I don’t believe it’s rocket science to say that this last couple of years have been full of unprecedented contrasts.
In simple terms, the financial services industry has had to keep a fine balance between regulation and change. On the one hand business and customers must stay safe; on the other organisations must be agile enough to gain commercial advantage through innovation.
Preventing harm and risk through operational resilience
Making sure that the financial services market is operationally resilient is essential on numerous counts. It avoids any risk to market integrity, protects consumers, ensures the viability of firms and keeps the financial system stable.
It make sense, but what is supposed to happen?
By October 2021, the industry’s component organisations are required to look at governance and responsibility. They must have identified their important business services. They need to have mapped the elements that will deliver each of those services.
In addition, they are expected to have set disruption tolerances, tested scenarios and made sure that their operational resilience communications are sufficiently robust. Finally, they need to detail every step and generate self-assessments, knowing that the board will need to approve the documents and that the regulators might request them at a moment’s notice.
That’s a lot to ask—but that’s not the full regulation story. There is also a series of key dates which organisations need to meet as they build towards March 2025. Even for those unaffected by the rules and guidance published by the FCA, PRA and the Bank of England in March 2021, there are still SYSC, PRIN and COCON to be considered, plus PSD2 and others. Finally, what happens now that the UK is no longer part of the EU? Will it align its regulations to Europe or go its own way, for example?
Using agility and innovation to prosper
On the other hand, making sure that resilience is baked into the industry is not the only priority.
You may recall that when Harriet Baldwin, at the time Economic Secretary to @HM Treasury, launched FinTech Week in February 2016, she did so with a call to arms for innovation in the financial sector. It was a call that didn’t go unheeded. Since then, we have seen new ecosystems deliver innovation in numerous shapes and sizes; the results have ranged from insurtech and wealthtech to financial inclusion, robo-advisors and alternatives to bitcoin.
Moreover, innovation is about more than developing new services. It has the potential to enable true digital enterprise transformation, changing the way your company operates and resolving complex business problems.
In principle therefore, the combination of innovation and operational resilience should have delivered a rosy future for the industry if technology and processes kept step. However, thanks to COVID, it has not yet done so.
And then there was COVID-19
When COVID-19 arrived, it forced us all, both as individuals and as an industry, to review the way in which we did business.
People increased the amount of time they spent at home, or working from home, and this in turn led to new operational architectures. They changed the way they held meetings and led teams.
In fact, people even changed the way in which they spent money as consumers. As Barclays pointed out in the recent panel session I mention below, before the COVID-19 lockdown there was already a 10% decrease in cash withdrawals. During lockdown, this increased to a 65% decrease as more and more people turned to online shopping and digital payments.
But this gave rise to the question: is this type of change one that can sit comfortably with operation resilience and innovation? After all, COVID was forcing unplanned change upon people, rather than giving them the chance to choose change for themselves. What would be the effect of these three key drivers on the financial services? How could their apparently different vectors be realigned?
Life after COVID-19
I recently had the honour of chairing a panel session which gave me the answers. “The Future of Finance: Life after COVID” at the RBI EU 2021 event included industry experts who had already recognised the potential issues. Over the course of the session, we were able to cover everything from demands to regulations, from cloud and open banking to collaboration. We touched on:
· How the patterns of digital demand and in drivers have changed since the pandemic hit home.
· What the future of payment operations holds.
· How payments architecture, cloud and regulation are forcing change.
· Why the right mind set is crucial to effective change and resilience.
· How open banking can use data to deliver what merchants and consumers want.
As one of our panel of experts, Tony Craddock, the Director General of the Emerging Payments Association says: “Financial Services are now at a crossroads with regulation and leaving the EU.” Personally, I agree, I cannot wait to see what the future holds.
You can see The Future of Finance: Life after COVID” panel session here.
To find out how ServiceNow Financial Services Operations enables financial institutions to streamline and transform business services, including payments, cards, loans, claims processing and more visit www.servicenow.com/uk/finserv