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EY speaks digital to the financial services industry

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There’s little doubt that digital disruption continues to define the shape, form and structure of the financial services industry. New technology and behavioural shifts that seemed unimaginable even a few years ago are transforming the industry on a day-to-day basis.

Yesterday, assurance, tax, transaction and advisory services company, EY, held a breakfast to update banks, insurance companies and regulators in the financial services industry, on the various digital disruptions impacting the industry and the urgency of staying ahead of the digital curve.

Robert Nyamu, East Africa Financial Services and Risk Leader at EY, says: “Discussions on growth, profitability and market perception are intertwined with conversations around how to get products to market faster, how to engage with customers and understand their needs, how to protect the integrity of sensitive data and how to process routine transactions faster and more accurately, among others. The common theme underlying all these conversations is digital transformation. A firm’s agility to anticipate and adapt to digital disruption is becoming a key differentiator in determining which players will thrive in the digital age.”

One of the key disruptors discussed at the breakfast, was the emergence of FinTech – innovative business models and technology that enable, enhance and disrupt financial services. In Kenya, we have witnessed the growth of FinTech and its role in facilitating payment solutions. Banks and insurance companies are forming partnerships to leverage the platforms of mobile money service providers to that ensure their products are available to a wider market.

We have also recently seen the emergence of technology companies, which offer financial services, largely targeting the unbanked population. One such example is a company based in San Francisco and Nairobi, which uses its mobile platform to provide micro-loans to its members. Such companies, tend to be more nimble, flexible and customer centric and rely extensively on data analytics in designing the customer journey and making lending decisions.

Blockchain technology

Blockchain technology was also highlighted as a key disruptor in the financial services industry. A blockchain is a distributed database that hosts a continuously growing number of records, the database stores records in blocks rather than collating them in a single file. Each block is subsequently ‘chained’ to the next block, in linear, chronological order, using a cryptographic signature; as a result, records cannot be revised and any attempted changes are visible to all participants.

READ: Equity goes big on digital banking

This technology is the foundation for cryptocurrencies such as bitcoin and it can be deployed on a wider scale in financial services to ensure the integrity of data. While the adoption of blockchain technology is still in its infancy globally, several major banks and insurance companies have formed alliances with blockchain-based start-ups to research the application of this technology within their businesses.

Robotic Process Automation

Robotic Process Automation (RPA), is another digital game changer that involves the deployment of software solutions, which can rapidly automate repetitive manual back-office and customer-facing processes. This has resulted in increased operational efficiencies, which significantly reduce costs and increase consistency in the execution of routine tasks.

“Rather than representing a threat to the workforce, our experience at EY suggests that RPA could be a complementary workforce, working hand-in-hand with people, which helps improve process efficiency and focuses their time on other, higher priority tasks,” says Nyamu.

With the evolving technological landscape, global connectivity and numerous customer touch-points, financial services firms are under increased pressure to secure their networks from attacks. Cyber-attacks have increased in recent years, posing a risk not only to individual firms, but the financial services industry as an ecosystem.

SEE: Standard Chartered rolls out video-chat banking service

Regulators have become increasingly cognisant of this fact and this was evident when the Central Bank of Kenya issued a guidance note in August 2017 requiring banks to put in place measures to mitigate against cybersecurity risks. This includes, among other provisions, a requirement for banks to have a cybersecurity strategy, policy and framework approved by the Board of Directors.

Other digital disruption trends include customer intelligence, data analytics and cloud technology. The key message put forth by EY subject matter specialists during the event, which also included a launch of leading digital solutions in the local market, was that firms need to articulate a clear digital strategy and allocate the right amount of resources to survive and thrive in the digital era. Furthermore, regulators should remain abreast of these shifting dynamics in order to ensure the soundness and safety of the entire financial services ecosystem.

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BT Correspondent
BT Correspondenthttp://www.businesstoday.co.ke
editor [at] businesstoday.co.ke
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