Three Trends That Will Shake Up The Insurance Sector

The insurance sector can trace is heritage over hundreds of years with the first known insurance contracts being recorded in Italy in 1347. Fast forward to 2017 and with Lloyds underwriters still grappling their trademark slipcases, the flimsy leather sheaths that bulge with bundles of papers, some would argue that the sector has change very little since 1347.

In today’s highly connected world, customers’ expectations have dramatically changed, but the insurance sector is falling short of meeting those expectations. For many customers, interaction with their insurance company typically happens once a year, far less than any other industry.

Previously, insurance processes have been determined by the limitations of technology with many back office processes designed around legacy systems that are creaking at the seams. Many of the procedures are paper based, impacting efficiency which dramatically increases the cost base of the organisation.

As an example, current processes to purchase car insurance from an aggregator site are fragmented and far from streamlined. After being presented with a quick view of the premium from each provider on the portal, the customer is redirected and forced to login with the selected provider in order to complete the transaction. When compared to the process of buying a book on Amazon, with the option of single click fulfilment, the process of purchasing insurance mirrors how business was conducted 20 years ago.

With fast changing consumer expectations, new technology has introduced the expectation of ease of use, personalised pricing and immediate fulfilment.  This new way of working, putting the consumer in control, has not translated to the insurance sector which now realises that it has been caught snoozing and now needs to change.

With the insurance sector now waking up to its own industrial revolution, there are 3 exciting trends emerging to improve customer engagement and optimise the insurance industry:

 

  1. AI (Artificial Intelligence)

The introduction of Artificial intelligence could revolutionise the industry, automating routine tasks that are methodical, repetitive, and rules-base, such as form processing and onboarding new customers. It is particularly valuable in automating “swivel chair” tasks, where data needs to be transferred from one software system to another.

These processing tasks are traditionally undertaken by an army of back office staff and by creating a virtual workforce of software robots, companies can streamline processes, as well as increase the quality and cost-effectiveness of the service being provided.

 

  1. Data Is The New Golden Thread

With the advancement of new techniques such as AI and cloud computing, there is a significant opportunity for insurance companies to exploit the amount of data that can be analysed and the way that it can be used.

Leading insurers are actively using data to empower underwriters to drive continuous improvement in the customer journey, identifying the most common causes of referral (to an underwriter) and automating their underwriting decisions.  This improves the customer experience, and in many cases gives the customer the peace of mind that their cover is in place immediately.

The combination of AI and big data sets is enabling insurance companies to free up valuable and scare underwriting resource and to develop new valued added propositions.  Smart data analytics provides reliable data on user behaviour from developing enhanced analytic tools to spot fraud patterns quickly through to developing new chatbot agents to take customers through the application process.  In addition, the development of new risk pricing models can be used to provide alternative insurance decisions such as “sell to budget” function or “upsell” to the maximum allowable sum for a family heirloom.

 

  1. IoT (Internet of Things)

The internet of things, where everyday objects are connected to the internet, means insurance companies will have access to more data about the sort of risks they face.

By measuring how people drive through telematics or monitoring physical wellness via wearable devices, the industry hopes that it can persuade its customers to change behaviour, to cut out risks and so push down the cost of claims.

With the use of big data and IoT, Insurance companies are discovering that they are able to use new techniques to manage the risk portfolio in real time. By utilising techniques of gamification, insurance companies are able to offer game like features to manage driver behaviour, from a free Frappuccino to reward careful driving, through to notifying poor drivers of the potential impact to renewal premiums or the policy being suspended.

Insurance companies hope that by leveraging new technology they can influence user behaviour to avoid accidents and reduce the number of claims, moving from being a source of claim payments to become a trusted and informed advisor.

Conclusion

The insurance industry has to take a different view of how it operates and is at last embracing its very own industrial revolution.

How we purchase insurance in the future will be enormously different as companies move from an annual “disgruntled” purchase to embracing AI, smart data analytics and IoT.

New Technology will sharpen up the insurance sector and improve the way it works, enabling risk to be assessed in new ways, presenting a significant opportunity for the industry to transform and reposition itself to become a trusted and informed risk partner.

 

 

 

 

IAN ALDERTON
Email : ian@IanAlderton.com
Tel : +44 (0) 7702 777770

Posted in Digital, Innovation, Big Data | Leave a comment

Two Important Regtech Trends That Will Shape The Future

A leading Private Equity firm approached me to share my insight on the strategic trends and commercial opportunities that are driving the regtech sector.

Regtech is a sub-set of fintech that focuses on the use of new technologies and innovation to solve regulatory and compliance requirements more effectively and efficiently.

