Blue skies for financial services digitisation during COVID but increased disruption forecast has been saved
Blue skies for financial services digitisation during COVID but increased disruption forecast
7 July 2021: The financial services industry is poised to ramp up digital solutions to deal with increased customer inquiries, remote working and better data use to inform decision making, a Deloitte Access Economics survey of the industry reveals.
Deloitte Access Economics report - Embracing cloud transformation: Benefits for the financial services industry in Australia and New Zealand - Google Cloud – reveals the results of a survey of industry leaders in Australia and New Zealand across various sectors, including retail banking, insurance, superannuation and wealth management.
Deloitte Google Cloud APAC Lead Alliance Partner James Allan said despite the rosy outlook for economic recovery in 2021 and 2022 financial services firms will face fresh challenges as it seeks to find further growth opportunities on the back of lower overall industry revenue growth (2.4 per cent this year.)
“The post COVID or COVID normal world is likely to see continued levels of disruption and pressure for innovation that demands financial services organisations transform,” Mr Allan said.
“This transformation requires more than implementation of new technology, it requires a shift in how organisations partner with their technology providers to leverage industry leading competitive edge services.
“Our research has shown that not enough financial services institutions understand how to leverage cloud technologies to respond to disruption and benefit from the current market conditions – the good news is the path forward is well trodden and proven.
“There’s a number of key actions businesses can take using market leading technologies. Deloitte and Google have seen business transform swiftly and at scale. As Google Cloud’s premier partner, Deloitte along with Deloitte Access Economics is excited to launch this research piece that will help organisations to think boldly of innovation with Cloud.”
Incumbent businesses will face off against emerging players entering the market.
Newer, smaller, market entrants are leading the technology drive, using their tech spend to improve operational efficiency (60%), innovation (44%) and increasing revenue (44%).
Google Could Asia Pacific Director of Financial Services Stuart Houston said the rise of cloud-native fintechs and challenger banks has led consumers to expect more from FSIs, whether it’s mobile self-service options, more personalisation, or AI-based advice.
“By giving companies the tools to better predict marketing and business outcomes, they can create digital experiences that differentiate and keep pace with consumer demands.”
A new five-level cloud maturity framework based on firm performance across seven domains found 21% of financial services business are on the bottom two levels – ‘cloud laggards’ and ‘cloud followers’, and just 6% are cloud leaders.
More than half of firms indicated that data is not informing all decision making and say that while they have a strategy to transition to cloud, they have made little progress in implementing their cloud strategy.
Businesses will navigate an increasingly complex competitive environment and the sector will need to keep adapting, with much of the digital adaption relying on cloud-enabled technologies, including AI, machine learning and large-scale data analytics.
Key findings of the survey show:
- Digital innovation will play a major role in the future of the finance sector in Australia and New Zealand in coming years. 89% of finance businesses surveyed for this study saw their use of data analytics, artificial intelligence and machine learning increase. Four in five firms used innovative technologies to improve the customer experience. Financial services businesses increased their employment of ICT workers in 2020 by over 6,000, more than any other industry (except for the one that includes technology businesses).
- Newer, smaller, market entrants are leading the technology drive, using their tech spend to improve operational efficiency (60%), innovation (44%) and increasing revenue (44%).
- Cloud technology Not all businesses understand the power of cloud, with many businesses hoping to digitise their customer channels – communications and personalisation – but don’t have the matching plans to lift cloud use.
New economic analysis for this research points to the financial benefits of cloud. Businesses leading cloud adoption saw a revenue growth rate of 75% in 2020, compared to 29% for the most cloud-lagging businesses. Cloud technology is set for growth in coming years. According to IDC data, financial services industry cloud spending in Australia and New Zealand is set to grow to $US3.1 billion by 2024 – more than double its level in 2020.
However, financial services businesses cite a range of barriers to digital and cloud adoption.
Almost half of financial firms indicated limited trust in data and 40% identified issues with leadership or strategy for adopting cloud technology.