Increasing demand from financial institutions for technology is leading to a collaborative approach with Fintechs, says Uday Nimmakayala from WealthObjects.
The regulatory landscape is changing now more than ever, and modern technologies (if selected and implemented correctly) are far more robust, scalable and cost-effective to operate. FinTech firms have reacted to ever-increasing customer demands by innovating in areas such as robotic automation, API usage, machine learning, and developing simple and efficient digital business models to attract and retain customers at scale.
In recent years at WealthObjects, we have seen increasing demand from financial institutions to utilise technology to launch digital solutions, or upgrade their existing offerings – leading to improvements in efficiency and revenue gains.
Wealth and asset management is now seen as a disruptive sector and the concensus is that globally the future of wealth management is digital. Through our experience of delivering digital business models to clients across EMEA and APAC, we have seen that ‘Digital’ is not just for young or millennial investors and that many mass affluent and high net worth investors are willing to switch providers for a better digital experience with personalised service.
Conversely, we were surprised to learn that young professionals prefer an element of human interaction for financial planning - as an additional hybrid option within a transparent digital proposition, not as a replacement.
Digital may mean different things to different firms – but one constant is that firms must adopt a digital approach to their entire front to back-office functions to evolve and grow.
Financial institutions can progress their digitalisation in the following ways:
Build solutions in-house - Companies with sufficient in-house resource may decide to build solutions themselves to maintain control of projects and IP, but this typically increases the risk of failure and time to market. Then there is the risk of staff leaving with the knowledge base.
Furthermore, company culture (or sheer size) can stifle innovation and efficiency, making it difficult to react to customer trends and thus stay competitive. Firms often struggle with this, and we see a clear trend of working with FinTech providers, with ‘in-house’ no longer the default option.
Buy a technology firm - Larger Institutions have multiple offerings across various channels. Acquiring a FinTech firm can help to simplify and enhance the wider omnichannel experience.
However, such deals are capital intensive, and post-acquisition it is challenging to maintain the innovative culture of the acquired firm and maintain past levels of staff motivation. Mismatched cultures, increased approval procedures, differing goals and operational costs can hinder ongoing innovation. To mitigate this, some companies take a ‘hands-off’ approach to acquisition, leaving the acquired firm to run as a stand-alone business with operational freedom.
Partner with FinTech firms - Partnering with FinTechs who have an open, agile and innovative culture (and no conflict of business interest), enables firms to launch solutions faster and more cost-effectively, futureproof their offerings and stay competitive.
Institutions of all sizes can leverage the capabilities and technologies of FinTechs to gain competitive advantage, stay relevant and accelerate growth across segments by attracting and retaining clients. Such partnerships help companies to align their goals and work collaboratively, keeping the innovation going and launching solutions with good customer outcomes.
At WealthObjects, experience has taught us that the most efficient option is to collaborate with B2B Fintechs and develop a true partner-relationship. Partnerships where both sides contribute and share in the success will be the winners the long term. This is not a new concept; firms have always collaborated. But as the financial services sector continues to change with the introduction of new technologies, and existing business models are under constant threat from disruption, the need for collaboration is greater than ever.
How should firms choose the right technology partner?
Whilst the technology is key, it is important not to overlook the people behind it; good people are needed to build good tech, and to futureproof it to retain competitive advantage in the long-term. FinTechs need capable staff to adapt the solution to evolving markets and regulations, deliver ongoing innovation and – critically – underpin all of this with quality customer project management and support.
So as well as a deep-dive into the technology, take a good look at the company’s people, processes and philosophy. Do you have good cultural alignment? Do they act as a vendor, or as a partner? And will they provide the right ongoing support and consultation to help you grow your proposition?
At WealthObjects, experience has taught us that the most efficient option is to collaborate and develop a true long term partner-relationship. As the financial services sector continues to change with the introduction of new technologies, and existing business models are under constant threat from disruption, the need for collaboration is greater than ever to produce truly customer-centric propositions.
This article features in the UK Wealth Technology Landscape Report. See that here.