The industry of financial services (FS) has seen some dramatic technology-led changes over the past some years & this trend is set to accelerate. While Fin-Tech start-ups are encroaching upon established markets, many executives look to their IT departments to improve efficiency, reduce costs & facilitate innovation. While the Information Technology departments are likewise trying to equilibrium the costs related to supporting many legacy systems, some of which are more than 30 years old. Many organizations are now forming the view that the public cloud is safer & more reliable than on-premises solutions. Soon, Blockchain may prove to have the same impact on the future of financial services as the Internet had in many sectors such as media & entertainment, telecommunications, travel, retail etc. Technology forces that will shape financial services in 2020 \tFinTech will drive the new business model \tThe economy which is sharing will be entrenched in each part of the financial system bringing together those who have excess capital with those that need financing, leading to the disintermediation of traditional lending models \tBlockchain will shake things up \tDigital becomes mainstream \t'Customer intelligence' will be the most important predictor of revenue growth & profitability \tAdvances in Robotics & Artificial Intelligence (AI) will start a wave of 're-shoring' & localization \tThe community shall become the dominant infrastructure model. \tCyber-security will be one of the top risks facing financial institutions \tAsia will emerge as a key centre of technology-driven innovation \tRegulators will turn to technology. The industry of financial services is now at a crossroads & how well one adjusts to technology developments & innovations will describe the leaders in 2020 & beyond. The priorities from which financial services organizations can benefit are as under: \tUpdate your IT operating model to get ready for the ‘new normal’ \tSlash costs by simplifying legacy systems, taking Software as a Service (SaaS) beyond the cloud, & adopting robotics/AI \tBuild the technology capabilities to get more intelligence about your customers’ needs \tPrepare your architecture to connect to anything, anywhere \tYou can’t pay enough attention to cyber-security \tMake sure you have access to the necessary talent & skills to execute & win. To succeed in this rapidly changing landscape, IT executives will need to agree with the rest of the management team on the posture they wish to adopt. Will they try to be industry leaders, fast followers, or will they just react? Whatever direction one selects, they will require devising a clear approach to move forward. Most likely, there will be a need to partner with innovative Fin Tech start-ups & change their business practices based on lessons from other industries. They will certainly need to maintain a laser-sharp focus on their customers’ preferences, both stated & unstated. Frankly, each priority is important. The good news is that each one is also achievable. The answer: combining tactical short-term actions with long-term initiatives that tie to a larger, strategic vision. This is how financial services firms will succeed in 2020 & beyond. The new business model Fin Tech will drive New market entrants found it difficult to break into the financial services industry. The large, well-established financial institution that we call ‘incumbents’ had advantages in size, & their networks added a multiplier effect. They had very strong compliance systems in place to manage ever-increasing regulations & they had the client base & resources to prosper even in tough economic conditions. The Sharing Economy will be Embedded in every Part of the Financial System By the year 2020, customers shall require banking services, but they may not turn to a bank to get them. Or, at least, maybe not what we think of as a bank today. The so-called sharing economy may have started with cars, taxis, & hotel rooms, but financial services will follow soon enough & due to which the sharing economy refers to decentralised asset ownership & using information technology to find efficient matches between providers & users of capital, rather than automatically turning to a bank as an intermediary. Blockchain will shake things up In the late 1990s, when companies began to realize the Internet’s potential power, e-commerce investment & experimentation soared. & despite the ‘dot-com crash,’ it is unlikely that anyone would deny just how revolutionary the technology has proved to be. Today, there are curious similarities with blockchain— both in how companies are being funded & how they are exploring use cases. Digital becomes Mainstream Decades ago, many big financial institutions built ‘e-business’ units to ride a wave of e-commerce interest. Eventually, the initial ‘e’ went away, & this became the new normal. Internet development & large technology investments drove unprecedented advances in efficiency. \tCustomer intelligence will be the most important predictor of revenue growth & profitability Customer intelligence used to be based on some relatively simple heuristics, built from focus groups & surveys. These were proxies for real, individualized data about consumer behaviour, & the results were pretty hazy. Now, technology advances have given businesses access to exponentially more data about what users do & want. It is an incredible opportunity for whoever can use analytics to unlock the information inside, to give customers what they really want. \tAdvances in robotics & AI will start a wave of re-shoring & localization When ATMs were first introduced, many customers refused to use them. Gradually though, after time & training, they came to see that ATMs could offer a better service experience. & trust followed. \tCyber-security will be one of the top risks facing financial institutions Financial services officials are already depressingly familiar with the impact that cyber-threats have had on their industry. The pervasiveness of data collection coupled with advanced analytic capabilities could potentially result in consumer privacy violations. Many devices currently do not support the implementation of strong security controls, & maintaining a security baseline will only get harder as devices proliferate. \tRegulators will turn to technology, too The use of technology & its implications is not limited to financial institutions. Six priorities for 2020 \t Update your IT operating model to get ready for the ‘new normal’ By the year 2020, one’s operating model is possibly going to look quite stale, even if it is serving you well today. That is because what your financial institution offers to your customers is almost certain to change, in ways both large & small. This will require important changes across, & around, the entire IT stack. \t Slash costs by simplifying legacy systems, taking SaaS beyond the cloud, & adopting robotics One of the starkest differences between a legacy financial services institution & a Fin Tech upstart comes down to fixed assets. Incumbents carry a huge burden of IT operating costs, stemming from layer upon layer of systems & code. They have bolted on a range of one-time regulatory fixes, fraud prevention & cyber-security efforts, too. \t Build the technology capabilities to get more intelligent about your customers’ needs As we have noted, customer intelligence – & the ability to act in real-time on that intelligence – is one of the key trends affecting the financial services industry, & it will drive revenue & profitability more directly in the future. As this happens, many of the attributes that drive today’s brands, from design to delivery, could become less important. \t Prepare your architecture to connect to anything, anywhere The FinTech trends that we have discussed in this paper, from the cloud & peer-toper transactions to customer intelligence & cyber-security concerns, all rely on the rapid transmission & assimilation of data. Today’s systems do this too, of course, but without the scale or resilience that the future will require. To stay cost-competitive, & to have the flexibility that innovation requires, financial institutions will need to update their infrastructure to make it more agile & responsive. You will need an architecture that can bend as requirements change & interact with data & systems that could be anywhere – because they will be. & at most financial institutions we know, this will require a significant reorientation. \t You cannot pay enough attention to cyber-security Financial institutions have been addressing information security & technology risks for decades. But a growing number of cybersecurity ‘events’ in recent years has shown that the traditional approach is no longer good enough. \t Make sure you have access to the necessary talent & skills to execute & win As financial institutions look to the future, one of the biggest hurdles will have nothing at all to do with technology. For many years the traditional financial institutions have designed their offerings from the inside out: ‘this is what we will offer,’ rather than ‘what do our customers want?’ But this model no longer works. & the skills & interests of today’s IT team members & third-party talent may not be up to the challenges of tomorrow’s technical environment, we're partnering with customers will be essential. Conclusion Financial institutions have a lot on their plate emerging competitors, shifting demographics, rising customer expectations & changing regulations. Technology offers solutions, allowing financial institutions to cut costs & 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.