Financial Services in an era of Exponential change. Oracle Open World October, 2015

Transcription

1 Financial Services in an era of Exponential change Oracle Open World October, 2015 D E L O I T T E CDO EN LSO UI TLT TIE NCG OLN LSP U LT I N G L L P

2 Executive Summary

3 EXECUTIVE SUMMARY The Financial Services industry is undergoing a rapid transformation, forcing an entire rethink of existing models Accelerating Technological Advancement Transforming Customer Expectations Changing Regulatory Strategy and Objectives Forces for Change Broader accessibility of products and services Automation of once highly manual activities Increased market transparency and efficiency Leveled playing field for small and mid-sized firms to compete Emergence of non-traditional competitors (e.g., Apple, Google) Empowerment through digital connectivity Increased information access and products options Ability to obtain / share financial advice without intermediaries Ability to generate funding without intermediaries Need for greater capital levels Increased oversight on data security Fee caps leading to impact on traditional revenue models Uncertain response to cryptocurrencies and non- traditional competitors Key Questions for the Financial Services Industry The Game is Changing Traditional approaches of how: You interact with customers You operate internally You interact with other financial institutions and a broader ecosystem of players... Need to change in order to: Create enduring competitive advantage Increase margins and value for investors How will empowered, digitally connected consumers choose you over a myriad of other providers? How will automation and commoditization of high-value activities and broader accessibility of financial products change the role of traditional financial institutions? What relevant partnerships will need to be established to compete effectively? How will regulatory oversight affect the launch and growth of new business models? What role will human capital play in the transformed future? What strategies need to be developed in order to future-proof business models? 3

4 Pace of Innovation CONTEXT The industry is being transformed at an exponential rate, opening the door for disruptive innovations to take hold Technology Innovation Where Exponential Technology is now Where Exponential Technology is headed Time (Years) Today As the speed of technological change accelerates, the intersection of exponential technology and linear business performance will: Change customer expectations Change industry economics Change the competitive landscape as a whole

5 What does this ultimately mean for the business of banking?

6 Playing to Win MIND-SHIFT

7 PLAYING TO WIN Why do Firms exist? is a question that has been around since 1937:? 7

8 PLAYING TO WIN Digitization is reducing friction and challenging the nature of the Firm DIGITIZATION Dematerialization Democratization De-monetization Reduction in technology costs has enabled the growth of digital providers, including advent of branchless banks Crowdfunding and P2P lending have democratized access to capital Automated investing services bring low-cost wealth management services to mass market customers 8

9 PLAYING TO WIN forcing a rethink of the traditional organization The Traditional Enterprise Producer Agent Creator Infrastructure Management Customer Relationship Management Product Innovation Management The only reason these functions with very different economic, competitive and cultural imperatives exist in the same place is because the internal interaction cost is lower than the external one In an era of Digital disruption the historic benefit of scale economies now seems to be a hindrance 9

10 PLAYING TO WIN So Leadership need to work out where scope and agility are creating new avenues for growth and where scale is a disadvantage FinTech scaling and disrupting industry economics Unique avenues for regional banks G-SIBs strategically down-sizing Technological change enabling scale (e.g., mobile internet, cloud computing, digital currencies) Digitization enabling broader geographic reach than brick and mortar counterparts Alternative source of capital enabling scale (e.g., Lending Club, Paypal, Betterment) Focus on market niches and specific customer needs, enabling agility Increased ability to reach mass market (e.g., via automated advice, insights-driven lending) Not bounded by legacy infrastructure What you have Strategic agility Business model dexterity What you know Industry Customers Region G-SIBs reshaping their business to counteract regulatory requirements: Products: Reducing exposure in nonoperating deposits, trade finance etc. Businesses: Likely to exit certain sectors (e.g., OTC clearing) Clients: Likely to exit low ROE segments (e.g., small business) Simplifying operations by eliminating non-performing assets 10

11 MINDSHIFT Create a shift in leadership s mental model to allow for a change in business model KEY ACTIVITIES Expose leadership to new insights to create a shift in perspective and generate interest in Exponential innovation and transformation Create an environment for divergent thinking and understanding of Exponential trends Identify Exponentials trends relevant to client and sector OUTCOMES AND DELIVERABLES Intense ambition for transformation Connectivity across the executive team resulting from group and individual processing of Exponentials Alignment on priority themes relevant to client industry and sector Clear platform to action 11

12 Playing to Win FOCUS

13 WHERE TO PLAY: NEW MARKETS PLAYING TO WIN Banks must be explicit about their activity and resources across different ambition levels TRANSFORMATIONAL 10% CORE ADJACENT 20% 20% 70% Average balanced portfolio Key TRANSFORMATIONAL Developing breakthroughs and inventing things for markets that don t yet exist 70% 10% RETURN ON INVESTMENT HOW TO WIN: INNOVATION ADJACENT: Expanding from existing business into new to the company business CORE Optimizing existing products for existing customers Investment Allocation ROI 13

14 WHERE TO PLAY: NEW MARKETS FOCUS Engage in disciplined and structured analysis to determine the right balance for your portfolio KEY ACTIVITIES OUTCOMES AND DELIVERABLES Identify disruptive intersections between Exponentials and your sector, including analysis of opportunities and threats at intersections Develop concept options for 2-3 potential ideas at each disruptive intersection Test, refine and validate of potential concepts Define business model change strategy, including clear Where to Play and How to Win choices Perspective on future market evolution across a range of scenarios Priority set of potential opportunity spaces and portfolio of potential ideas within spaces Clear set of strategic Where to Play / How to Win choices Implications of Desirability, Viability and Feasibility for 2-3 new business concepts Concept pitches for 1-2 business ideas HOW TO WIN: INNOVATION 14

15 Playing to Win EXECUTE

16 PLAYING TO WIN Banks need to execute on strategy with clear governance and dedicated resources Moving from. Moving to. PRODUCTS PLATFORMS SILOS ECOSYSTEMS SEGMENTS CLIENT NETWORKS 16

17 EXECUTE Execute on strategy with clear governance and dedicated resources Identify key capabilities required, including network and partner assessment (if needed) Ratify clear governance structure Develop and validate business case and roadmap for investment Identify and deploy dedicated resources for implementation and capability development Prototype, pilot and launch concepts based on market realities Moving from. PRODUCTS Moving to. KEY ACTIVITIES PLATFORMS OUTCOMES AND DELIVERABLES Capability, client network and partner assessment Clear governance structure and success metrics Business plan, financial model and scenarios Operational and roadmap implications Dedicated resources with appropriate skillsets Product platform development and implementation; integration with existing product platforms SILOS ECOSYSTEMS SEGMENTS CLIENT NETWORKS 17

18 Closing Thought?