Powering the new regtech wave are two “hot” categories of Robotic Process Automation (RPA) and Intelligent Automation (IA):

  1. Robotic Process Automation (RPA)

RPA is an emerging form of process automation technology based on the notion of software robots.  Applied independently, RPA has great potential for automating routine tasks, that are methodical, repetitive, and rules-based.  It is particularly valuable in automating “swivel chair” tasks, where data needs to be transferred from one software system to another, such as form processing, accounts payable and staff onboarding. These tasks are traditionally undertaken by humans and by creating a virtual workforce of software robots, companies can streamline processes as well as increase the quality and cost-effectiveness of shared services.

According to Gartner, RPA is “relatively low cost, quick to implement and unobtrusive“. Supporting this, a number of vendors have established dedicated RPA tools, such as Automation Anywhere and UiPath, which can be used to capture a sequence of user actions and speed up the definition and automation of a process.

RPA benefits include accelerated cycle times, improved throughput as well as increased flexibility and scalability. Furthermore, RPA offers the opportunity to automate the “long-tail” of low-volume / low-value processes that have been historically uneconomical to automate.

The sheer volume of data to be reported and monitored by financial organisations makes RPA solutions a necessity. Regtech, powered by RPA,  can be used to collect, analyse and test entire new data sets, identifying potential risks, as well as generating more meaningful Management Information (MI). For example, a robust fraud detection platform developed using RPA technology could shorten the transaction life-span and improve consumer experience as well as commercial profitability by reducing the number of false negatives.

By contrast, nonroutine tasks involving judgment, intuition and problem solving are currently too complex to be automated via a standard RPA approach.

  1. Intelligent Automation (IA)

The decreasing costs of data storage and processing power are enabling a new breed of cognitive technologies with humanlike capabilities, such as recognizing handwriting, identifying images, and natural language processing. When combined with robotic process automation, these cognitive technologies can form Intelligence Automation “IA” solutions that can either directly assist people in the performance of nonroutine tasks or even automate those tasks entirely.

Intelligent Automation are pieces of software with machine learning capabilities that work with unstructured data such as email, documents and web data.  They use a variety of techniques to automate processes including smart data analytics and neural process patterns to learn from experience and expand their knowledge base.

These new cognitive tools are based on a variety of machine learning algorithms such as Deep Learning Neural Networks or Random Forests.

New intelligent automation platforms such as Worksoft Analyze automate business process discovery, capturing end users’ normal activities and connecting them in an end-to-end process, using artificial intelligence.

The introduction of IA provides the concepts of continual predictive analysis, providing a more automated and cost effective way of meeting compliance.  As an example, IA can monitor a bank’s traders in a real time basis, learning their behaviour patterns and raise the alarm when they do something out of character.

Across the wider financial services ecosystem, the use of IA looks just as promising.  Wealth Management firms are using IA to review and analyze portfolio data, determine meaningful metrics, and to generate natural-language reports for their customers on the performance of each of their funds.

 

In conclusion, with many companies continuing to fall short of regulatory expectations by maintaining highly manual processes, the emergence of regtech offers financial organisations the opportunity to introduce a generation step change in process automation.  The use of new innovative technology, such as RPA and IA, can transform incumbents by increasing their profitability and efficiency, while at the same time making compliance less complex and capacity demanding.

 

 

 

 

IAN ALDERTON
Email : ian@IanAlderton.com
Tel : +44 (0) 7702 777770

Posted in Digital, Risk / Regulation | Tagged , , | Leave a comment

How to build a Digital Dream Team

Many organisations are pivoting to new digital business models, requiring large parts of the employee base to adopt a digital business value chain. At the same time, digital experiments such as innovation labs and new digital products have delivered notable successes such that digital skills are now in high demand and short supply.

A question I am frequently asked is how do you build a digital dream team for your new digital enterprise?

What is a Digital Business?
The first question we need to tackle is what do we mean by a digital business?

Gartner defines a digital business as:

the creation of new business designs by blurring the digital and physical worlds … via an unprecedented convergence of people, business and things”.

I believe that this can be further refined by defining a digital business as:

creating new business models based on new customer experiences and products that exploit information and technology at speed.

Delivering business value from a digital workplace requires a new form of “Digital Dexterity”, the ability to master and execute a pragmatic set of techniques to quickly exploit emerging technology. This new form of agility will be a significant source of competitive advantage as organisations pivot to new digital business models.

Digital Dexterity will need to be supported by a strategy that is focused on building a dynamic digital team of people and culture:

Building a Dynamic Digital Team
Establishing a dynamic digital team to improve processes and drive new profitable business models is at the crux of a digital strategy.

