More than 80% of respondents believe Amazon and other tech giants could become major competitors
London UK – July 16, 2019 – According to research findings released today by NTT DATA, new digital technologies, increased competition, and evolving customer expectations are driving 61% of financial services and insurance companies (FS&Is) to shift away from traditional, vertically-integrated business models of offering customers only their own products.
FS&Is are moving toward creating a Digital Business Platform (DBP) that allows them to operate with fintechs, insurtechs and other parties in a global ecosystem to provide consumers unique value, 24/7. As a result, nine in 10 global FS&Is believe in the need for transformational digital change.
New technologies, such as artificial intelligence and blockchain, are the top trend impacting FS&Is as identified by 53% of respondents, but the findings also indicate technology giants are a significant concern for leaders. According to the research, 84% of firms report that industries outside of financial services and insurance are providing a significant influence on the direction of the market, and 83% believe new entrants, such as Amazon, Apple and Facebook, could become major competitors in offering financial products.
“Platform-driven companies such as Amazon, Google, and Netflix that provide fast and easy digital experiences to customers are changing the expectations for financial services and insurance companies,” said Toshi Fujiwara, Representative Director and Senior Executive Vice President, NTT DATA. “These technology giants operate agile business models that allow them to leverage existing customer data and quickly customize new products at competitive prices to better serve mobile-first consumers.”
In order to address these market forces, 85% of respondents indicated a Digital Business Platform represents a significant opportunity to reposition their companies and 83% agreed that integration of legacy core systems into a DBP is important for their competitive position in the next 3-5 years. However, only 23% said their companies currently have a DBP that is working and providing benefits.
“Banks have actually been digital business for decades, moving money at the speed of light. Recasting their capabilities and building a true Digital Business Platform will allow companies to create and support multiple business models on a single technical framework without replacing outdated, legacy core systems,” said Wayne Busch, President, Financial Services, NTT DATA Services. “This will also enable partnerships with fintechs and insurtechs that help to more easily incorporate new digital technologies, use application programming interfaces and share customer data.”
Key study findings include:
1) 61% of FS&Is are changing their business models to compete with platform-driven companies such as Amazon and Apple.
2) Each sector of the financial services and insurance industry is evolving their business models differently.
3) FS&Is are in the early stages of digital business platform maturity.
4) Insurers are ahead of other financial sectors when it comes to having already built a DBP.
5) Europe is ahead of the game in building Digital Business Platforms due to the PSD2 regulation. Below is the ranking of countries from the highest to the lowest percentage of mature DBPs:
6) FS&Is expect meaningful business benefits from investing in digital business platforms. The 23% of companies that have digital business platforms working and providing business benefits now reap these rewards:
7) Partnerships with fintechs and insurtechs will be a popular strategy.
“Digital-forward financial institutions and insurers see digital business platforms as the path to effectively modify legacy core systems with digital features and functions,” said Jose Pablo Carbonell, CEO of Europe, everis. “Those who attempt to maintain their vertically-integrated businesses supported by aging technology will have difficulty remaining relevant in the new world of platforms and the digital ecosystem.”
Download a copy of the research, “Digital to the Core: Transforming Financial Services and Insurance in the New World of Digital Business Platforms and Ecosystems”.
For the research, NTT DATA surveyed 471 senior executives in banking, insurance, brokerage, wealth management and cards & payments across the U.S., UK, Germany, Spain, Italy and Japan in early 2019. Nearly 50% of respondents were from institutions with more than $10 billion in annual revenue and 55% of those who completed the survey were C-level executives.