The digital transformation challenge – or the fourth industrial revolution/4IR – necessitates a huge transformation in how financial service institutions and providers operate. How can the financial services industry respond to the fast pace of innovation in artificial intelligence, robotics and the Internet of Things, which offer the possibilities of automation, algorithms, bots and blockchain?

Financial institutions and service providers will have to invest far more in digital transformation than they have done so far, says a report by management consultancy firm Oliver Wyman, Transforming for Future Value. However, the report suggests that “retooling existing businesses for digital efficiency will not in itself create shareholder value”, and that financial services firms “will need to make clear, strategic choices about where and how they can compete in evolving ecosystems, by choosing a single ‘archetype’ for each business in their portfolio in order to create sustainable, future value.”

Systematic approach to embracing the digital era

The report focuses on four areas, which financial services should consider as they face the challenge of digitalisation. As shown in the graphic below, those four areas are:

1. capabilities (which activities can be streamlined and improved with digital technology such as bots and algorithms);
2. architecture (how can activities be simplified across different areas to create more efficiency and refocus internal capabilities);
3. people (focus on mission-focused teams, quick learning and collaboration);
4. governance (rethink approach to governance with focus on optimisation and innovation).

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CTMfile take: This report says the financial services industry as a whole is not going far enough to invest in digital capabilities. It suggests that, as clients, corporate treasurers can expect to see far more digital innovation and services offered in the coming five to 10 years.