By design, the digital team is small and specialised, staffed by multi disciplinary subject matter experts from across the businesses, including marketing, sales, technology and related lines of business. This team will often consist of both a permanent and temporary team.

The permanent team is designed to maintain focus on the enterprise’s digital vision and goals. The team consists of a digital programme team, responsible for creating and communicating the digital storyline, in addition to a technology team who are responsible for developing the technical platform to deliver the digital vision.

The temporary team supports the permanent team and is responsible for initiating and incubating the ultimate digital deliverable. The temporary team members will come from business departments and external suppliers, proving deep subject matter expertise on new products and customer insights.

Both permanent and temporary teams will have an entrepreneurial attitude for experimenting, innovating and creating new customer value. The combined team will have a disciplined ‘test and learn’ approach, supported by a risk-taking mind-set and technical creativity to break with the status quo, accept failure, gain new customer insight and learn.

The digital team will need to iterate the digital solution until they get it right—not only delivering what the customer wants but also understanding why they want it so that issues can be addressed and emerging needs factored in with speed.

Challenger Board
A recent market development is that a number of companies have set up a separate “challenger” or advisory boards for their digital portfolio. The board will include domain experts who know the business inside out and digital natives hired from start-ups or tech companies. With their deep digital experience and outsider perspective, the in-house advisory experts can ask tough questions, uncover problems quickly, and spot opportunities for disrupting the business with sleek customer solutions and enhanced commercial value.

People
A successful digital team will need to possess a number of key capabilities and competencies. These individuals will bring varied perspectives, earned from working in a customer focused environment where the user experience and customer intimacy reigns supreme. The team will need to have a high degree of digital literacy – intensely focused on the customer, constantly evolving and improving the customer experience.

These individuals will be a jack of multiple competencies, such as smart data analytics and hyper scale cloud computing, as opposed to a mastery of a single skill. They will recognise that user experience (UX) design is a differentiator and will be comfortable with uncertainty and act with agility.

Culture
Organisations are ruthlessly competing for people with digital skills so turning a digital vision into reality requires attracting, motivating and retaining talented people.

To succeed in digital business, leaders must build a culture that is unrestricted by traditional beliefs and practices, by investing in simple processes and support structures.

Team members must be liberated from counterproductive beliefs and practices. The team should feel that there is a risk-taking culture ready to challenge with the status quo, accept failure and learn. The team will need to feel they can safely change from what has made them successful in the past to something that will make them successful in the digitalized future.

Only by investing in a learning culture that is ready to break with the status quo and accept failure will the organisation be able to gain new insight and learnings on driving organisational change.

 

In summary, building a highly effective digital team require as new form of Digital Dexterity and the ability to master a new set of techniques focused on building a dynamic digital team that is obsessed with improving the customer experience and a culture that can challenge the status quo.

Only then can the organisation be confident that is has the digital team in place to engage talented employees across the company and drive new, profitable business models.

 

IAN ALDERTON
Email : ian@IanAlderton.com
Tel : +44 (0) 7702 777770

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Time to Reboot Corporate Banking – Is Everyone Ready ?

Corporate banking is often seen to be removed from the digital disruption that has shook many traditional industries such as retail, music and travel.

In an industry that has operated as a relationship business, many corporate banking customers have shifted to digital banking for their personal banking yet opted to keep a wait-and-see attitude for their commercial banking needs.

A number of new competitors have entered the corporate banking landscape, with advanced digital platforms that are allowing customers to bypass traditional banks in a number of key areas such as real time, low cost cross currency payments.

Has the time now come for the corporate banking landscape to be exposed to a far-reaching digital shakeout ?

A Digital Shakeout?
Corporate banking, as the name suggests supports corporate customers with lending, cash management and trade finance services to organisations that dot the globe, representing a scale and complexity that seems at odds to the sleek simplicity of the point-and-click Internet world.

Corporate banks have historically struggled to make the transition to the new digital landscape due to the significant amount of legacy debt caused by two unsustainable approaches to technology:

Firstly, banks tried to build a one size fits all core banking system, a monolith, that could be scaled up over time to support different types of businesses from specialised lending, treasury services, through to cross border trade. As banking demands grew, customer requirements increased and regulation intensified, the monolith approach stalled under its own weight.

Secondly, the best of breed model, which relied on selecting the strongest system for each key business area or function, resulted in an eclectic system architecture. The patchwork of different systems, with multiple data islands, resulted in a lack of data aggregation, to make informed commercial decisions for clients as well as providing the transparency required by regulators.

