Celent’s Innovation & Insight (I&I) Day—a deep dive into key financial services technology themes and case studies—took on an entirely new format in 2020. This annual event is usually an in-person gathering. Businesses everywhere are responding to the COVID-19 pandemic and shifting to a new normal of work from home (WFH). Celent is no exception: I&I Day transitioned to a fully digital event. We were honored to have more than 700 participants attend. As we watched Zoom connections come in from Argentina, Bolivia, China, India, Japan, the Philippines, Poland, South Africa, Turkey, the United Kingdom, the United States, and beyond, we were pleased that this new format enabled participation by colleagues who may not have been able to travel to the in-person event.
We’re also pleased to make free I&I Day materials available for the remainder of 2020 through the I&I Day Hub page, an amount of complimentary material unprecedented for Celent. The site allows users to access Innovation & Insight Day materials virtually, at their own pace, and through three tracks: Banking, Insurance, and Wealth & Asset Management. Videos on this page address key technology themes and case studies of financial institutions bringing the benefits of innovation into their organizations.
Beyond the inspiring individual examples set by our Model Award Winners, important trends bubbled to the top, showcasing how financial innovations may execute at scale and the opportunities for financial institutions to respond to the growing challenges posed by the COVID-19 pandemic.
Lesson #1: Crises Present Opportunities for Fresh Tech Agendas
Challenges always occur during times of crisis. In a live I&I Day poll, participants report that the top challenges, to date, during the COVID-19 crisis are pipeline, project and task management; keeping track of content and ideas for cross referencing/aggregation; and security of sensitive information/IP. Celent’s own work shows that FIs are working to address themes of resilience, customer empathy, and digital acceleration.
Fortunately, crises also present opportunities for fresh tech agendas. Celent CEO Jamie Macgregor highlighted how technology has evolved in response to past crises. Though the full evolution of technology in responses to the human and economic crises created by the COVID-19 pandemic is yet to be seen, past events indicate that innovation will continue. Crises expose weaknesses and technology agendas for financial services evolve to meet new needs, as past examples demonstrate: The bursting eBusiness bubble of 2000 showed which models could work—and which didn’t have enough value in them to last; data center resilience grew following the attacks of September 11, 2001, reducing reliance on physical structures and enabling outsourcing at scale; the Global Financial Crisis brought a democratization of IT and the growth of both open source software and mobile; and while the outcome of the US/China trade dispute is not known, we may end up reflecting on this as a pivotal moment, as well.
Lesson #2: Ambitions Programs Can Be Executed at Scale
Executing at scale can be difficult. That’s clear. The past few weeks have demonstrated challenges to it. But it’s possible. Small firms may have more challenges as they try to scale; large incumbents benefit from an ability to ride out storms, even though their efforts may take time to get going. The ability to execute at scale was showcased through the Celent Model Award submissions: 74% of Model Bank submissions and 88% of Model Insurer submissions executed at scale, as did 100% of Model Asset Manager/Model Wealth Manager winners. Citizens Commercial Banking, Cathay Walker, and Fidelity are among the FIs that have successfully executed new initiatives at scale.
Dan Latimore, Celent’s Chief Research Officer, demonstrated financial institutions may be able to execute ambitious programs at scale. The goal: to reach the upper right-hand quadrant of the 2x2 matrix above, where scale potential and execution capability are greatest. Large incumbent financial institutions have advantages as they respond to accelerating changes: customers won’t be going anywhere right now unless a company severely mistreats them; the strength of reliable brands; assets, strengthened following the financial crisis; data, offering a trove of analytic possibility; experience, with staff who know how to get through down cycles; and regulatory competence, with compliance officers who know how to interpret and maneuver quickly changing laws and regulations.
Lesson #3: Effective Integrations Require Consideration of Front, Middle, and Back Office Needs
Dan also addressed how financial institutions can execute at scale, even while addressing major change. Success relies on company-wide integrations, with thoughtful consideration of the specific implications for each firm, throughout front, middle, and back offices. Current trends that should be addressed regarding people, processes, and technology include:
- Front Office: Consumers are usually slow to change their ways. The COVID-19 pandemic is forcing behavioral changes, on multiple dimensions. We’re seeing reduced in-person interactions (on both sales and service sides), while a massive migration to digital interactions is also underway. This new paradigm creates new challenges to identity and increases the need for improved, robust digital channels. Contactless payments are likely to rise, as are DIY services for consumers, such as the ability to file an auto claim through an app.
