`Updating the Business model` in Financial services — insights from the Salesforce survey

Running a retail bank, a wealth management firm, or an insurance company requires a digital transformation strategy with a road map. COVID19 has left no room for any further boardroom discussions on this topic. However, the distinction between tactical and strategic moves makes a big difference.

CEOs, CFOs, CDOs running any financial business have been forced to reshuffle their previous business priorities and intensify internal digitalization processes towards what Forrester calls `Autonomous Finance`.

The Salesforce research focused on financial services trends covers in detail the reshuffling of business priorities and shows the shifts in retail banking, wealth management, and insurance companies before and during the crisis.

The research shows how enhancing security, or increasing personalization or automating processes, for example, have become more or less important in the digital transformation of the company. Most of the questions of the survey look at how technology empowers different objectives like improving customer experiences, or developing new services, or improving customer trust. These are mainly tactical transformations and not strategic. If the business model remains unchanged then anything from cloud adoption to any other kind of technology improving the way the business is run, is really a tactical transformation and not a strategic one.

Running a bank versus changing the business model of a bank, is a distinction that needs highlighting. Running a wealth management business versus changing the business model, is an important distinction. To translate this in tech terminology, I highlight the distinction between a business that has fully moved to the cloud and a business that is cloud-native. The latter is a business model built-in the cloud allowing any scaling to be secure, reliable, and efficient. On the other hand, a business that has moved to the cloud in a batch processing fashion and whose internal and external interfaces are not via APIs, is not cloud-native.

In financial services as long as there are two separate teams, one running the business be it a retail banking, a wealth management, or an insurance business, and then another team focused on changing the business; then actually updating — transforming the business model is in pilot mode.

This important subtle distinction prompted me to look into the Salesforce survey with a focus on responses on the importance of `updating the business model`, which is a strategic decision.

Looking at the top-line results of the survey in all sectors, I realized that both before the COVID19 crisis and during, `updating the business model` was a low priority and remained overall a low priority (roughly ranking around the 7 to 8 range on a scale from 1–10).

Looking specifically into the retail banking sector, `updating of the business model` ranked 9 in 2019 and 8 during the crisis, so always extremely low.

Zooming into the survey results by country, it becomes clear that there are major differences in retail banking. Japan, Canada, Spain, and the Netherlands, are the countries for which `updating the business model` became a top priority. More interestingly for Spain and Canada, it was a low priority in 2019 and then became a top priority, whereas for Japan it was always a top priority. On the other end of the spectrum, `changing the business model in retail banking` was a low priority for both France, Germany, the UK, and the Nordics (ranked 8) and even worse for the US, IT, and Brazil (9).

As a business priority `updating their business model in retail banking` has fallen significantly.
More than 50% of the countries surveyed, showed `updating their business model in retail banking` an extremely low priority (8/9 out of 10). 7 out of 12 of the countries surveyed, showed `updating their business model in retail banking` an extremely low priority (8/9 out of 10). In 2019, it was 5 out of 12.

Looking at how wealth management businesses in different countries prioritize `updating the business model`, the survey shows that for the US, France, and Brazil it became at top priority and for Germany, Italy, Japan, and the UK it is at the bottom of their priorities. As the US is a major market and was overweighted in the survey (21% respondents were from the US whereas each of the other countries participations were 7%).

it’s interesting to highlight how changing the business model in retail banking is really low priority in the US, whereas it is a top priority in wealth management. Japan is also a country where we see this big differentiation, with Japan having as a top priority to change the business model in retail banking and not at all in wealth management.

The survey shows that in the US, changing the business model in retail banking is really a low priority, whereas it is a top priority in wealth management.

The survey shows that in Japan it is the exact opposite.

One-fourth of the countries surveyed, showed `updating their business model in wealth management` an extremely low priority (8/9 out of 10).

The drop in terms of business priorities of `updating their business model in wealth management`, is less severe than in retail banking.

The reshuffling of priorities in the different lines of businesses is especially important for financial institutions that are both in retail banking and in wealth management. The trend of integrating more services to keep serving more and more needs of the end customer, is in place both for incumbents and for digital-first newcomers.

Ironically, if a business places as a top priority to update its business model with the mission to become a cloud-native business, then several of the `Autonomous Finance` ingredients highlighted in the survey, would automatically fall in place.

Strategically, ` updating the business model` should have become the top priority. If the business model is updated with a cloud-native mindset, then 7 out of the 9 items ranked in the Salesforce survey would become business as usual.

This article is sponsored by Salesforce. You can access the full report here that also includes the insurance sector. You can also read additional insights in `Lessons from Nearly 2,800 Financial Services Leaders on Resilience in the Face of Crisis`.

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