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The future of FinTech and banking: Digitally disrupted or reimagined?

New research reveals three key themes for banks wanting to disrupt their own business model and reimagine themselves digitally.

Overview

Global investment in financial technology (FinTech) ventures tripled to $12.21 billion in 2014, clearly signifying that the digital revolution has arrived in the financial services sector. It is still unclear whether this presents more of a challenge or an opportunity for industry incumbents, but established financial services players are starting to take bold steps to engage with emerging innovations.

At Accenture, we wanted to map out the activities that established players believe could allow them to reimagine themselves digitally. In our interviews with 25 influential financial services executives involved in innovation, we discovered three common themes:

Openness.
Open innovation is at the heart of the digital revolution. For large organizations this means engaging with external technology solutions, knowledge capital and resources, and often opening up the organization’s own intellectual property, assets and expertise to outside innovators to help generate new ideas, change organizational culture, identify and attract new skills, and discover new areas for growth.

Collaboration.
Traditionally, financial services incumbents have partnered with others in their own industry—especially to share processes or services considered “non-core,” which help all collaborators reduce their costs or create new market opportunities. Yet collaboration will need to go a step further in the future, to build ties with those in different industries and with different outlooks, and to identify new ways to generate value.

Investment.
Venture investing has always been at the heart of the start-up innovation model. Now, more than ever, established financial services firms are taking this route to try and generate innovation for their business.

Embracing these themes and creating the right foundations will allow banks to disrupt their own business model rather than sit on the sidelines watching challenger models disintermediate them. But these themes also create challenges when it comes to the rate of change and approach to risk hardwired into the way banks currently adapt to innovation. Anticipating this, banks are creating new businesses within their existing structures that adapt and collaborate to meet these challenges and make better use, faster, of their enduring source of competitive advantage—customer insight.

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Recommendations



It is clear that the digital revolution in financial services is under way, but the impact on current banking players is not as well defined. Digital disruption has the potential to shrink the role and relevance of today’s banks, and simultaneously help them create better, faster, cheaper services that make them an even more essential part of everyday life for institutions and individuals.

To make the impact positive, banks are acknowledging that they need to shake themselves out of institutional complacency and recognize that merely navigating waves of regulation and waiting for interest rates to rise won’t protect them from obsolescence. Embracing openness and collaboration, and making smart investments is a good place to start. But they will only know they are winning in digital when bank valuations start to factor in the future value of proven innovation, in addition to protecting the core franchise.

Fortunately, in conducting this research, we have discovered a sense of commitment and purpose among leading bankers to re-imagine the business model, build momentum, fail fast and learn from their mistakes.

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