THREE TECH TRENDS OF 2017: it’s all about the humans
As 2016 draws to a close, many financial services firms find themselves in the unusual position of having technology at their disposal that is more advanced than their processes and their humans. It is time to play catch up. And technical know-how is only part of the equation as new regulations, client requirements and competitive forces demand a new approach. In the battle between running the old and introducing the new, something will have to give. In this article, Dr. Leda Glyptis explains three of the most important technology trends for the year ahead—and the paradigm shift they represent.
Once upon a time, software engineers were expected to be introverted perfectionists who disliked the messiness, emotional detours and sometimes illogical parameters of human life and decision-making. They had an appreciation of art and beauty and software was perfect. It could be beautiful; it was rational, neat and impervious to emotional variation.
Their business overlords in the financial services world neither understood nor shared the developer’s view of the world, but they accepted the magical quality of technology, the mystical path of learning how to use it and the uneasy tension of explaining what was required to the IT department. Business requirements documents (BRDs), super users and angry meetings were the name of a game that was rational, serious and rigid.
Fast-forward to today: the digital era has arrived fully loaded with a new aesthetic and culture of “user friendliness.” It carries its own economic paradigm (sharing, coalescing, tandem growth), a different organizational position (human centric, non-hierarchical, saturated and interrupted) and a whole host of assumptions about human nature, society and value. This is in stark contrast to the values that leave both the hard-nosed banker and the bona-fide software geek of yesteryear deeply uncomfortable.
Financial services professionals and their IT partners, while never historically the best of friends, were at least united in having settled into a clinical, numbers-and-facts world. Now, the shift to human-centered interaction and design—not a theoretical notion of what technology can do—is already here, proven to work and ready to be used.
So what does this new world look like and how is this paradigm shift manifesting itself? Below are three of the most significant trends for the year ahead.
Solving for the technical talent gap will be the easy part. Getting comfortable with the purpose and aim of the shift will be the bigger challenge, but it has its own reward.
1. Firms will move from a fortress mentality to deliberate dependency
Banks collaborate. SWIFT is a great example of collaboration in action. Clearly, if each organization could do it all without each other’s help and clinch the market, they certainly would. Instead, they rely on each other, yet never totally depend on each other. Systemically, even core services are divided to safeguard against the dreaded dependency.
Enter the application programming interface (API) and the new economy it enables: welcome to a world of sharing and deliberate dependency.
Uber did not build a proprietary geolocation capability. Tinder did not build a proprietary identity validation function. Revolut did not build a bank account. They were all quicker to market and much more operationally efficient because they were willing to borrow or lease their infrastructures, share the client footfall and base their success on the success of others. They weren’t beholden to notions of building and maintaining their own core services. They defined their niche and embraced dependency. That meant that if Facebook is down, Tinder is inaccessible to its millions of users. But while Facebook is up and running, Tinder leverages the ease of sign-on and deferred trust signing in with Facebook conveys. Its books also don’t groan under the financial load of building the identity validation infrastructure. Translating that into banking is not too dissimilar. Apps, such as Loot Bank (on a prepaid Visa), Monzo or Revolut (on a prepaid Mastercard), made very similar decisions around profit sharing and infrastructure investment. They are trading freshness and innovation for credibility and stability, and gaining market traction exactly because of that blend.
Ultimately, firms can hire as many fresh-faced, API-savvy digital natives as their buildings can hold, but until the company’s leadership understands the mechanics of dependency, pricing an API call will be challenging.
2. There will be a shift from a knowledge economy to a learning dynamic
In the past, ‘data’ was often shorthand for a management information screen, usually in garish green with purple and orange pie charts. It was static and backward looking. And it was staggeringly uninformative. It gave a temperature check of trends, performance and delivery but no one looked at it to really learn anything. At the end of the day, managers would cast an expert eye at it to confirm that “Yes, all is well.” The type of data was tailored to the type of management FS firms tended to generate: expert, knowing, static.
Today, there are clever technologies and some creative ways of showcasing fresh and relevant information that will allow firms to learn new things about the business in real time. Data analytics and visualization techniques weaving multiple data sets allow users to learn as they do, enabling them to potentially challenge assumptions and constantly refine operations and tactics in line with their strategies.
Ultimately, humans can become smarter every day. Learn something and improve something, every day. The mindset of fluidity, the humility of constantly questioning and learning, and the agility to engage with fresh perspectives and instigate creative thought when looking at a familiar terrain are weaponized by technology. But no number of data scientists will trigger the transition from being the boss because of what they know, to being the boss because of their ability to constantly learn.
3. Firms will leverage technology to minimize rather than hide the chance of human error
The capital markets world operates on the assumption that people will make mistakes and it is hugely padded with numerous protective measures to catch and rectify them.
Because people make mistakes, itís important to have a thousand checks around each process, several layers of sign-offs, reconciliations, post reconciliations and a few recall processes for good measure.
Clients understand, because their people make mistakes, too. Hence the idea of a simple recall. Only the idea is not that simple. It reveals that firms can trust their peers, clients and even their competitors to revise the record once a mistake has been made, because they are all in the same boat. But can they trust everyone else?
Historically, financial services firms, wanting to avoid known and unknown risks, set themselves up like a black box to ensure that information contained therein remained safe, proprietary (in case that turned out to be useful) and invisible. It spared everyone embarrassment in case mistakes were made, and allowed “activity” to be “valued” and priced in terms of its impact on the client, and not always the amount of effort it entailed.
Today’s new world of digital connectivity changes these rules. Black boxes are no longer acceptable, and the “value” perceived by the client needs to align with the value extracted by the provider. At this point, the enhanced visibility changes the conversation. Clients accustomed to a digital experience in their day-to-day lives will no longer see the value in a value-added serviceófor which banks charge a premium.
Mistakes are human, but transparency is divine. So rather than having no trust in one’s people, too much faith in one’s peers’ understanding and an arms-length approach to information sharing, the new world suggests that firms secure their assets with the most reliable identity protection, encryption and cybersecurity genius they can muster and money can buy.
They should also use the huge suite of technical capability at their disposal to minimize manual intervention (hence, the chance of error), delays (to increase trust between the moments of exchange) and multiple versions of the truth and accept that operations are not striving for perfection or sainthood. Mistakes will occur and people will cause mischief. They key is to find a way to minimize that rather than hide it.
The technology is available. It’s real, robust and relevant.
But it’s not quite “ready to use,” as it comes with a new aesthetic, economic models and philosophy about the meaning of value. It needs to be understood, digested and aligned. Or rather, the business needs to become aligned to the possibility.
New tech is sending a shockwave through the industry that is leading to fundamental shifts in how firms operate, how management thinks and the best way to secure the enterprise moving into 2017.
Leda Glyptis is a Director at Sapient Global Markets working within the transformation/strategy capability. Leda joined Sapient from BNY Mellon, where she served as regional head of innovation. Leda was focused on articulating and delivering a digital value proposition to clients and developing a meaningful FinTech strategy for the firm. Leda holds an MA from King’s College, Cambridge and an MSc and PhD from the London School of Economics and Political Science.