Digital Is Driving Higher Expectations
The evolving landscape of corporate banking has attracted the attention of non-bank competitors. One such organisation, Ripple, offers an open payments protocol for international payments, enabling real-time settlement and clearing, reducing the need for intermediaries.

Business clients are not only open to transacting and liaising with relationship managers (RMs) over digital platforms but the majority are willing to pay a premium to work with banks that are capable of delivering a new type of highly integrated digital service that they have grown accustomed to and expect.

Three digital value propositions show particular promise for corporate banks: customer centric value propositions, enhanced digital advice, and real-time decision-making support.

(i) Customer-Centric Value Propositions
Today’s corporate banking customers require a customer centric proposition that is based on corporate connectivity, connecting the customer with the correct service as part of a multi channel offering. By providing the correct connectivity, based on self-service, convenience and efficiency, the bank can reduce the cost to serve while at the same time improving the customer experience and increasing client efficiency.

Data will be key to enabling this customer centric proposition, delivering new business intelligence such as risk and profitability, as well as unlocking new operational insights and digitally enabled sales, enabling banks to boost both customer cross sell and potential wallet share.

(ii) Seamless Online Banking
In a highly connected world, corporate customers need access to key information, such as bank statements and payments, in less than three clicks. The future of Corporate banking technology will have to combine highly connected tools and best-of-breed components on a platform that is driven by open interfaces and cross-business cohesion.

Banks will need to leverage modern business intelligence tools and application programming interfaces (APIs) that draw on the latest database technologies, visualization tools, and processing capabilities from the wider fintech ecosystem in order to provide the customer with a seamless online banking experience

(iii) Enhanced Digital Advice
Banks have traditionally automated disparate parts of their business, but are now looking at end to end process digitisation to increase efficiency and lower operational risk.

Fully digitised workflow applications, based on straight through processing and real time decision making offer the opportunity to revolutionise lending and treasury products. New workflow-based applications, will be able to offer dynamic dashboards with real-time cash, liquidity, and payment management capabilities, increasing the efficiency and transparency to the corporate user, while at the same time enabling banks to offer highly effective and targeted advice to their corporate clients.

In conclusion, corporate banks are under mounting pressure to respond to the new level of digital disruption as non traditional banking entrants continue to challenge and shake up the status quo.

The next generation of corporate banks will have to radically optimise performance by learning how to embrace digital transformation, developing a customer centric proposition, seamless online banking and enhanced digital advice at its very heart.

Only by developing a clear digital strategy will corporate banks stay relevant, while at the same time opening up new paths to sustained economic profit and customer benefit.

To discuss this or any other technology challenges you may have, please contact me directly.

 

 

 

 

 

IAN ALDERTON
Email : ian@IanAlderton.com
Tel : +44 (0) 7702 777770

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Fintech Collaboration – A story of David and Goliath

The partnership between fintechs and banks has often been told as a story of David and Goliath, a relationship that has been contentious at best and adversarial at worst.

Many industry observers predicted that the progressive culture and technology superiority of fintechs would topple the established banks.  Fast forward to 2017 and stories about David defeating Goliath have been put to rest as banks and fintechs are entering a new form of partnership.

Fintech organisations have made huge investments in developing new products and services to make banking as frictionless and effortless as possible, driving innovation and providing better products to customers.

As an example: TransferWise, a peer to peer money transfer service is disrupting international remittances, by allowing users to send and receive international bank transfers in less than two days and at a fraction of the cost when compared to a standard banking service.

At the same time, fintechs have been held back in scaling their new propositions due to a lack of banking credentials, such as access to a larger customer base and expertise in managing regulation.

Established financial organisations have been burdened by their legacy processes and systems that are both difficult and expensive to reengineer. This has restricted a bank’s ability to adapt to the changing landscape and demand for inhouse innovation.

Banks have now realised that if they want to speed up their innovation they need to significantly increase their collaboration with fintech companies.

A New Relationship
Both fintechs and banks have realised that they are far better off as friends rather than foes. By collaborating, banks are able to launch new innovations and enter new markets at a price point and speed it would never be able to match in its own environment. In addition, fintechs gain access to banking expertise, regulatory know how and an expanded customer base.

Fintech Accelerators
Many leading banks are running startup programs to incubate fintech companies. London now has four corporate-sponsored fintech accelerators, intensive courses for start-ups that usually involve exchanging the start-ups’ equity for an injection of cash, as well as free office space and mentorship to accelerate growth.

MasterCard, Rabobank and Lloyds are providing mentorship, data and access to their systems’ software code as part of Startup Bootcamp, a global accelerator group that has launched a specialist fintech initiative near London’s Tower Bridge.

