What CFOs can do to stay competitive in a changing, disruptive market. […]
COVID-19 has rapidly accelerated the business landscape, forcing many organizations to catch up technologically. Above all, the traditional players in the financial and insurance sector have recognised that their existing internal processes no longer fit into the “new Reality” and that their digital services need to be further developed in order to meet both existing and rapidly changing customer needs.
Customer needs and wishes in focus
In the past, efforts to digitize customer – centric processes were often quickly put on hold due to concerns about regulatory compliance, business resistance to change, or scalability. Today, however, there are few reasons not to take advantage of technological possibilities, because they are more flexible, safer and more compliant with the law than ever before and, that is the crucial point, are actively demanded by the customer.
Financial and insurance products that would have previously required an appointment at the branch can now be handled virtually and, in fact, tech-savvy customers are more attracted to brands that can offer a positive digital experience. For example, a Bitkom study showed that the possibility of processing inquiries with insurance companies completely digitally is of great importance for 68 percent of respondents. The increased choice by providers such as Comdirect or Targobank, which focus entirely on online business, has changed the level of customer loyalty. If expectations are not met, customers today simply go elsewhere.
This puts enormous pressure on CFOs across all financial organizations to invest in technology to deliver digital experiences that consumers expect without compromising on physical brand offerings. For example, a study by Lünendonk & Hossenfelder in technical cooperation with Core, KPMG, Q_Perior, Nexgen and Senacor shows that responding to ever shorter innovation and technology cycles in the course of digitization is an important task for around 60 percent of banks – as is greater agility in the company itself. At the same time, a market launch via new, digital sales channels poses major challenges for every second bank. In addition, only one third of the companies surveyed have so far integrated digital products from start-ups or technology companies into their product portfolio.
Technology: the tool of choice for the CFO
Here, in addition to the already mentioned stumbling blocks of strong competition and declining customer loyalty, two other obstacles are revealed – outdated technologies and strategies. According to a survey by analyst firm Gartner, 82 percent of respondents see advanced data analytics technology and tools as their top priority. However, 78 percent also believe that it will be difficult to successfully implement their own goals in this regard next year. Outdated core systems are so deeply rooted in the enterprise that they often require complex extensions and special skills to get around them.
Here, a platform-based approach is becoming increasingly popular. Insurers and banks need an architecture that can scale and evolve quickly, with the ability to add new technologies as needed – without disrupting the underlying systems. The cloud is one of the most popular solutions for the financial sector and many financial institutions already use cloud-based software for business processes such as customer relationship management, human resources and financial accounting. They provide a much more scalable and reliable IT infrastructure, specifically designed to optimize performance and support development and expansion. Even for core activities such as consumer payments, creditworthiness checks, bank statements and invoicing, such services promise endless possibilities, while reducing internal costs and optimizing business growth.
If you go one step further, automation, artificial intelligence (AI) and machine learning are three of the technologies that have been touted for a while as crucial to the digitization of financial services companies. According to an international McKinsey study, automation in the insurance sector could reduce the costs of claims processing by up to 30 percent. By streamlining daily administrative processes, not only can tasks be accelerated, but also employees can be relieved. As a result, they have more capacity for customer-oriented, more personal support, which in turn can contribute to stronger customer loyalty.
A clear view of the future
In order to maintain and expand the customer base, financial institutions will have to invest primarily in technology in the coming year. This is not an easy task at a time when budgets are constantly being reviewed and subject to increased scrutiny. To counteract this, it is important for organizations to understand how their IT is being used at the moment and what the underlying costs are. Only then will you be aware of where efficiency increases are possible. This is where financial management tools for enterprise services can help, as they enable organizations to capture critical operational, project, and vendor cost data in real time. This allows organizations to make fact-based decisions about IT spending based on sound scenario planning. This releases liquid funds, which can then be invested in new digital initiatives. This clarity and insight into current capabilities versus future strategy is the direction CFOs need to steer their businesses.
* Ronnie Wilson is Group Executive Vice President at Serviceware.