What to expect in 2019 for the financial services industry

November 30, 2018

A blog post by Jim Eckenrode, managing director, Deloitte Center for Financial Services

Hot off the press, our 2019 Financial Services Industry Outlooks are available for your reading pleasure. As usual, our team here at the Center for Financial Services has done a first-rate job collaborating with our client-serving professionals to distill the complex array of challenges and opportunities facing financial firms into a few issues to address over upcoming quarters.

As I've mentioned in previous blog posts, much has changed in the industry over the past ten years, and yet much remains the same. First and foremost, we observe a shift to a growth mindset among our global financial services clients. Performance has been strong in most global regions, and firms are moving away from investment priorities focused chiefly on compliance towards a broader mix that includes investment in people, process, and technology to support new products and penetrate new customer segments.

Challenges emerge with changing times

All this is good news, but that doesn't mean firms should rest on their laurels. Far from it. We live in an increasingly volatile and uncertain world, rife with new challengers and complex challenges. External forces create management challenges, including:

• The shift to client self-service
• Diverging regulatory regimes demanding greater transparency
• Explosive growth in data and tech capabilities
• New talent models

Financial services leaders are focused on combating shrinking margins in a challenging economic environment, balancing digital threats and opportunities that are emerging at speed and scale, and managing the push-pull between customer empowerment and risk management.

At the same time, firms are too inward focused, too big and complex to manage, and lack a "house view" on the impacts technology will have on their firms. Any efforts at change are only attempts to make the current business more efficient, which is merely buying time, because fintechs and others are showing them—and their customers—the art of the possible. So, the fundamental ways in which financial services firms make money and the assumptions that leaders have about their competitive advantages must change.

Adaptability key to future success

The reality is that future winners in the financial services industry will be those that can evolve the mindset and culture of their firms so that they can both envision and execute initiatives faster than the speed of change. To do that, organizations need to update how they think about and execute change as a "run the firm" capability. There are many on-ramps they can take in this journey but ultimately they will need to change culture, acquire new organizational capabilities, and rely on more modular and flexible models to provide the capacity required for growth, while securing their brand and reputation for an increasingly digital financial future.