- Middle Office: The move to WFH creates new challenges to sustainability and security. As reliance on video increases, hardware and network capacity are being challenged. Call centers may see new demands; video services for call center interactions may be requested as customers become more accustomed to face-to-face interactions. Some call centers have already moved to WFH procedures; whether this continues is yet to be seen. Increasing reliance on remote interactions will drive the need for digital signatures and new approaches to consultations and screen sharing. Underwriting models may change in response to the new credit cycle; machine learning (ML) will play an increasingly important role on this front.
- Back Office and Infrastructure: Current work processes mean many back-office employees must commute to a company facility. Processes may need to be restructured to execute things such as printing invoices or processing payments. New threat vectors are likely to emerge, necessitating new approaches to mitigate the impact of bad actors. Robotic process automation (RPA) is likely to grow, though the extent still to be determined. SaaS and Cloud adoption is also likely to increase; among I&I day participants, 41% indicated that they will likely or definitely increase use of Cloud/SaaS from prior plans. Hardware, software, and bandwidth demands are also likely to increase.
Lesson #4: Increasingly Reliable Modeling of COVID-19 Scenarios Can Refine & Improve Industry Responses to the Pandemic
Celent is part of the Oliver Wyman Group, a unit of Marsh & McLennan, so we turned to an Oliver Wyman colleague for additional insight. Barrie Wilkinson, who co-leads the Digital Transformation platform in EMEA at Oliver Wyman, shared his perspective as a data scientist about the future outlook of the financial industry amidst the current COVID-19 pandemic.
Barrie shared four epidemiological scenarios and addressed feedback loops (e.g. between government and banks) that will impact the global response. He also addressed how increasingly reliable forecasting and modeling of COVID-19 scenarios can help refine and improve industry responses to the pandemic—including why a summer break from lockdown may provide opportunities for technology vendors and FIs to position themselves for the next wave of the virus. Effective analytics may help drive plans for more effective, targeted lockdowns, should lockdowns after the current one be necessary.
Though nobody knows the eventual outcome of this pandemic, scenario-based planning, in which whole teams are involved in creating multiple plans, can help position businesses and sectors for success. A strong focus on advanced analytics, for both operations and customer propositions, will be critical. Agility will become the core of every financial services business.
Congratulations to Celent’s Model Award Winners
Celent’s annual Model Awards recognize excellence in technology in the financial services industry. The awards are designed to answer the deceptively simple question, “What would it look like for a firm to do everything right with today’s technology?” Winning entries highlight real world examples of individual technology initiatives.
This year, Celent received 273 entries from 43 countries during the September¬–December 2019 nominating period. Our 47 Model Financial Institution winners honor recipients in 17 countries, each demonstrating the diversity of high-quality initiatives.
Model Bank:Winners and video overview of the program: featuring Royal Bank of Canada, Celent Model Bank of the Year 2020, and highlighting key themes of:
- Execution Focus: Transforming Commercial Banking
- Executing in Retail Banking
- AI Driving Step Change
- Upgrading the Backbone: Transforming Core Banking and Lending
- Pushing the Boundaries in Payments
Model Insurer:Winners and video overview of the program: featuring AIA International, Celent Model Insurer of the Year 2020, and highlighting key themes of:
- Customer Experience Transformation
- Data, Analytics, and AI
- Innovation Execution
- Legacy and Ecosystem Transformation
- Digital and Emerging Technologies
Model Wealth & Asset Management:Winners and video overview of the program, highlighting key themes of:
- Integration Customization
- Workflow Optimization: Transforming Investment Advice
- Innovation in Automation
We hope that you’ll explore the free materials available on the I&I Day Hub page. To learn more or to set up a meeting with a Celent analyst, please connect with us on Twitter (@Celent_Research, #IIDAY2020) or message us.