Digital to the Core: Transforming Financial Services and Insurance in the New World of Digital Business Platforms and Ecosystems
Article Synopsis :
Financial services and insurance entities must get their act together if they are to benefit from the powerful transformation that digitalisation offers. And it has to be soon.
So says this report from NTT Data Services, if incumbents are not to find themselves crowded out by tech giants who have the digital capability to enter the market and eat their lunch.
The concept of building digital business platforms is proven. It will allow providers to support multiple business models within a single framework. This will reduce their dependence on obsolete – or legacy –technology that supported the old world models.
These platforms allow agile and secure businesses to be developed and provide greater ownership of the distribution channels.
The benefits are clear: fintechs and insurtechs gain better access to the mass market; customers enjoy a transformed, personalised experience and the protections of a regulated industry; and traditional providers will have access to new revenue streams and stay relevant in an era of digital disruption.
Maintaining vertically integrated businesses on old tech is the alternative and it isn’t an appealing one.
Those who fail to evolve will fail.
That’s the context, but NTT has five key recommendations for organisations that want to survive.
1) Create a digital culture
Culture is key and all messaging has to start at the top if it is to succeed.
Define the digital values and develop a change management programme that will embed it throughout the whole company. Because digital is a state of mind, rather than just technology or process.
While the messaging must start with the high ups, don’t leave it to the management alone. Gathering views from employees and other stakeholders creates a holistic set of values which everyone can ‘own’.
This change in mindset will require a change in personnel. Recruitment and training will be essential. IT leaders will find they have a strategic. role, and anyone who isn’t comfortable with that should be replaced.
2) Embrace new technology
While there’s more to culture than technology, technology remains critically important.
Agile businesses are able to customise and launch products rapidly, integrating partners equally quickly.
New technologies such as artificial intelligence (AI), internet of things (IoT), blockchain and cloud is essential if they are to develop a flexible IT infrastructure that enables open collaboration with partners, customers and employees.
3) Look for new allies outside the business
Vertically integrated business models are dead. Incumbents should instead develop the capabilities to recruit partners and integrate each partner’s business model into their own.
4) Make a commitment to a digital customer experience
Customers and their entire lifecycle of engagement with your company must lie at the heart of every products and service you develop.
Big data and analytics are key components to providing the best customer experience, but they must satisfy expectations around privacy, preferences and permissions.
5) Become a transformative and innovative organisation
Going digital cannot be accomplished with a vertically integrated business strategy. The two are incompatible.
Create an agile business model and overhaul your business processes and operating model to become more responsive.
Time to market is now critical to satisfy consumer demand. And digital will help drive out cost and create better connections with employees and customers if properly aligned.
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Digital Insurer's CommentsThere is increased focus on the claims process as a route to digital transformation and this paper leans on this heavily.
It cannot be done in isolation, but the suggestion that this new model for claims will be essential has some weight.
Some insurers have already succeeded in automating elements of their claims processes for parts of their business, such as auto, baggage and flight delays.
If we can do some of this now, there will be no excuse for developing this capability when technology – probably blockchain – influences areas such as healthcare claims.
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