The financial services industry continues to be a key driver for the world economy, but shifting customer demand and a need for rapid transactions are changing the face of the industry.
Across the value chain, financial services businesses are trying to stay ahead of newer, more agile players by delivering better client experiences, while reducing costs and increasing efficiencies at the same time.
At the big end of town, banks and wealth managers hold the higher ground thanks to their distribution network and multiyear client relationships.
However, they are also grappling with many layers of legacy technology, which require significant capital outlay to maintain.
At the smaller end of town, fintechs are developing alternative solutions to outdated services, as well as generating new ways to reach a younger client demographic.
Future-proofing financial services businesses
Large financial services businesses are responding to increased competition in three key ways: either hiring and building technology internally, partnering with small fintech or outsourcing to white-label technology providers with the innovative smarts to improve customer experience.
One of Australia’s major banks, for example, is close to completing a mammoth 10-year IT infrastructure upgrade to replace its legacy systems, while another is working with a range of start-ups and developers.
Historically, banks globally have focused on maintaining old systems, with research showing a typical bank in Europe uses up to 80 per cent of its IT budget on maintenance.
Many also made significant investments in developing their own technology, as was the case with the development of customer relationship management (CRM) systems 10 to 15 years ago.
Today, fintech has become not just a disruptor but an enabler to the financial services industry, marking a significant step forward in the sector’s use of technology.
Financial services businesses are buying into “business as a service”, investing in off-the-shelf technology from white-label providers, which creates value from day one and frees up their resources to deliver better products and services to meet the ever-changing demands of customers.
Proposed open banking legislation, which will increase access to bank customers’ data, is likely to drive further innovation in the industry, serving as a catalyst for smaller fintechs to develop new products and business models.
Looking ahead, we expect many more businesses to form complementary partnerships and collaborations to efficiently deliver cutting-edge client experiences.
Sustainable, scalable service
So, what should a white-label service look like today and in the future? Based on our experience, here are some of the core elements of a sustainable, scalable service proposition.
Flexible infrastructure and platforms
While many white-label partnerships are likely to have stemmed from a need for liquidity or pricing in a noncore market such as foreign exchange or emerging markets, new business needs soon emerge.
The white-label provider, therefore, needs to provide flexibility in their solutions, to cater to evolving client needs such as enhanced risk management, additional reporting capabilities, or settlement and safekeeping of securities.
The continual investment and breadth of functionality required for a white-label provider to meet these needs can be substantial, but over the long term, it is typically rewarded with stronger, longer-term relationships with partner businesses.
Service model
In addition to providing a branded platform for the partner business, the white-label provider should also provide a full range of services to help the bank adopt and utilise the new technology.
This should include training and education, a sound on-boarding process and ongoing support of front, middle and back-office functions. Not only do services have to be available 24/7, but support responses are also expected to be immediate.
Customer experience
Today’s consumer demands real-time responsiveness, customised functionality, and seamless interchange between devices, platforms and channels. Much of this digital innovation has been facilitated by open APIs, which allow businesses to combine a range of capabilities (often developed by different service providers) in a single service or customer interface.
To support partner firms’ desire to assemble tailored customer experiences, white-label providers must therefore ensure their platforms can interact smoothly and seamlessly via open application program interfaces.
To summarise, we believe the best white-label providers will continue to enable the financial services industry to keep pace with technological and regulatory change, becoming part of a fluid ecosystem in which multiple parties can be selected and integrated into new, diverse and exciting service propositions.
Ben Smoker is the CEO of Saxo Capital Markets (Australia)
