The fintech imperative
Fintech is one of the biggest disruptors of our time for financial institutions. Whether it is providing new ways to enhance the customer experience, make service delivery more cost effective, or improve the efficiency of back-office functions – the myriad fintech solutions are rapidly reinventing the value chain. The challenge for many financial institutions is determining the best way to embrace the fintech imperative given their unique strategic vision and business objectives.
To better understand how companies are evolving to meet the new digital paradigm, KPMG conducted a survey of 168 financial institutions from 36 countries worldwide, and interviewed executives from leading financial institutions and KPMG financial services professionals, on how companies are embracing fintech when the very definition of fintech is constantly changing.
Building the right foundation
What KPMG experts learned is that there is no single best way to approach fintech. Leading financial institutions are pursuing various avenues to leverage fintech – from partnering and buying to sourcing and direct investment. Yet, one best practice underpinning a successful approach to fintech, is the definition of a focused fintech strategy, which includes:
- solid knowledge of current business operations
- awareness and early identification of signals of change
- readiness for change and understanding of cultural barriers
- alignment between business objectives and fintech approach
- broad array of innovation active that includes both incremental improvements and transformative change.
Even with a well-defined strategy, integrating fintech successfully within an organization isn’t easy. Financial institutions are addressing fintech on a continuum – some are adopting a defensive approach to protect what they already have; others are on the attack, looking to grow. Envisioning the future during a time of massive transformation is a complex process. Leading organizations are getting started by asking four key questions:
- What will we be famous for?
- What role(s) do we want to play in our clients’ lives?
- Where should we play?
- How can we win?
Responding to these questions will likely have significant implications for the organization’s business model and culture, and therefore the way they identify new fintech capabilities to support their aspirations.
The road ahead
Fintech innovation remains a race – and there are no clear winners yet. Incumbents have a great opportunity to drive value from fintech given their customer relationships, capital resources and established reputations. While most organizations don’t see themselves as leaders in this space, there are many success stories from leading institutions shared throughout the report.
At the rate the industry is evolving, financial products and services – and the technological infrastructure behind them – will look remarkably different in a decade. Financial institutions that take the time to define their fintech strategy and align it to their future vision and business goals, will be best positioned to forge the future of financial services.