By William Fenick, Strategy and Marketing Director, Financial Services
2014 saw continued change in the financial services industry as further consolidation occurred in the wake of the recession. This consolidation drove renewed efficiency efforts, which has put the use and effectiveness of technology under further scrutiny. After we look at what 2015 holds for us we should review how accurate our predictions were for 2014. As you can see it was a mixed bag of results, but that reflects the volatile nature of the industry.
1.) The sharing economy gets complicated – The growth of the “sharing” economy in the form of services such as Uber and Airbnb is going to bring considerable disruption to the insurance industry in 2015. As start-ups innovate in this field, insurance companies will have to develop and launch products that better enable the emergence of the pay-as-you-go economy. In 2015 insurers will leverage innovative technologies more fully to enable more dynamic responses to the opportunity that the growth in the sharing economy presents.
2.) Mobile only – In 2015 we will see traditional trading environments made fit for the mobile world. Today there are only a few wealthy traders who have the capability to trade from home, yet over the coming year this will change as more investment will go into getting trading applications mobile. It will soon become possible for real-time trading to occur in a purely mobile environment and this will impact the market as barriers to entry will be reduced considerably.
3.) Back to capital markets – It will be interesting to see how the capital markets fare over the next 12 months, as more western exchanges create products for the Renminbi. How successful these capital markets will be depends on the strength of the financial products on offer and the litmus test will be the amount of money China is able to invest in London and other financial centres through these products.
4.) Rise of the CTO – As the financial services industry grows in complexity we are seeing financial firms growing to resemble technology companies in many respects. This is having a serious impact on the structure of companies in the sector and where the senior leadership is being drawn from. Traditionally CEOs were drawn from the ranks of the investment bankers, but increasingly we will see the CIOs take over. This is because the CIO understands the costs and processes involved in the technology that underpins their operations with the bird’s eye view that many in the trading side of the business simply don’t have. This makes them the ideal candidates to run what have become, in effect, technology companies.
1.) Big data will become mainstream for banks - While cloud adoption saw only slow but steady gains, big data definitely went mainstream in the past year, providing unprecedented insight for those FS companies who made an investment in it. Over the coming year this will continue, but it will be interesting to see how existing infrastructures will cope with this new workload.
2.) Tech giants will drive industry transformation – 2014 did see continued industry transformation, but this was driven more by investment in financial technology start-ups. Interestingly this funding was also not always being driven by the likes of Google or Facebook. 2014 saw the likes of Santander creating a $100m innovation fund to invest in companies with disruptive finance ideas.
3.) Cost-cutting will encourage cloud adoption – While companies continued to dip their toes into cloud adoption, there wasn’t the increased uptake that many had expected in 2013. Most companies remain on the sidelines, only testing in small ways. The key issue here continues to be that the performance element of cloud computing is not yet as compelling as the monetary argument. While, non-mission critical elements will continue to move to the cloud, and most native applications are now being written for that environment, it will still take some time for cloud adoption to really take off in this industry.
4.) Bitcoin – will the bubble burst? – While the bubble has certainly deflated somewhat, in 2014 people began to see real value in the block chain that underpins Bitcoin. It has multiple potential uses, and this will continue to sustain interest in the technology in 2015.
5.) The year of the exchange clearing services – Exchange clearing services continued to show progress in 2014 but what became clear was that the market was very risk averse, meaning that potential mergers were avoided that could have driven considerable growth.
6.) The Russian capital market matures – We couldn’t have predicted the political events of 2014 that have caused significant damage to the Russian economy. However, while Russia’s relationship with the Ukraine has hogged the headlines, it’s the price of oil that prevented the Russian capital market from maturing in the way we had predicted.