Is the pace of change really accelerating, or does it just feel that way?
The answer lies in your perception. If a new technology doesn’t directly impact you, then its existence and evolution mean little. But when a change occurs that invades your life or your business, then it rightfully grabs your attention.
Recently I delivered a keynote presentation on “Five Forces of Digital Transformation” at the American Bankers’ Association Insurance Distribution conference. During my presentation, I asked the audience a series of questions to engage them in our topic. Their responses, and the ensuing discussions, indicate financial service executives are on high alert to the massive and potentially disruptive changes impacting banks and insurers, driven by consumers and enabled by technology.
Seventy-three percent of conference participants indicated that a very small percent of their sales, under 10%, are delivered digitally today. Yet there is keen interest in preparing their firms to meet the increasing demand for seamless digital delivery, transparency, and responsiveness. This increase will require bank and insurance executives to embrace the technological innovations transforming their businesses and successfully lead their firms into the future.
While all these forces are technology-based, addressing them isn’t solely the responsibility of your IT team. At tech-forward financial institutions, everyone from executive leaders to customer service employees is investing time and resources to understand the forces disrupting their business. Active participation in the technology decisions that impact sales teams requires that leaders expand their interests from the day-to-day work to discover how technology can position them for the future.
- Hyperconnectivity – People and machines are now connected in fascinating ways through a variety of telematics and IoT (Internet of Things) devices. Fifty-five percent of conference participants responded that they expect connected devices to be a driver of revenue growth in the next five years.
- Supercomputing – Predictive analytics, also known as supercomputing, utilize data from multiple sources and can provide a single source of the truth about the true value of any individual customer, what their needs are, and when they are most likely to make a purchase. While only 37% of conference attendees indicated that their firm is able to find meaningful insights in their data today, there is a widespread recognition that much more can be learned from their data. Nearly 40% are evaluating how to better leverage the power of predictive analytics to personalize and target their distribution efforts in the future.
- Cloud computing – Most legacy computer systems cannot move at the speed that today’s hyper-connected finance world requires. IDC anticipates that within the next five years over 90% of all IoT data and two-thirds of all work will be hosted in the cloud. The questions I hear most often are no longer focused on concerns about the security of the cloud; instead, I’m now asked, “How quickly can we get to the cloud?” and “How can the transition be accomplished as simply as possible?”.
- Artificial intelligence – We anticipate that artificial intelligence will drive over $34 billion dollars a year in cost savings and new revenue in the financial services industry alone by 2025. And while there are some concerns about AI eliminating jobs, Accenture suggests that the least likely employees to lose their jobs will be customer-facing employees. Financial advisors and insurance agents who emotionally connect to their clients may provide a unique differentiator for firms to grow revenue, while significant cost savings may be found in replacing routine, paper-intensive operational activities with robotics process automation.
- Customer-centricity – The cornerstone of any financial firm’s distribution strategy must be customer experience. Consumers no longer judge banks and insurance companies against their peer institutions. Instead, they evaluate them against their experiences with technology advanced firms like Uber and Amazon.
Ray Kurzweil, acclaimed author, futurist, and director of engineering at Google, said it well in his essay “The Law of Accelerating Returns“: “So we won’t experience 100 years of progress in the 21st century – it will be more like 20,000 years of progress at today’s rate.”
Today’s financial service companies will have to reinvent themselves at a faster and faster pace, as will their leaders. Regardless of whether you perceive the pace of change to be moving too fast or too slow, its critical to be as well-informed as possible to ensure your team is prepared to embrace the changes when they impact your world.
For more on digital transformation in finance, see How Effective Is Your Finance Organization In Developing New Digital Skills?