Despite the challenges and disruptions of COVID-19, the regional Financial Services Industry (FSI) has continued to forge ahead and accelerate the pace of digitization in response to the pandemic, according to findings by Microsoft-IDC.
Unveiling the FSI findings of the culture of innovation study in conjunction with Singapore Fintech Festival 2020, the Microsoft and IDC’s studyfound that more than 6 in 10 (66%) FSI organizations are accelerating digitization of their businesses.
This figure rises to 86% amongst FSI Leaders, organizations who have the most mature culture of innovation, defining their ability to drive sustained innovation.
Based on the survey of 597 regional business decision makers in FSI across 15 markets in Asia, within a 6-month period, before and since COVID-19, the sector was found to be ahead in its ability to innovate in response to challenges.
Specifically, 70% of all FSI organizations in Asia Pacific say that innovation is now a “must” and almost all FSI Leaders (96%) agree and are actively putting this into practice.
“One thing is clear: the industry’s rapid response, reflected in the increase of maturity in adopting a culture of innovation, across people, process, technology and data practices, has paid dividends,” explained Connie Leung, Regional Business Lead, Financial Services, Microsoft Asia.
“FSI Leaders, in particular, expect to thrive amid the crisis, with 53% of them expecting to increase their market share despite the pandemic and 86% further accelerating digitization in response to the crisis.
“We are definitely seeing this take shape within the industry, with organizations like Bankwest, investing in self-service solutions to improve the customer experience at a time where customers are expecting meaningful connection despite social distancing,” continued Leung.
Apart from relying on innovation, the study also revealed that FSI organizations are deriving high revenue shares from digital products and services — this stands at 39% currently and is forecasted to rise to 52% in three years. This is much more so for FSI leaders, where this stands at 47% today and expected to rise to 57% in three years.
This is evident in the examples of Indian fintech start-up, Paisabazaar, which introduced a new digital service to digitally overhaul the personal loan application and approval process amid the pandemic, as well as banking groups like Standard Chartered Bank andNational Australia Bank which have taken steps toward a cloud-first digital strategy, to make virtual banking, next-generation banking and payment services a reality for customers.
Assessing the Innovation Maturity of FSI Organizations
During COVID-19, FSI organizations matured in their approach toward innovation. This has included the swift pivot of business processes to raise customer experience and centricity and embracing data management insights to enhance the speed and quality of decision making. In addition to that, FSI organizations have integrated cloud technologies to ensure business continuity during a time of remote working and living.
The study confirmed this, and found that in the span of six months, Asia Pacific’s FSI organizations have matured in the culture of innovation by 12%, which indicates an increased ability to drive sustained innovation.
FSI organizations have improved their sentiments on innovation with 61% of FSI leaders agreeing that innovation is easier since COVID-19. Other FSI organizations have also embraced a more positive stance, with 52% agreeing with this statement.
“FSI has maintained its lead, based on our findings, and was assessed to be the most innovative vertical, with the highest culture of innovation maturity score, and the highest proportion of leaders and verticals,” said Michael Araneta, Head of IDC Financial Insights, Asia Pacific.
“What has been most interesting is that large FSI organizations — the incumbents — are not necessarily laggards in the space but on occasion, credible leaders with a mature culture of innovation.
“On the flipside, the prospects of some challenger banks are already dimming in some markets, as they have not been able to address sources of funding despite previously having good prospects when it came to their services in payments, and lending,” continued Araneta.
Best practices from FSI Leaders for the new year
The study revealed the best practices that organizations can adopt, referencing the culture of innovation framework, for progress across people, process, data, and technology.
Specifically, organizations are encouraged to:
1. Leverage platforms to drive transformation
As FSI organizations continue to forge ahead and integrate technology in their operations as well as products and services, moving mission-critical business processes and workloads onto cloud platforms will be key to ensure that innovation scales. Technology architecture will also need to be well-integrated to effectively enable transformation, which will be a key measure of technology Return on Investment (ROI).
2. Enhance People’s capabilities through enterprise-wide skilling initiatives
A diverse cross-industry, multicultural and multi-generational talent will be key in generating new and disruptive ideas. Beyond that, FSIs need to champion a culture that embraces collaboration, especially with third parties, to create new value.
3. Utilize Data for extreme personalization and rapid value creation
Investing in data will not only enable FSIs to enhance and differentiate products and services, but with trust, privacy, and security paramount for their businesses, a well-integrated data architecture will enable the building of accurate, trusted and secure data sources for reliable decision-making when it is needed most. This will enable personalization and real-time insights.
4. Integrate automation within Processes to empower continuous innovation
Automation will be key especially for business processes that have high implications to customer experience, to accelerate the enablement of enterprise-wide collaboration and knowledge sharing. Processes will also need to account for a way to ensure a formal and systematic approach to driving innovation and incorporating this within operations for sustained impact.
“As FSIs continue to forge ahead in a post-pandemic world, lasting transformation will only take place if FSIs alongside investments in technology, prioritize people and culture, as they are key to ensuring greater collaboration and continuous transformation,” says Leung.