Digitalization of the Financial Services and the Impact to the Industry and People
The financial services in Malaysia are going through one of the most challenging times in history. With tighter regulations being enforced for financial prudence, the industry is also trying to cope with the ever changing demands of customers. As margins are eroded, the financial services players have to find new channels to optimize the margins that are left. Technology has progressed so fast that now applications are more nimble. Banking channels are becoming more “lightweight”. From traditional “brick and mortar” layout, banking channels are now as “light” as the technology allows it. Channels are getting smaller, to the size of a palm.
Digitalization or digital transformation (also known as DX) is more than just adopting cloud, social, mobile or big data technologies. It is about using technology to create new values or change the business model. Digitally transformed businesses typically create an ecosystem where all market participants and consumers participate.
Digitization, on the other hand, is the enablement of digital tools to improve efficiency and productivity, hard paper documents become PDF or HTML pages. The sales force can be empowered with a mobile device. Gone are the days where product information sheets and application forms were the norms. Today, all such information has already been digitized and can be easily displayed via a simple mobile device.
Most of the financial services providers have started to embrace this new technology. Some financial services providers are way ahead in this curve as they recognized the importance of digitalization in the ever changing business environment. Faced with obstacles for being the “hero”, these financial services providers are also the first to reap the new opportunities arising from these endeavors.
There are some financial services providers that have taken on a back seat approach and observe the developments in this digitalization space. This is probably a safer approach given the risks and costs involved. On the other extreme end, there are also financial service providers who have yet to embark on any digitalization strategy. However, this does not mean they will not be able to leapfrog ahead once they have strategized their digital strategy.
Questions arose on the readiness of the workforce to embrace digitalization. The financial services industry has many legacy systems which have to be compatible to the new digital technologies. Some of these systems are so complex that any integration to the legacy is almost not feasible. Hence, the workaround to ensure the integration is made possible. In worst cases, it is almost not possible to do anything other than to change the legacy systems.
New technology means new skill sets’ to be acquired. At times, it is rather difficult to change certain mindsets to adopt new skill sets. With so many changes happening on the technology side, it is not surprising to see resistance from all levels in the organization. There are new responsibilities resulting from the digital transformation affecting the whole organizations.
The key to survival in the digital transformation is to be able to adapt to the changes and adjust accordingly. CIOs have a heavier burden to lead the transformation and at the same time, adapt to the new responsibilities. While putting in the right technology will spur the efficiency of the organization, it is the people factor that will ensure the success of the technology implemented. An effective change management strategy will ensure the workforce is assimilated into the planning, implementation and rollout of the new technology. This will help with the buy in and acceptance of the workforce on the new technology implemented. Ultimately acclimatization and adaptation phase will be made easier.
In a recent IDC survey, 60 percent of organizations with a digital transformation strategy will create an independent corporate executive position to oversee the digital strategy implementation by 2017. New positions such as CDOs (Chief Digital Officer) will be a norm as organizations differentiate the roles of IT and Digital.
It’s a matter of time before we see the impact of the disruption to the financial services. One can now practically get a loan without going to a physical bank. There are new financial players in the digitalized world offering non-traditional products under new terms which are unheard of in this traditional conservative industry. The uberization of the financial services is going to be a norm as consumers become smarter and more demanding of the financial services.
We have seen how Pokemon GO had mesmerized and captured the attention of all players, be it young or old. A simple game made available over mobile devices is able to attract, capture and retain the attention of its players. Digitalization of the financial services will also be able to attract, capture and retain the attention of its customers. Are we prepared for it?