Banks, Insurers Underestimated Magnitude of Digital Transformation Challenge: Capgemini
Financial services providers like banks and insurers are lagging behind in digital transformation compared to other industry sectors.
Financial services providers report falling confidence in their digital capabilities, and a shortage of the skills, leadership and collective vision needed to shape the digital future, reveals a report.
The Global Digital Mastery Series report from Capgemini says that while banking transformation has taken centre stage, insurance players are more focussed on automation. Although banks' digital transformation journeys are well underway, the industry has reached a crossroads, cites the report, as it attempts to meet the rising digital expectations of customers, manage cost pressures, and compete with technology upstarts.
Fewer than half of banks (38%) say they have the necessary digital and leadership capabilities required for transformation. Insurance is catching-up with only 30% claiming to have the digital capabilities required and 28% the leadership capabilities necessary.
"...this is a wake-up call for banks and insurers to re-examine their business models. Tomorrows operating model is collaborative, innovative and agile. The digital masters we looked at are working with an ecosystem of third-party partners, developing and testing ideas more quickly under an MVP model, and nurturing a culture of bottom-up innovation and experimentation. The majority of financial services firms need to learn from the small pool of genuine innovators in their field," says Anirban Bose, chief executive officer of Capgemini's Financial Services and member of the group executive board.
In Capgemini's digital mastery framework presented in the report, just 31% of banks and 27% of insurers are deemed to be digital masters, while 50% and 56%, respectively are classified as beginners.
Executives also criticised the lack of a compelling vision for digital transformation across their organizations. "Only 34% of banking and 24% of insurance respondents agreed with the statement that 'our digital transformation vision crosses internal organisational units', with just 40% and 26%, respectively saying that 'there is a high-level roadmap for digital transformation'," the report says.
The banking sector does, however, outpace non-financial services sectors on capabilities such as customer experience, workforce enablement and technology and business alignment. About 56% of the banking firms said they use analytics for more effective target marketing (in comparison to 34% insurance and 44% non-financial services sector).
More than half (53%) of banking organisations also said that upskilling and reskilling on digital skills is a top priority for them (32% for insurance and 44% for non-financial services sector).
One area of advantage for insurers was operational automation, the report says adding with 42% of executives saying they used robotic process automation, against 41% of bankers, and 34% reporting the use of artificial intelligence in operations, compared with 31% of bank executives.
On the other hand, the Capgemini report says business model innovation, defining a clear vision and purpose, and culture and engagement are some areas, which are challenging both for banking and insurance.
"Only 33% of insurance and 39% of banking organizations have launched new businesses based on digital technologies and 41% in non-financial services sector.
While banking is in line with the non-financial services average, only around a third (34%) of banks had a digital vision that crossed organizational units. Insurance lags even further behind, with just around a quarter (24%) having an all-encompassing vision. In terms of culture aspects as well, only 33% of banking and 25% of insurance organizations thought their leaders were adopting new behaviours required for transformation, as compared with 37% in non-financial services organisations," it added.