With new technology comes new risk and ensuring your employees are protecting your customers and business when working in such a highly regulated industry is absolutely critical. This is perhaps one of the reasons why the financial services industry has often been a bit behind the curve in terms of digitalisation, compared to other sectors who are storming ahead in the realms of technological advances. The penalties for not adhering to governance, risk and compliance legislation can be devastating, aside from big fines, the reputational damage can be hard to bounce back from.
In their recent 2017/2018 Business Plan, the FCA outlined a number of technology and innovation risks for the financial services sector, ranging from increased opportunities for money laundering and scams through cybersecurity to consumers buying unsuitable products through digital devices by not paying sufficient attention to terms and conditions. The FCA also highlighted system infrastructure as another key risk, both in the way it is designed, maintained and overseen, but also legacy systems where infrastructure can be compromised.
So what future trends are we likely to see in the financial services industry? In a recent report, PwC talked about financial services firms embracing digital disruption and outlined the top ten competitive technology influencers for 2020 that financial services organisations need to be aware of and start planning for now:
- Fintech companies
- The sharing economy
- Blockchain
- Digital becoming mainstream
- Customer intelligence
- Robotics & AI
- The public cloud
- Cyber Security
- Asia emerging as a key centre of technology-driven innovation
- Regulators adopting technology
The report concluded, "Financial institutions have a lot on their plate: emerging competitors, shifting demographics, rising customer expectations and changing regulations. Technology offers solutions, allowing financial institutions to cut costs and become more efficient at what they do. But this is tricky because it is a classic ‘limited time offer’. Most technology is not proprietary, so it is a bit of a race: if you blink, you might find that your competition has already built up advantages that are now harder for you to match".
The way companies do business is rapidly changing and the financial services industry is no exception. We only need to look at some of the recent examples of companies that have gone from strength to strength in the digital era (from streaming services to taxi's to hotel booking) and those that failed to keep up with innovation and changing customer demand, to understand how critical being open to innovation, digitally ready and having the ability to quickly adopt change is.
Where financial services organisations are streamlining processes and adopting new technology, they will also need to ensure their people are equipt with everything they need to be able to balance adoption of new technology with compliance to regulatory legislation. Digital innovation can mean a great opportunity for the financial services industry, but compliance teams will need to be ready to embrace technological change, rather than stifle innovation and work hand in hand with those in the organisation that is pushing for change and innovation.
One thing is clear, the financial services industry has got big changes on the horizon, as more firms look to embrace the digital landscape. This is an exciting time for the industry, and firms will need to be prepared for continuing digital disruption, to ensure they are not left trailing behind their competitors and new startups. This is perhaps the time for financial services firms to reflect on their readiness for the future, reviewing current culture, technology, process and capabilities and plan how they will ensure they have the ability to quickly adapt change and get their people ready for the future.
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