Three key macroeconomic trends are transforming the role of the CFO in financial services: The convergence of risk and regulation and subsequent need for a single source of truth in data, the rise of fintech (emerging business models that are asset-light, freelance-driven, and youth-favored), and a resulting pent-up demand for innovation and modernization of legacy platforms.
This phenomenon has put enormous pressure on traditional revenue streams for financial institutions. As a result, CFOs have been thrust into an unprecedented strategic role that requires complete visibility and real-time insights from all aspects of the business, and the ability to pinpoint a data narrative to guide information-based outcomes. Perhaps the CFO should really “own” the data assets. After all, when was the last time you heard the CIO report quarterly results on an earnings call?
Risk and regulation have created a new normal for standards across the industry, compelling CFOs to provide unparalleled transparency to internal and external stakeholders. These stakeholder demands, despite delays caused by unreconciled systems, must be met in real time. Data redundancy and latency often stifle the ability to garner insights needed to react to changing market conditions.
This pressure to continuously modernize and reimagine traditional business models makes it crucial for today’s CFO to be actively involved in modernization of the IT infrastructure and business applications which help carve out complexity and run simple. Finance executives would be hard-pressed to find a better strategy to thrive in today’s economic climate that is within their control.
According to a recent study by IDC Financial Insights, sponsored by SAP, six in 10 global banks are open to partnering with fintechs. While these relationships are evolving, banks still need to do more to implement key lessons learned from fast-moving competitors to achieve full digital transformation. The study found that while most banks are quick to report they are digitally savvy, most transformative initiatives are still business-led “islands of innovation” only posing as digital transformation; true business-wide transformation remains rare.
The fintech boom is ushering in nimble, unregulated, non-financial competitors designed to disintermediate financial services firms from traditional revenue streams. Addressing this trend will provide a very real opportunity to advance business by embracing a digital core.
Witness the tens of billions of speculative capital pouring into the fintech segment designed to challenge traditional revenue models. Some will emerge as true disruptors, but most will fail without the access, scale, and sway that financial institutions hold. However, let us not forget about some of the original fintechs, like e*Trade and PayPal, that have become a part of mainstream financial services. It was not that long ago that online trading and ecommerce money movement was a novel concept.
A recent study by Sapphire Ventures supports the idea that pent-up demand for innovation following the global financial crisis is palpable. Furthermore, attracting and retaining top employees is much easier in an environment where the very best are increasingly enticed by technologically advanced companies that embrace the ability to make real-time information-based decisions. Are you that firm, or are the top business schools’ MBAs still flocking to Silicon Valley?
These three macro trends compel CFOs today to seek an on-demand, fully traceable, single source of truth in a digital platform. By doing so, they will create more options for consumers, greater transparency for their stakeholders, and increased value to their shareholders, and help restore trust in the financial services industry.
Understanding the data narrative is the number-one way forward-thinking CFOs can use technology to their advantage. Once a company understands why things are changing, and not just what is changing, they are empowered to not just pivot quickly with changing market conditions, but also to innovate with a clear, outcome-focused vision.