IBM s Future of Financial Services

Big Blue research offers look at state of industry in the next ten years culture first, technology second.

While financial services has always been on the few industries associated most closely with technology adoption, what the industry needs now is more of a cultural shift than technology adoption. That s the conclusion that emerged from a talk with Suzanne Dence, a Senior Consultant in IBM Institute for Business Value. When we asked companies if they had the technology they needed, there wasn t a gap, says Dence, The technology is there. Some of the hottest emerging technology, in the case of financial services, consists of tools for risk measurement and client analysis. Not coincidentally, the intermediation services responsible for a big chunk of financial services revenue will need to take on more risk, and know more about their clients, in order to differentiate themselves in a technology-saturated marketplace. Simply put, financial services middlemen need to do higher-value tasks that simply pushing through trades in secure environments. When we interviewed asset management clients and asked why they didn t disintermediate brokers, they said, We need them to take up the risk, Dence relates. We want them to do that for us. On the surface, then, it s a simple solution. Financial services customers can get closer to their clients by using risk measurement/management and client analysis technology including data warehouses- to move up the value chain. There is, however, a cultural roadblock. Equities owns their own stuff, fixed income owns their own stuff, Dence says. There are silos. Thus, fnancial services companies who want to offer services that can t be easily disintermediated need to break down silos before they can take advantage of technology. This doesn t mean, however, that technology is not having a disruptive effect. Both technology and regulatory activity are forcing financial services companies to be faster and more transparent. But neither compliance nor technology adoption will help financial services companies to differentiate themselves in the next ten years if they don t overcome their own internal inertia and break down silos. That s a job for consultants, not tech companies. Source: line56.coma>