Capgemini delivers a digital “wake-up call” for financial services firms

Capgemini has reported that the likes of banks and insurers are still underestimating the magnitude of the digital transformation challenge. As a result, they are falling short of expectations—especially when compared to other industry sectors.

As a result of this, financial services firms have admitted in the Capgemini survey that confidence in their own digital capabilities is falling. They believe they have a “shortage of skills, leadership, and [the] collective vision needed to shape the digital future.”

“This research shows that a reality check has taken place across the financial services industry, as incumbents now understand the true extent of the digital transformation challenge.”

Capgemini’s report examines the current opinions held by bank and insurance executives on digital and leadership capabilities within their own organisations. They have then compared the collated data with an equivalent study conducted back in 2012.

“Over 360 executives were surveyed from 213 companies, whose combined 2017 revenue represents approximately $1.67tn,” Capgemini revealed.

A smaller proportion of financial services executives in 2019 have said that their organisation has the “necessary digital capabilities” to succeed compared to seven years prior—confidence has fallen from 41% to 37%.

Conversely, an increased number of executives now feel that they have required enough digital skills around customer experience (40%) than they managed to in 2012 (35%).

“Although banks’ digital transformation journeys are well underway, the industry has reached a crossroads, as it attempts to meet the rising digital expectations of customers, manage cost pressures, and compete with technology upstarts.”

Nonetheless, most of the data gathered in the 2019 report has proven to be more pessimistic than it was in 2012. For example, general confidence in operations is rated at 33%, as opposed to 46% in the older study.

It is not only the issue of not having the relevant skills to drive digital innovation plans forward in their organisations, but a matter of confidence when it comes to the implementation of it.

How can banks and insurers use the new technology if they are not confident in their ability to use it to its full potential? Or, indeed, if their workforce is not confident that their leaders have the necessary capabilities to understand what needs to be done?

• Executives who have claimed that their organisation has the necessary leadership capabilities: 41% (51% in 2012)
• Confidence in governance: 32% (45% in 2012)
• Confidence in engagement: 35% (63% in 2012)
• Banks who believe themselves to be “digital masters” in 2019: 31%
• Insurers who believe themselves to be “digital masters” in 2019: 27%

Anirban Bose, chief executive officer of Capgemini’s financial services, said: “This research shows that a reality check has taken place across the financial services industry, as incumbents now understand the true extent of the digital transformation challenge.

“In an environment of growing competition and consumer expectation, the view is very different from a few years ago, and it is unsurprising that large organisations have become more realistic about their capabilities.”

“The banking sector does, however, outpace non-financial services sectors on capabilities such as customer experience, workforce enablement, and technology and business alignment.”

 As well as concerns surrounding the handling of digital transformation, Capgemini has discovered that many executives worry about a lack of “compelling vision for digital transformation across their organisations.”

The financial services sector handles data daily, tracking their client trends and advising them through regulations, governance codes, and uncertainty. As well as this, the financial sector is one of the most susceptible to cyber threats. It is clearly imperative, then, that organisations within this sector are leaders in digital innovation—it is a gateway into understanding the cyber threat landscape and therefore protecting information from external attacks.

When presented with the statement—“our digital transformation vision crosses internal organisational units”—only 34% of banking respondents and 24% of those working in insurance agreed that this could be applied to their company. With the statement—“there is a high-level roadmap for digital transformation”—a total 40% of banking respondents and 26% from insurance agreed.

“On the other hand, business model innovation, defining a clear vision and purpose, and culture and engagement are some areas which are challenging both for banking and insurance.”

Capgemini said: “Although banks’ digital transformation journeys are very underway, the industry has reached a crossroads, as it attempts to meet the rising digital expectations of customers, manage cost pressures, and compete with technology upstarts.”

38% of banks who were involved in the study said that they had the necessary digital and leadership capabilities required for transformation, thus proving that there is a particularly bumpy road ahead of them.

“The banking sector does, however, outpace non-financial services sectors on capabilities such as customer experience, workforce enablement, and technology and business alignment,” Capgemini continued.

Use of analytics for more effective target marketing:

• Banks: 56%
• Insurance: 34%
• Non-financial services: 44%.

“On the other hand, business model innovation, defining a clear vision and purpose, and culture and engagement are some areas which are challenging both for banking and insurance.

“In terms of culture aspects […], only 33% of banking and 25% of insurance organisations thought their leaders were adopting new behaviours required for transformation, as compared with 37% in non-financial services organisations,” Capgemini concluded in their report.

“At the same time, this is a wake-up call for banks and insurers to re-examine their business models,” Bose added.

“Tomorrow’s 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.”

He concluded: “The majority of financial services firms need to learn from the small pool of genuine innovators in their field.”

For the full report, click here.

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