Gearing up for success in the digital world

THE last few years has seen a wide range of industries being disrupted by new and established players leveraging on powerful digital technologies to address consumer pain points and provide them with intuitive user experience.

The lines between industries have been blurred and new business models from both established digital giants and startups are challenging incumbents and winning in some instances. The financial services sector has not been spared, as financial technology, or fintech, and startups looking to upend traditional channels of finance sprout in Singapore and abroad. Almost every type of financial activity - from banking to payments to wealth management and more - is being re-imagined to solve consumer pain points. New entrants in the payments and lending space are fundamentally changing the financial landscape and unbundling pieces of the traditional banking model using new technologies that enable phenomenal speed and simplicity. Reflecting the scale of the fintech explosion, some US$20 billion in venture capital have been invested in the sector and 4,000-5,000 new startups emerged in 2015. This rapid pace of this expansion requires everyone to rethink the speed and direction of their growth strategies. The Monetary Authority of Singapore (MAS), in partnership with The Association of Banks in Singapore, took the lead and organised the inaugural Singapore FinTech Festival last year, which brought together financial institutions, startups and investors from around the world to interact and explore possible collaborations. This week-long event coupled with the commitment to fund S$225 million over five years to the fintech innovation ecosystem reaffirmed the government's efforts to develop the city-state as a leading global fintech centre. All these activities from the greater ecosystem have raised the bar on customer expectations in a short period of time, and established financial institutions will need to evolve to stay relevant to their needs and habits in an increasingly digitised world. Keeping up with change Indeed, this speed of change is one is one of the biggest concerns for the financial industry. Established players realise that it is no longer enough to find ways to improve efficiency through cost-savings initiatives or simply by enhancing their legacy systems or processes. Rather, in line with the CFE's recommendations, financial institutions are building strong digital capabilities and diffusing innovation strategies throughout their organisations - through new platforms, solutions and skillsets - to help them drive growth for the next decade. Beyond investing more heavily in innovation, financial institutions are also increasingly shifting from a traditional mindset of building complete business models to one that is ''agile'', and launching products with a minimum value proposition and rapidly iterating the products. Undertaking all these require them to instill a culture of innovation among their employees and nurture a nimble workforce. To that end, financial institutions have started to invest heavily in and train their employees in the necessary skillsets - from human-centred design to scrum methodology among others - to equip them for a digital-compatible future. Success in the Future Economy In this new environment, being able to attract, engage with and serve customers in a more compelling and efficient way is critical to the success of any financial institution, and digitisation is a transformative factor. Financial institutions will need to reinvent how they work and what they deliver to customers in order to succeed in the digital world of tomorrow. I believe that there are three key aspects to doing this successfully: 1. Enabling an ecosystem that promotes collaboration among companies, banks, fintech startups and governments through application programme interfaces (APIs) and data sharing (with disclosure and permission from consumers). This will harness collective creativity that can accelerate innovation and fuel growth. 2. Developing an effective cyber security programme to protect systems and customer data will create a greater sense of confidence for consumers to adopt the new solutions. This programme should also facilitate broader collaboration amongst companies across industries and government agencies to share intelligence gathered on cyber threats. 3. Fostering talent is critical to meeting the challenges of a digital world. Financial institutions will need to offer training opportunities to employees to expand their skillsets, and to attract experts in the field to transfer learning and skills. Skills in new areas such as understanding and interpreting data, human-centred design, data governance and risks will enable employees to become more confident and adaptable to various jobs available now and in the near future. The financial services sector must be prepared for creative destruction over the next decade, coupled with a significant shifting of market share to newer or stronger players. Those that do not adopt new skills and technologies and adapt to the changing reality will be left behind as non-traditional players become more dominant. We are entering new and exciting times where I believe that the ongoing disruption of the financial services sector will transform the industry as new technologies are fully harnessed. This will lead to vastly improved products and services for consumers and the creation of new types of jobs in the industry.