Connecting Commerce. Financial services industry confidence in the digital environment. Written by

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1 Connecting Commerce Financial services industry confidence in the digital environment Written by

2 About the research This article is part of the Connecting Commerce research programme from The Economist Intelligence Unit, commissioned by Telstra. The analysis is based on a survey of 2,620 executives in 45 cities across 11 industries conducted in June and July C-level respondents account for 42% of the survey sample, with the balance being other senior executives. Based on the survey, The Economist Intelligence Unit created a digital cities barometer for industry to assess and compare confidence in the digital transformation environment across industries. Business confidence is a highly subjective measure of a state of affairs, based on attitudes, and is not necessarily an indication of an industry s actual level of digital development. Executives in financial services rate their overall environment for digital transformation quite highly (ranking third out of 11 industries in the barometer). They are also bullish on technology adoption as a competitive advantage. Prudential Corporation Asia, an insurance company, is rapidly looking to implement new technology for customers and agents using a mix of chatbots, artificial intelligence and increasingly extending social media platforms into new areas. Macquarie, an Australian financial services provider, is also looking to Figure 1: Overall barometer readings financial services leverage digital transformation and innovation to add value for customers. This has driven our focus in providing customers with highly personalised and intuitive experiences and to help seamlessly integrate banking and wealth management into their daily lives, says Tony Graham, head of product and technology for Macquarie Banking and Financial Services. For our intermediary clients, digital transformation is again providing efficiencies for the intermediary s business and a personalised and intuitive experience for their clients. Score (out of 10) Rank (out of 11) Indicative of the relentless focus on enhancing services for customers in financial services, new ideas for products and services (48%) was cited as the most valuable type of assistance received from external sources, whereas technology advice (44%) was the leading answer across all industries. We see ourselves as innovators our aim is to change the way Australians think about and carry out their digital banking, creating a new experience they can t get elsewhere, says Mr Graham. Overall environment Innovation and entrepreneurship rd th Financial environment th People and skills th Development of new technologies th ICT infrastructure rd 2 Telstra Connecting Commerce The Economist Intelligence Unit Limited

3 Too fast? At the same time, there is also a risk in being too bullish. There is a danger with any organisation that the rush to digital is more about following the hype than having a clear measurable set of business objectives, says Mike Usher, director of information risk and privacy at Prudential Corporation Asia. Our strategy is based essentially around putting customers at the heart of what we do and measures around customer retention, growth and platform usage are typically what is used. As in other industries, legacy systems and architectures are also obstacles to digital transformation, as they constrain the customer experience and slow down the pace of desired change for progressive financial services companies. At Macquarie, we are investing and making significant changes across our technology stack, including the implementation of a new core banking platform and investments in market leading digital platforms, which is allowing us to overcome these types of obstacles to deliver superior client experiences quickly and efficiently, says Mr Graham. Open data for business The technology alone can t support innovation, so we ve built a collaborative and start-up culture, which enables us to be swift in decision-making and improve our teams speed of innovation. This has been a huge part of the success of our digital transformation journey and helped us to create a better experience for our customers, says Mr Graham. Because our open banking platform is based on open API [Application Programming Interface] architecture, the opportunities to create new connections, integrations and customer experiences are endless, and we see really exciting potential for how this will transform banking and wealth management in the future. Such open platform initiatives are proliferating across industries, but are especially important in financial services. For example, the availability of open government data provided by city departments is considered very important to financial services to a greater extent than to all industries in The Economist Intelligence Unit s survey (39% v 31%). The main benefit of open government data, in terms of creating new business opportunities, was cited by more business executives compared with other industries (40% v 37%). The technology alone can t support innovation Security revisited There are two prevailing global trends that have a direct impact on financial services in particular. First, cyberattacks and breaches, highlighting the need to protect data and money. Second, there is a general digital skills shortage. Particularly in Asia, we face a skills shortage making the recruitment market difficult and expensive, says Mr Usher. Combined, these pose a large challenge for companies in the industry. A lack of digital security skills was the leading answer across industries when asked which type of digital skills are most needed by their organisation to support its digital transformation initiatives. However, it was considered a far greater challenge in financial services specifically (41% v 30%). Given the concern regarding security in financial services, city authorities are also said to have consulted companies in this industry regarding cyber-security frequently in the past two years to a greater extent than cited by other industries (33% v 23%). 4 Telstra Connecting Commerce The Economist Intelligence Unit Limited

4 Forging ahead Financial services companies are often pushing the envelope when it comes to digital transformation. Over the next three years, 60% of survey respondents say digital transformation will be very important to their organisation (compared with 47% in all industries). In three years I think it will be essential that fuller use of digital platforms will allow us to react quicker to customer requirements, be more flexible in offering and selecting more bespoke services and allowing greater control, says Mr Usher. At Macquarie, we want to empower our customers through more seamless and personalised banking experiences, giving them the chance to use the technology and tools they want, adds Mr Graham. In return, financial services companies expect more support with their efforts than most industries. For example, far more survey takers in the industry agree that their organisation has considered moving operations to another city to take advantage of a more favourable external environment than the overall survey sample across all industries (55% v 48%). Financial services executives are also more likely to agree that over the next three years the role of city support for digital transformation at organisations will increase in importance compared with respondents across all industries (75% v 69%). Figure 2: Professional services readings by region financial services OVERALL ENVIRONMENT ASIA 7.13 US 7.13 AUS 6.45 INNOVATION AND ENTREPRENEURSHIP ASIA 7.27 US 7.25 EMEA 6.52 FINANCIAL ENVIRONMENT US 7.31 ASIA 7.18 EMEA 6.52 Regional takeaways for financial services firms EMEA 6.38 AUS 6.38 AUS 6.38 PEOPLE AND SKILLS DEVELOPMENT OF NEW TECHNOLOGIES ICT INFRASTRUCTURE US 7.31 US 7.06 ASIA 7.02 ASIA 7.02 ASIA 6.95 US 6.94 EMEA 6.82 EMEA 6.76 EMEA 6.68 AUS 6.12 AUS 6.56 AUS Asian and American executives (tied for first) rate their overall digital transformation environment higher than those in Australia and EMEA. Asian survey takers rate their digital transformation environment in the innovation and entrepreneurship and ICT infrastructure subcategories higher than all other regions, indicative of regional progress in those areas. American executives rank first in three out of five subcategories: financial environment, people and skills, as well as development of new technologies. Respondents from EMEA and Australia consistently rate their environment as less supportive overall and across all subcategories. 6 Telstra Connecting Commerce The Economist Intelligence Unit Limited

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