Other banks, such as Barclays are focusing on creating a global community for fintech innovation, including opening an accelerator in both London Shoreditch and New York’s Silicon Alley.

Venture Capital
As banks continue to engage with fintechs for their business models, this will result in a need for internal “venture capitalists”, to conduct detailed business model assessments that identify which fintech firms are a good fit for their respective banks. Several banks have already established their own venture capital funds including Santander which has established a $100million fintech fund, called InnoVentures, to invest in or acquire new companies.

In conclusion, the early impact of fintech galvanised the banking sector into action. Having operated from a position of relative safety, behind robust regulatory walls building large value chains, banks have recently found their highly visible and commoditised products being undermined and eroded by a new disruptive and agile competitor.

While the relationship with fintechs was initially adversarial, fintech firms are now being considered partners rather than competitors. Through a new form of partnership, banks gain access to pipeline of new innovative products and services, while fintech organisations gain access to banking expertise, regulatory know how and an expanded customer base.

In addition, the new collaborative environment will enable fintechs to scale their business and connect the bank’s customers to an innovative environment and an ever increasing range of differentiated products and value-added services.

Long may the new relationship prosper.

 

IAN ALDERTON
Email : ian@IanAlderton.com
Tel : +44 (0) 7702 777770

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Banking As A Utility Changes Everything

In today’s highly competitive landscape, banks are facing an ever demanding challenge from an increasing cost base and declining revenues, coupled with rising compliance costs and capital requirements.

At the same time, increasing customer demands, internal pressures to identify new streams of fee-based revenue and competition from the fintech industry are driving a desire for evolution.

At the heart of this modern-day Darwin evolution are a number of digital technologies from (i) Industry Utilities, (ii) Cloud Technology and (iii) Artificial Intelligence that will enable businesses to digitise and simplify their existing business processes:

1.Industry Utilities
Top tier banks are increasingly looking to adopt new utility based service models to drive down costs and increase efficiency in the middle and back office functions, such as risk management and compliance.

From 2012 to 2014, JPMorgan Chase added 13,000 new employees to support regulatory, compliance and control efforts, at a cost of $2 billion. Today, approximately 1 in 6 members of staff at the bank work directly in a control and governance function.

The emergence of new industry utilities, would allow organisations, such as JP Morgan,  to migrate labour intensive control functions to a trusted third party. Key areas of focus for these new industry utilities include control functions such as customer onboarding, anti-money laundering and trade surveillance.

By making key functions such as risk management and compliance less complex and capacity-demanding, new industry utilities could free capital, improve the quality and efficiency of supervision, and reduce risk in the system

Key to the success of this new digital utility will be cloud technology and artificial intelligence.

2. Cloud Technology
It is only now, with Cloud technology in its second decade that the perceived infrastructure, security and regulatory risks are starting to recede that banks are starting to accelerate their journey to the cloud.

Banks have traditionally kept close control of their infrastructure, building their own data centres and supporting large in house technology teams. This is set to change as Banks are under increasing pressure to reduce infrastructure costs and increase flexibility. Use of the public cloud enables a bank to increase its agility, without having to invest in capital intensive infrastructure, shortening the time to market for new products and services.

Global banks are now investing heavily in building out their public cloud platforms, engaging with multiple Hyper Scale cloud server providers, such as Google, Amazon and Microsoft, to maintain a competitive cloud ecosystem, that is based on open standards, avoiding by design proprietary technology and potential vendor lockin.

3. Artificial Intelligence
The combination of new cloud enabled utilities alongside artificial intelligence will enable a number of new propositions to be developed to provide improved customer insights with more informed commercial decisions.

One of the most interesting developments is “conversational commerce”, commonly known as a chat bot.  A chat bot is a software program that you can talk to from a messaging application, voice or website and are typically used in dialogue systems including customer service and information acquisition.

Conversational commerce, can turn dialogue and the verbal exchange of information, into a meaningful discussion with consumers and businesses alike.

The electronic brain behind the chat bot, is powered by Artificial Intelligence & Advanced Machine Learning. These systems have been developed to learn, adapt and respond autonomously rather than simply execute predefined instructions.

Within a bank a chat bot can help onboard a new customer, perform KYC (know your client) compliance checking through to executing a new trade, all at the pace of an instant message.

In conclusion, new industry utilities that are powered by cloud technology and artificial intelligence, will enable banks to reinvent the customer experience whilst also cutting down on costs for routine control functions that are manually employee intensive and ripe for automation.

It’s definitely exciting times as digital reboots the banking landscape.

