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April 18, 2016updated 28 Mar 2017 4:14pm

Financial services see the threat, and the promise, of emerging tech

By John Oates

The pace of technological change creates challenges for all types of business.

Financial services is one area which has always been at the forefront of technology adoption – partly because of competition and partly because it often has the human and financial capital to invest.

But despite this track record of early adoption there are major challenges for financial institutions.

Firstly any technology use be it for trading or for communicating with customers is likely to bring attention from regulators. Use of mobile phones by traders in banks for instance has only just been officially approved. They way banks communicate with customers whether via website, email, social media or text message is all subject to regulation.

The pace of change is now so fast that increasing numbers of financial chief executives are worried that emerging technology might fundamentally challenge their core business.

A recent survey chief executives in banking and capital market institutions from PwC found 81 per cent of CEOs regard the pace of technological change as a major threat to their business.

They fear technology will allow new entrants into markets which have traditionally been effectively ring-fenced and protected.

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Mobile payment providers for instance can quickly reach a scale and critical mass which took bank and credit card systems many years to achieve.

Despite fears that technology is removing traditional barriers to entry in banking and financial services the pace of change is also bringing benefits to these businesses.

CEOs recognise that technology can transform and deepen relationships with customers. Proper collection and analysis of data surrounding customer engagement can improve predictive abilities and acclerate improvements to customer service.

These changes also increase demands from customers who, in the age of Twitter, expect far faster solutions to their problems.

Executives identified CRM systems as the area where technology was having the most impact. In second place was data and analytics followed by systems relating to social media and engagement services.

PwC researchers found that these technological changes are leading to changes in the structure of financial institutions as well as changing demand for the type of staff they need.

PwC said:

”The need to keep pace demands a flatter and more flexible organisation, which can interpret digital intelligence as it comes in and rapidly mobilise around market openings. It also requires more people who combine banking and digital skills. Few as yet possess these hybrid capabilities. Competition to attract them isn’t just coming from traditional peers, but also FinTech start-ups and technology groups looking to develop their presence within the financial services market. Little wonder then that 72% of BCM CEOs see the limited availability of key skills as a threat to growth.”

But the speed of technological change is not all positive – security issues have not disappeared.

Cyber crime remains a concern for 74 per cent of chief executives surveyed.

Brian Moynihan, chief executive of Bank of America, told PwC: “As technology transforms our company, the risk of intrusion and cybersecurity worries us the most. Now, we’ve spent serious amounts of money on this, but the reality is you’re never done. As much as we used to think about protecting our physical assets, it’s the same today with our non-physical assets.”

Banks are working together not only to improve cyber security but also to improve public policy and regulation.

Bank bosses recognise that the only constant they can count on is a state of constant change.

There’s more on the PwC research here:

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