Digital transformation acceleration becomes key to survival

The Coronavirus crisis has accelerated an existing trend for digital transformation within financial services, with those companies further ahead with these changes appearing to be faring better in the market.

While incumbent institutions may have the benefits of scale and customer base, digitally native challengers have been recently reaping the rewards of being able to push out new products and services in response to customer demand.

Legacy systems, siloed data and slow routes to market have plagued big banks for some time now, but the pandemic has seemingly freed up budgets and projects that might have taken years have now been completed in months.

Huawei has been at the heart of many such initiatives, lending its technology expertise to trusted banking brands, helping them keep up with disruptive FinTechs and user expectations.

Having been involved in banking sector for more than a decade, it has helped support widescale cloud transformation, building new connectivity capabilities and working to drive agility and innovation.

Bringing Chinese banking up to speed

Recent use cases include work with Shanghai Pudong Development Bank (SPD Bank) that was unveiled at the Huawei Connect event in September.

The bank’s president Pan Weidong explained that in today’s marketplace, connectivity is productivity, something increasingly evident through intelligent network connections with clouds, edges and devices.

“Based on intelligent things' connection scenarios, we can build a people-centric intelligent space to provide comprehensive services,” he stated. “In this space, financial services will act as an adhesive for multiple stakeholders in the intelligent, efficient, and collaborative ecosystem to achieve mutual success and develop a thriving real economy.”

Huawei and SPD Bank produced a whitepaper proposing a new financial service model and design system for ‘intelligent things’, ushering in a new era of ‘bank of things’ services.

Under the national new infrastructure strategy, emerging technologies such as 5G, the Internet of Things (IoT) and artificial intelligence (AI) are evolving rapidly, resulting in hundreds of billions of connected devices.

The two companies set up a joint innovation lab in 2018 and in August this year, they signed a comprehensive strategic cooperation agreement, focused on improving user experience, applying digital technologies and assisting innovation across the economy.

Other examples include work with Chinasoft International, a Beijing-based investment holding company, to upgrade its data warehouse capabilities, launching a new middle platform solution for financial data, among other things.

“Digital infrastructure is the driving force of digitalisation,” explained Chen Yuhong, chairman and chief executive of Chinasoft International. “The improvement of data convergence, business service and data asset management capabilities is critical to the digitalisation of financial institutions.”

He went on to explain that big data and AI technologies are well-suited for use in financial enterprises.

“Although bottom-layer technologies have an abundance of open source projects, financial enterprises increasingly rely on large platform enterprises, because these enterprises conduct superior cutting-edge research, carry out regular upgrades, and regularly perform operations and maintenance,” stated Yuhong. “The stability and sustainability of technologies developed by platform enterprises are far superior to those of non-technology-oriented enterprises, which typically employ one or two technical experts.”

The success in China has been replicated across Asia and other regions too, with Huawei having been awarded the Most Valued Technology Partner of the Year 2020 from DBS Bank. Here, the Huawei team has been working closely to meet the bank’s evolving requirements and drive digital transformation especially during the COVID-19 pandemic.

The new normal

There has been much debate as to which firms will survive the economic crisis caused by COVID-19 and how customer expectations will shift over the long term, with more people permanently working from home and less desire to carry out transactions in person.

A survey in June by EY of over 200 senior managers from across 162 financial services firms found that 87 per cent believed that working from home due to the pandemic will result in firms’ tech transformation developing far faster than they had ever previously predicted.

Almost two thirds (65 per cent) of respondents thought the workplace will change fundamentally post pandemic, with a further 30 per cent expecting moderate change.

Simon Turner, financial services partner at EY, said: “Financial services is unlikely to ever return to the ‘old normal’, and new ways of working - incorporating a far greater degree of technology and flexible working - seem inevitable.

“Technology is expected to develop at a far faster pace than ever forecast, bringing forward years’ worth of tech progress to banks, insurers and asset managers, and if done well, will create a huge cost saving just at a time when firms need it, while improving customers’ digital experiences.”

Meanwhile, Marqeta interviewed 200 heads of digital transformation, chief technology officers, heads of innovation and chief innovation officers at traditional and challenger banks in the UK, France, Germany, Italy and Spain – finding that 78 per cent plan to change their future banking strategy to adapt to changes in consumer behaviour, such as the accelerated adoption of digital services and cashless payments.

As a result of these wider trends, 80 per cent of banks have accelerated their plans to digitally transform, with respondents predicting that such projects will need to be delivered in two thirds of the time, with 89 per cent saying that the pandemic has drastically increased the speed of change in banking.

The study also found that three quarters of banks 'weren’t prepared' for the scale of change that COVID-19 has triggered in consumer behaviour, with a further 88 per cent admitting they were overwhelmed by the demand for online and mobile banking during lockdown.

Work has focused on improving the online and mobile banking experience (76 per cent), offering new, differentiated payments services (70 per cent), investing in security and anti-fraud solutions (70 per cent) and modernising core banking and payment platforms (66 per cent).

Ian Johnson, European managing director at Marqeta, commented: "Attitudes to modernisation have clearly changed - banks are now speeding up efforts to transform because they know that the winners of the next age of banking will be determined by who can best adjust their strategy to adapt to the new normal.”

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