 

IAN ALDERTON
Email : ian@IanAlderton.com
Tel : +44 (0) 7702 777770

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How to transform your business to a digital platform

When taking your business from a traditional IT model to a modern digital platform there are 3 key areas to review: Customer First, a Platform for Talent and New Ways of working.

Let’s review each one in turn to understand the key business factors that will make or break your digital transformation….

1) CUSTOMER FIRST
The key pinch point for business growth with a digital platform is to develop a customer first digital strategy.

The focus is to create a digital infrastructure that always supports customer’s needs. This includes delivering information to customers, using business intelligence and smart data analytics, to constantly improve the service to customers.

The CIO must harness technology as a tool, connecting internal users and customers to one another and the right information. For this, the CIO must provide the company with the infrastructure and information strategy, powered by smart data analytics, to enable new types of connections that provide new ways of sharing information to drive improved engagement with customers and prospects.

For example, existing connections such as mobile engagement, web based access and cloud based software need to be extended to drive new commercial insights to support a personalised service with real time customer engagement.

In addition, with data being the new golden thread for the modern digital economy, there needs to be a robust and well controlled security model that controls access and data usage across all users and stakeholders. This week we have seen a significant cyber-attack with the WannaCry ransomware virus, that can be traced back to the US National Security Agency, affecting organisations around the world, reminding us only too well of the susceptibility of our modern digital infrastructure.

Any IT platform has its risks that need to be actively managed, but a customer first digital infrastructure has the benefit of enabling us to be closer to our customers, delivering a personalised service with improved real-time engagement.

2) PLATFORM FOR TALENT
The skills required to be effective in the new digital data fuelled economy are shifting as the new language focuses on customers and the financial bottom line.

To proactively manage the skills gap CIOs should develop a platform for talent, creating a digitally proficient workforce by utilising key processes such a talent improvement, staff retention and benefits engagement, alongside focused training and development.

Hiring the right staff is paramount and the technology organisation needs to be smart about developing the skills with the current state to prepare them for the new technology challenge. For example, a key priority will be to build a team that can accelerate the technology value across the organisation and spark innovation with skills such as business relationship managers, data scientists and API developers.

3) NEW WAYS OF WORKING
The key to creating a new digital eco system is introducing new ways of working to develop an innovative and nimble culture that’s willing to take risks and move at a faster pace. This includes adapting an agile approach and putting innovation front and centre.

To successfully transform your business to a digital platform requires the need to embrace the new ways of working to become an agent of change in the new digital economy.

In 2014 Gartner introduced the term BiModal IT to reflect a 2-speed technology delivery model: Mode 1 is slow, steady and methodical, whilst Mode 2 is fast-moving and bleeding edge. Much attention has been given to the disruptive and innovative “Mode 2” teams building on the practices established by web-scale giants like Amazon, and Google.

Whilst Bimodal might appear to be a new word, it’s now a new idea that’s been embraced by the industry.

Bimodal and in particular Mode 2 is being further refined and developed with methodologies such as Agile development and Dev Ops to deliver increased velocity and software quality. These new methodologies provide well documented and best practice to introduce new ways of working that increase the agility and innovation of technology development in a digital marketplace.

These 3 key areas focus on accelerating your digital transformation: Customer First benefits the customer with the speed of information, a Platform for Talent supports the business with the speed of learning and New Ways of Working provides innovation and agility for speed of development. Combined they provide a modern digital platform that will not only support but also strengthen your digital business transformation.

 

IAN ALDERTON
Email : ian@IanAlderton.com
Tel : +44 (0) 7702 777770

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Cash Is King ?

cash-is-kingTraditional experience would teach us that cash is king, but a recent survey reports that most UK adults are carrying less than £22 in their wallets, barely enough to accommodate an evening out.

With multiple ways to pay, including mobile wallets, payment applications, and tap and go credit cards, the crown status of cash is starting to slip. According to Payments UK, an industry body, 2015 was the first year that consumers used physical cash for less than half of their payments.

Contactless payment is viewed by many as a stepping stone to a cashless society, with smartphones becoming the preferred method of payment. As an example, many big retailers accept “tap-and-go” technology for small-value items, with  TfL (Transport for London) at the forefront of the revolution. Since the launch of Apple Pay in 2015, 8 million journeys on London Underground have been paid for by iPhone users tapping their handset at entry and exit barriers. With this trend continuing, many leading economists are now calling for cash to be phased out.

Heritage
While cash can trace is heritage back to 600 B.C., when King Alyattes from Lydia (modern day Turkey) minted the first official currency, cash has stood the test of time to providing universal acceptance, instant clearing and anonymity.

