Exploring New Frontiers in the Era of Digital Finance

In the last edition of CUPlatform for 2022, I expressed the sentiment that financial institutions are transitioning from physical entities with a digital offering to digital entities with a physical offering — and that this inversion will continue to define the rest of the decade. In this first edition of CUPlatform for 2023, we need to evolve the discussion from inversion to the need for complete transformation. Wholesale change must be now considered a burning platform for incumbent financial institutions.

Burning platform is a metaphor used to emphasize the necessity of change, despite ambiguity over what will happen after that change. The metaphor has uncanny applicability as we continue to discuss the era of platform and ecosystem in finance. As technological innovation proceeds, both in the field of technology in general and in the financial services industry in particular, it is increasingly apparent that being in a position to adapt to evolving digitally-enabled business models is critically important.

Incumbent financial institutions supporting themselves within legacy frameworks are running on empty — as change subsumes our daily lives, and expectations shift for customer and member experience, legacy technology will not be able to keep up with the experiential “step change” being stewarded by modern technology.

Legacy is used as an adjective in technology dialogue to denote “software or hardware that has been superseded but is difficult to replace because of its wide use.” It is ironic that on the first day of university, in the first Economics 101 class, we are advised “not to make decisions based on sunk costs” and then turn around later in life to observe this as a common practice. While legacy dependency has been tolerated during previous decades due to linear change, the transformation we will be seeing this decade in finance will be exponential, rocket-like, and driven by modern disruptive technologies and standards. Remaining with legacy technology essentially means being left on the ground while those that are future-focused take off to explore new possibilities. 

Legacy technology accommodates traditional retail delivery; however, moving to the era of platform-based delivery requires different thinking and different technology support. Previously, financial institutions were accustomed to defining their products, and “serving them up.” Platform delivery, however, is interactive, where consumers identify their "moments of value" in an exchange and then act on them through a combination of experiences.

Channel proliferation has resulted in the diffusion of customer experience. Customer experience and engagement now span multiple channels, with consumers choosing which channel(s) to use for their interactions. While branch, call centre, internet banking, mobile banking, and telephone banking are considered traditional, the future points to an explosion of new options facilitated by smart devices — VR headsets, smart watches, smart glasses, smart cars, etc. — with new contexts, the meta-verse, AI enabled chatbots, virtual reality (immersive and non-immersive), augmented reality, and more.  

In thinking about time, place, and context (or alternatively when, where, and how), channels support the context for an experience. Time and place represent data points, along with other information that we have available on our customers and members. AI and machine learning distills further insight from data. Platform technology can use the combined data points and insight to generate experiences that resonate and matter, enabling consumers to adopt innovative products and services.

Well-articulated, integrated, meaningful and relevant experiences that span channels represent the frontier of digital for financial institutions. Customers and members will gravitate to where they are served best. Institutions that maintain a holistic view of their relationships, manage those relationships across channels, and converge with their client on “moments of value” will be successful. For institutions that cannot or do not move to a customer-centric ecosystem and platform, they will find relationships increasingly difficult to navigate, resulting in myopia, lost opportunity, and attrition.

Management of technology is no longer a siloed function, but the process of supporting a business model by infusing it with digital capabilities and presence, making technical fluency across the entire C-Suite essential. Successful financial institutions of the future will be those with a culture of transformation and an unrelenting commitment to collaborating with their customers and members on “moments of value” — experiences that matter when, where, and how. Legacy technology disenfranchises organizations by limiting them from participating in this exchange. Modern technology, platform, and ecosystem supports leading from the front, and strengthens a financial institution’s value proposition as the work of finance steps beyond the branch door and directly into people’s lives. Now is the time to prepare for digital lift-off —the launch point we have been anticipating is on the horizon.