Tag: BFS

Where are Financial Services Jobs Moving to? | In the News

The global financial services sector faces a series of new challenges, from the rapid adoption of automation, increasing regulation and Brexit to protectionist rhetoric in the US. This changing landscape means that traditional outsourcing models are under scrutiny, some roles may disappear and others are shifting to new parts of the world.

Globally, banking and financial services sector (BFS) companies signed US$4.9bn worth of IT and business process outsourcing (IT-BPO) contracts between Q4 2016 and Q3 2017, according to KPMG’s Global IT BPO outsourcing deals analysis. Figures from Everest Group Research reveal that global revenue from the IT-BPO market in BFS is between US$100bn and US$150bn. And the three key low-cost countries of India, the Philippines and Poland employ a total of between 310,000 and 850,000 people in BFS BPO alone.

Read more in The Journal of the Chartered Institute for Securities & Investment

Digital Identity Trends in Banking and Financial Services | Sherpas in Blue Shirts

The meteoric growth in smartphone adoption, increasing preference for digital-first transactions, and mounting concerns over data privacy and the misuse of customer data are pushing firms in consumer-facing industries – particularly in Banking and Financial Services (BFS) – to make significant investments in modernizing their IT infrastructure.

DI solutions

One of the key focus areas is in digital identity (DI) solutions. And it’s a big focal point: the research we conducted to produce our recently released report, “Securing Digital Experiences in Banking and Financial Services – State of Digital Identity Services Market,” shows that the BFS industry’s investment in identity and access management services will grow at a CAGR of over 13 percent to reach US$5.8 billion in 2022.

But BFS firms aren’t focusing on DI solutions solely for data security-type reasons. In fact, they’ve found that having a robust DI strategy can also help them drive their digital transformation agendas. For example:

  • Big data & analytics: DI solutions can help avoid unauthorized access to data and insights
  • Automation: Automating business processes that access data from multiple systems require a DI solution
  • Customer experience: Identity management tools can help drive a consistent omnichannel user experience
  • Cloud: DI solutions help manage operational risk of unauthorized access to data on the cloud and digital identity over cloud platforms
  • Internet of Things (IoT): Devices that interact with the digital ecosystem need to be uniquely identified and authorized for digital transactions.

A Sampling of DI solution Use Cases

With the emergence of data privacy regulations such as the General Data Protection Regulation (GDPR) and Second Payment Services Directive (PSD2), BFS organizations are quickly building their DI capabilities to ensure better protection.

Related: See our latest banking and financial services research

Indeed, many banks are working in collaboration with government institutions to integrate banking and financial services with DI solutions, and are leveraging APIs, biometrics, blockchain, machine learning, and mobile technologies to allow DI solutions to become more secure and accessible. One example is BBVA Compass, which has been actively investing in the DI space through collaborations with fintech startups, hackathons, and establishment of dedicated firms.

Digital Identity Provider Ecosystem

Digital Identity ecosystem- BFS blog

From a country perspective, Estonia was one of the first to embrace DI. It implemented e-Estonia, which allows citizens to manage e-banking services that can be integrated with other e-commerce solutions, such as PayPal.

Increasing demand for DI-based offerings is also proving to be a breeding ground for new tech-startups, Indeed, the DI provider ecosystem is expanding well beyond the traditional tech vendors/service providers (HPE, IBM, etc.) and consulting and system integrators (e.g., Accenture, Deloitte, and DXC.) All these types of DI tech vendors are embedding AI and machine learning to enhance the capabilities of their DI solutions. For example, in 2018, Mitek, a DI verification company, acquired A2iA, an artificial intelligence (AI) and image analysis company that uses AI and machine learning to create algorithms that process checks, IDs, and documents.

While the current environment requires banks to evolve and actively invest in DI, it also presents them with a unique opportunity to reposition themselves as trustworthy identity aggregators/providers, as they already have secure systems in place to keep information safe. And some banks are already exploring the possibilities of generating revenue from DI solutions. For example, Capital One is one of the first banks in the United States to test if other businesses are willing to pay to check users’ identities with its DI products. And Rabobank entered into a partnership with Signicat in the Dutch market to offer such services as well.

Instead of treating DI as a problem, BFS firms need to embrace it to accelerate their digital transformation journeys, and build new business models to enable revenue opportunities. To further understand the major trends in the DI market, read our report entitled, “Securing Digital Experiences in Banking and Financial Services – State of Digital Identity Services Market.”

Anatomy of Digital Transformation in BFS | Sherpas in Blue Shirts

Everest Group recently conducted a study with 55 banking and financial services firms to evaluate their digital capabilities in areas including strategy, organization and talent, process transformation, technology adoption, and innovation. Here are the primary insights we collected from that study.

Investments in Digital Technologies are Increasing

More than 60 percent of BFS firms have invested in exploring the various use cases in cognitive- and AI-driven technologies. Typical use cases include helpdesk automation using chatbots and other cognitive capabilities for functions such as sales & marketing, data entry, credit assessment, and information gathering.

The AI Transformation Wave is Hitting the Front-Office

BFS companies are increasingly leveraging AI-enabled transformation in areas where there is significant customer interaction. So personal finance virtual agents, voice assistants for account servicing, voice-based payments and account authentication, and intelligent message-based account servicing are gaining traction. Not surprisingly, Millennials and a new breed of mass affluent (per The Financial Brand, this segment generates up to 70 percent of banks’ and credit unions’ total retail profits, even though they only make up less than 30 percent of the customer base) are extensively using these solutions for advisory and servicing assistance.

BFS Firms are Increasingly Emphasizing Their “Change” Agenda

Our study indicates that BFS firms will increase their digital investments by 9 percent in 2018. This is particularly driven by the need to change in response to the evolving regulatory regime, and customer demand for responsive and agile applications. For example, in the U.S., deregulation could pave the way to a shift in the utility space. In the U.K., the Second Payment Services Directive (PSD 2) has heralded an open banking revolution that forces banks to release their data in a secure and standardized format.

The Talent Gap is a Key Challenge for Digital Adoption

BFS digital skill gaps

Although BFS firms are accelerating their adoption of AI-driven applications, they’re facing significant scaling challenges as digital talent is scarce and in high demand. The biggest talent shortage areas include cybersecurity experts to handle stringent regulatory pushes – such as GDPR in the EU – and those with deep knowledge of big data, without which enterprises can’t realize their full potential in enhancing the technical and functional capabilities of their internal teams on leading big data platforms.

Our Recommendations

To stay ahead of the competition and remain relevant in the market, BFS firms must invest in enhancing the five following capabilities in alignment with their digital journey:

  • Strategy – Outline a clear vision, metrics, and realistic goals for focused and scalable digital adoption
  • Organization and talent – Acquire digital talent through reskilling and retraining existing employees, as well as recruiting talent from outside
  • Technology adoption – Adopt niche digital technologies at speed and scale with higher focus on AI, analytics, security, and risk
  • Innovation – Continually source new ideas for innovation, and embed human-centric design in the organization’s DNA
  • Process reimagination – Transform and automate internal business processes to remove inefficiencies.

Related: Learn more about our digital transformation analyses

The above recommendations translate to a customer-focused triple mandate of Experience, Efficiency, and Ecosystems (E3) for banks. The  evolution from a product-centric to a customer-centric mindset requires an open banking ecosystem to orchestrate the lifestyle services that individuals or enterprises demand from their financial institutions at speed and scale

This metamorphosis will be challenging not only because of the complicated regulatory regimes and resilient legacy structures, but also the rise of non-traditional competitors.

Please feel free to reach out to [email protected] and [email protected] to diagnose your firm’s digital adoption maturity.

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