For many, cash has a comforting effect particularly when catastrophe approaches. Prior to a hurricane encountering landfall, the US Federal Reserve reports an average of 25% increase in currency orders from Financial Institutions that are in the path of the storm.

As the same time, cash does have a murky side – it is the defacto payment for self indulgent or naughty treats, from illicit activities for a cheating spouse through to tax evasion and illegal activities for hardened criminals.

Challenge of a Cashless Society
The rush to a cashless society risks creating a new social economic class of financial exclusion that will directly impact the poor and vulnerable as well as charities.

In Sweden, the migration to a cashless economy had a negative impact on charitable donations as cashless citizens bypassed the collection tin. In order to support a new era of charitable donations, Sweden’s places of worship have set up a digital collection basket to take offerings via text, credit and debit cards as well as mobile apps.

At the same time, the use of cash can be viewed as a class issues. Many middle-class professionals can comfortably operate from one day to the next without using cash. The only time they would use a sizeable amount of cash is to pay a builder to avoid VAT.

People of limited income are potentially far more trapped with using cash and the costs that go with it, such as withdrawing £10 from a cash point and incurring a transaction cost of £1.50.

For mobile banking, the cost of cellular and data services can be just as prohibitive for low-income consumers both in terms of data costs and wireless coverage. In the UK, there is no single killer mobile payments app that can emulate the social success of M-Pesa in Kenya in providing a mobile bank account for everyone.

Premature Death of Cash
In a new economy where payments will require your phone to be charged, cash will never go away completely. It has survived for centuries and continues to be successful with the freedom it provides from universal acceptance, instant clearing and anonymity. High denomination bank notes will always be required when the tooth fairy calls !

IAN ALDERTON
Email : ian@IanAlderton.com
Tel : +44 (0) 7702 777770

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Digital Disruption – Key Pillars for Success (Part 3)

In my last blog Pillars Three v1.1I discussed the key trends of
Digitisation and Digitalisation, and the process of exploiting digital assets to maximise new revenue and value opportunities. In this blog I will be discussing the key pillars for digital success:

  • Clear Vision & Strategy
  • Architect for Digital
  • Innovative & Agile Culture

The digital agenda is changing the very nature of business, making markets more dynamic and putting the customer at the heart of the organisation. It is no longer sufficient to digitise separate end to end value chains by applying a digital veneer to existing activities. Banks need to move from a product centred approach based upon physical distribution to a new customer centric structure based on digital distribution.

Financial services organisations should consider the lessons from the Telecoms industry where AT&T, a large scale government owned monopoly providing local telephony services in the US and Canada, was broken up in 1982 into 3 separate “NetCos” or baby bells. These individual “NetCos” are responsible for the underlying operation with the “ServiceCos” providing the service direct to the customers. In this model, banks would become “Transactional hubs” or “high cost processing platforms” with new  “ServiceCos” (or FinTechs) providing the service direct to the customers and effectively disintermediating the banks.

Banks are much more nervous about being left with high costs, highly-commoditised processes and not much growth” Morgan Stanley.

Fast forward to 2016 and banks are facing significant structural reform, such as Basel and Dodd Frank legislation, but at the same time have the opportunity to embrace the new digital eco system.

In this new digital ecosystem, commerce and future business success is highly dependent on 3 key pillars of a (i) Clear Vision & Strategy that is (ii) Architected for Digital from the ground up coupled with (iii)  an Innovative and Nimble culture.

1. Clear Vision & Strategy
A clear vision and strategy underpins the digital roadmap and is paramount in order to articulate how digital will support and enable business to reach its strategic goals and aspirations. This needs to be owned by the CEO to drive execution, promoted through opportunities such as digital visioning road trips, to secure buy in and commitment across and down the complete organisation.

2. Architect for Digital
Today, Digital goes beyond mobile and the conventional mobile app. It requires the process of Digitalisation to change a business model and provide new revenue and value producing opportunities.

Digital and the ability to innovate at the core of the organisation is a critical skill set that will require new talents, pioneering capabilities and creative competencies.

Digitally Proficient Workforce
New digital skills will be required especially in new emerging technologies, such as data analytics and connected commerce (IoT). This will require investing in and up-skilling existing teams as well as bringing in skilled and focused expertise in to the organisation.

Arup the engineering consultancy famous for the Sydney Opera House and many of the world’s most iconic bridges is training 3,000-4,000 employees in digital skills.

Operating Model
Critical to success is adopting an agile and iterative operating model, transforming IT development to deliver the speed and agility business users require.

This should be underpinned by a flexible sourcing strategy to utilise increasingly commoditised technology services based on cloud technology, from multi channel commerce enablement and mobile payments through to customer journey analytics.

