centric practices.
What’s more, to really move the needle on business performance, institutions need to be able to analyze data across the organization and shift from being reactive to proactive. For example, what if an institution could compare historical data on a branch’s people, finance, and operations to determine the factors that contribute to its performance? If a firm knows certain skills or background experiences could contribute to better performance, it could do a better job of hiring and developing talent to support its goals.
In another example, while loan officers analyze the same type of data to determine credit worthiness, they also rely on supplemental information that may differ by applicant or location. Without a collective view of credit standards, employee performance, loan performance, and branch performance, organizations can’t determine what factors contribute to fewer charge-offs or better loan officers. This is only possible if people and financial data, as well as data from other sources, is accessible, with the right analytics tool in place to gain these business insights.
Digital disruption or not, financial services remains a heavily regulated industry, and firms often associate innovation with risk. While risk mitigation should continue to remain a high priority, failure to innovate may be even riskier. McKinsey reported more than three years ago that legacy financial institutions will see profits decline 20 to 60 percent by 2025 if they fail to evolve digitally.
“Cloud technologies allow firms to operate at a scale and elasticity that isn’t possible with legacy systems.”
Fortunately, there’s always room for innovation, and more established companies have some advantage. While they may not be as nimble as their new competitors—many of which are technology-first organizations—incumbents often have stronger compliance controls in place, allowing them to better manage risk and innovate responsibly.
Cloud technologies allow firms to operate at a scale and elasticity that isn’t possible with legacy systems. Modern cloud solutions provide an intuitive, scalable platform that can quickly adapt to emerging security threats and release new features and fixes as needed. In fact, Workday’s single security model provides always-on auditing and encryption for all analytics and transactions.
And as regulations change and agencies provide updated guidance, cloud providers can update their software services to remain compliant, without imposing an upgrade burden on the customer. Adapting to new rules and guidelines is more manageable if processes and systems can be updated in the cloud rather than on a multitude of systems or different versions of a system. It’s no surprise PwC predicted that the cloud will become dominant infrastructure model in financial services.
The technology landscape is ever-growing, as are customer expectations. As your firm innovates to keep up with changing needs, don’t overlook those of your own employees.