It can be said that the banking industry is going through a phase of radical modernization and technological change, transforming how finance delivers value to their customers.
Technology is simultaneously disrupting and enabling banking and finance at the same time. The barrage of fintech startups entering the industry is posing both a threat and an opportunity to incumbent organizations.
How the CFO chooses to adopt new digital technology is a strategic decision that will define an organization’s position in the market and its future success.
Ride the wave of technology change
CFOs who refuse to get with the times can expect to watch their organizations deteriorate and perish before their eyes. This is an extremely bold statement, but current events prove this to be true.
The current wave of technological change is not just a simple upgrade of existing systems and processes. The impact of digital technology now is re-defining the entire financial landscape such that new players are replacing large incumbent players in what used to be their fields of expertise.
Tech companies are now encroaching on the banking and finance market, such as Amazon who now offer loans to SMEs, Facebook and Apple enabling p2p cash transactions, and e-commerce Alibaba and Rakuten providing assets and securities services, to name a few.
These companies are able to offer fast and innovative financial products and services as compared to traditional banks that are limited and constrained by old technology and rigid processes.
In addition, the openness of the market to try new financial services should also drive CFOs to keep their organizations up to speed with digital technology. A study from McKinsey found that 73% of US millennials say they would be more excited about a new financial service from Amazon, Google, Square, or Paypal than from their bank.
Finance-enabling technologies to shape new business concepts
Innovative technology that enables new capabilities in finance are becoming more prevalent as industry leaders begin to leverage them as an advantage towards incumbent competitors and as response towards new players.
Optimization of Data Assets
Traditional banks and financial services organizations own vast amount of customer data that new fintech players don’t have. Data consolidation efforts of customer and fragmented financial databases can drive better analysis, more accurate forecasts, and more complex KPI algorithms that will improve strategic planning and decision making.
Therefore, organizations should stop manual data consolidation which is not just slow and tedious, but also very risky, as new technology now exists to automate the consolidation process towards attaining a “single version of truth”.
Extending the traditional server room to the cloud opens a world of sophisticated cloud products that can facilitate the streamlining and automation of business processes. This could mean faster turnaround time, and increased responsiveness and agility to market movement.
While traditional banks prefer having their servers to be on-premise, cloud technology offers low entry barriers and scalable architecture that organizations should take advantage of.
Banks, financial services, and fintech organizations can collaborate to accelerate the development of emerging technologies such as blockchain, distributed ledger, artificial intelligence and robotics to name a few.
These promising technologies are expected to improve efficiency and effectiveness of processes, as well as to create new products and services. However, organizations need to work together to establish a global set of standards and legal framework, as well as to provide valuable use cases and practical training.
While there are still some challenges that need to be solved for these technologies to become mainstream, being involved in these initiatives will define the CFO and organizations as innovations leaders of the industry.
Knowledge acquisition for finance professionals
Navigating these new territories of digital technology can be challenging. However, being pro-active in learning about these new technologies is a necessity, rather than an option, for finance professionals.
Citigroup reported that an estimated of 2 to 6 million jobs could be lost in banking across the U.S. and Europe over the next 10 years. While this could be caused by multiple reasons, industry professionals recognize that the timing of occurrence is not just a coincidence.
To stay ahead of the curve, finance professions including managing directors and CFOs from the world’s biggest banks are enrolling in fintech courses offered by top universities such as Oxford University through GatSmarter, and other online learning platforms.
Leveraging on existing strengths
While fintech companies may have technology playing to their advantage, traditional banks and financial services company also have strengths that they could use to their benefit.
For instance, people are generally still more willing to give personal information to banks rather than to fintechs. Think about it– Have you ever thought twice about giving your Social Security and other such information when filling-up at a form in a bank? What would you feel if Facebook asked you for this information? That said, banks have an upper hand in garnering the feeling of trust and security. This is valuable data that could be used for multiple cases such as data analysis, customer targeting, product development, etc
Banks also have advantage over tech companies in their knowledge and skill in compliance, risk management, and financial regulations. In fact, tech new comers in the finance industry recognize that this is slowing them down in terms of speed to market. They have the products and services, but are not totally compliant yet. Therefore, CFOs should take this time to innovate and modernize their tech in order to prepare their organizations for the new wave of competition.
How PARIS can help
CFOs are expected to be strategic leaders rather than merely finance controllers.
Organizations need new capabilities in order to successfully implement finance-led integrated business planning. This means that existing systems and financial infrastructures must be able to interact and operate with each other in order to utilize the most data for analytics and monitoring.
Likewise, CFOs need to spend more time on rolling forecasts and performance-first planning. Both require collaborative efforts from multiple business users for continuity.
PARIS Technologies Inc. is an expert in data and platform consolidations, system implementation, and offers flexible custom solutions that facilitate collaboration among users in the organizations.