Governance
A streamlined digital operating model will require new governance frameworks to embrace all key business units and ensure that key risks are managed and mitigated efficiently. This will include appraising the risk from the wider technology ecosystem, managing new emerging opportunities and mitigating threats in a well informed and cognisant manner.

3. Innovative & Agile Culture (Digital DNA)
The new digital world is a multi mode, omni channel, multi device ecosystem where the customer is king and innovation, speed of delivery and quality is highly prized.

As part of its new Digital DNA an organisation has to think digitally first and foremost across all its key processes. To support this pace of change an organisation has to adopt an innovative and agile culture, underpinned by cross functional teams that can embrace collaboration and is willing to takes risks to build new capabilities at a faster pace.

In Summary
Digital is all about innovation to put the customer first and foremost at the centre of the organisation.  This can only be achieved by establishing a (i) Clear Vision & Strategy  (ii) Architecting for Digital from the ground up and building (iii) an Innovative and Agile culture.

If you are struggling to understand digital and how it impacts your organisation, please get in touch with me.

IAN ALDERTON
Email : ian@IanAlderton.com
Tel : +44 (0) 7702 777770

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Digital Disruption – Digitisation and Digitalisation (Part 2)

In my last blog MakeItDigitalI discussed a new wave of digital disruption where existing business models are being challenged by agile new disruptors that have been built for the digital age, putting the customer in charge, with social, mobile, data analytics and cloud technologies at their core.

In this blog I will be discussing the key trends of Digitisation and Digitalisation.

1. Digitisation
Many organisations are anxious to get ahead of the curve on digital which is changing the very nature of business and making markets more dynamic, putting the customer first and placing data at the heart of the organisation.

In reality there is no instruction book or  bible on best practice. Digital commerce implementations are dependent on a complex ecosystem of technologies, data, tools and vendors.

To date, many banks are focusing their digital initiatives on “Digitisation” :

Digitisation: “Moving what you did offline (analogue) to online (digital)”

Historically, this has occurred across 3 distinct phases and has mirrored banks internal core systems  by applying a digital veneer to existing activities in order to reduce channel costs and improve operational efficiency :

3 phases of Digitisation

  • 1980 – 2002 Payments, ATM cards and tele banking
  • 2000 – 2010 Access banking remotely 24 /7  improving convenience and cost efficiencies
  • 2010 – 2015 Full digitisation of  sales and after sales

Although worthwhile, digitisation of separate end to end value chains is no longer sufficient by itself to justify future digital investment.

2. Digitalisation
These early digitisation pioneers, have given way to a new wave of “Digitalisation” :

Digitalisation: “Process of exploiting digital assets to maximise business success”

Alternatively Gartner defines Digitalisation as “the use of digital technologies to change a business model and provide new revenue and value producing opportunities”.

New competitors are aware that they can offer customers a more convenient and less expensive proposition by exploiting new service models and industrialising digital assets such as data, cloud and mobile.

Technology is now being used at the forefront of the user experience increasing customer centricity as well as driving innovation in new Omni channel products and services.

This approach relies on offering new technical capabilities (APIs, apps, functionality and connectivity) that support a broader customer use case — one that extends beyond simple financial services transactions such as mortgages and savings.

Digitalisation has already disrupted digital wealth platforms with the advent of new platforms such as Nutmeg and Simple to enable people to manage their money and investments online. The rise of new robo advisors will further accelerate change in this sector.

In addition, consumers are now choosing to invest their savings into small businesses through crowd funding or peer-to-peer lending platform such as Funding Circle and Zopa.

3. Walled Gardens / Digital ecoSystems
Powered by extensive use of big data techniques, data analytics and massive data pools, new digital disruptors are creating new digital eco systems or walled gardens to further accelerate the customer proposition and potentially disintermediate existing players.

These new digital walled gardens, such as Alibaba, Alipay and MyBank, promote both increased customer lock in as well as locking out traditional financial providers.  As an example Alibaba via its Alipay alliance now controls 82% of China’s online payments.

MyBank, an Alibaba backed online bank, uses big data techniques and a data trove of 40 trillion retail customer records to generate a unique competitive insight using predicative analytics of customer behaviours, business sentiment and commercial risk exposure.

4. In Conclusion
Applying a digital veneer to existing operations to make the service more attractive to the customer, is no longer worthwhile in the new digital eco system.

Banks now need to fully exploit their digital assets and update their structure, services and products to remain competitive and relevant in the new Digitalisation ecoSystem.

In my next post I will discuss the key pillars for digital success.

IAN ALDERTON
Email : ian@IanAlderton.com
Tel : +44 (0) 7702 777770

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