Paris, March 5, 2019 – A new report by the Capgemini Research Institute has found that financial services firms are lagging behind in digital transformation compared to other industry sectors. Financial services firms report falling confidence in their digital capabilities, and a shortage of the skills, leadership and collective vision needed to shape the digital future.
The report, part of Capgemini’s Global Digital Mastery Series, examines sentiment on digital and leadership capabilities among bank and insurance executives, comparing it to an equivalent study from 2012. Over 360 executives were surveyed from 213 companies whose combined 2017 revenue represents approximately $1.67 trillion.
Key findings include:
Confidence in digital and leadership capabilities has sunk since 2012
Compared to 2012, a smaller proportion of financial services executives said their organisations had the necessary digital capabilities to succeed – with the confident few falling from 41% to 37%. Breaking this down, although more executives felt they had the required digital capabilities in customer experience (40% compared to 35%), confidence in operations saw a significant drop. Only 33% of executives said they had the necessary operations capabilities, compared to 46% from six years ago.
A shortfall in leadership was also cited, with only 41% of executives saying their organisations have the necessary leadership capabilities, down from 51% in 2012. In some specific areas, confidence in leadership fell significantly, including governance (45% to 32%), engagement (54% to 33%) and IT-business relationships (63% to 35%).
Digital Mastery proves to be illusive
In Capgemini’s digital mastery framework presented in the report, just 31% of banks and 27% of insurers are deemed to be digital masters, while 50% and 56% respectively are classified as beginners.
Executives also criticised the lack of a compelling vision for digital transformation across their organisations. Only 34% of banking and 24% of insurance respondents agreed with the statement that ‘our digital transformation vision crosses internal organisational units’, with just 40% and 26% respectively saying that ‘there is a high-level roadmap for digital transformation’.
Banking transformation has taken centre stage, while insurance places focus on automation
Although banks’ digital transformation journeys are well underway, the industry has reached a crossroads, cites the report, as it attempts to meet the rising digital expectations of customers, manage cost pressures, and compete with technology upstarts. Fewer than half of banks (38%) say they have the necessary digital and leadership capabilities required for transformation. Insurance is catching-up with only 30% claiming to have the digital capabilities required and 28% the leadership capabilities necessary.
The banking sector does, however, outpace non-financial services sectors on capabilities such as customer experience, workforce enablement and technology and business alignment. Fifty-six percent of the banking firms said they use analytics for more effective target marketing (in comparison to 34% insurance and 44% non-financial services sector). More than half (53%) of banking organisations also said that upskilling and reskilling on digital skills is a top priority for them (32% for insurance and 44% for non-financial services sector).
One area of advantage for insurers was operational automation, with 42% of executives saying they used robotic process automation, against 41% of bankers, and 34% reporting the use of artificial intelligence in operations (compared to 31% of bank executives).
More challenges are ahead
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. Only 33% of insurance and 39% of banking organisations have launched new businesses based on digital technologies (41% in non-financial services sector). While banking is in line with the non-financial services average, only around a third (34%) of banks had a digital vision that crossed organisational units. Insurance lags even further behind, with just around a quarter (24%) having an all-encompassing vision. In terms of culture aspects as well, 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.
“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’s unsurprising that large organisations have become more realistic about their capabilities,” said Anirban Bose, Chief Executive Officer of Capgemini’s Financial Services and member of the Group Executive Board.
“At the same time, this is a wake-up call for banks and insurers to re-examine their business models. 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. The majority of financial services firms need to learn from the small pool of genuine innovators in their field,” Bose concluded.
The report can be downloaded here.
The Capgemini Research Institute surveyed 1,338 business leaders at the manager level or above at 757 organisations. Seventy-one percent of organisations reported revenue of more than $1 billion in FY 2017. Within the financial services sector, it surveyed 369 business leaders at the manager level or above at 213 financial services organisations. Out of this, the banking sector represents 200 respondents in 125 organisations and insurance includes 169 respondents in 88 organisations.
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About the Capgemini Research Institute
The Capgemini Research Institute is Capgemini’s in-house think-tank on all things digital. The Institute publishes research on the impact of digital technologies on large traditional businesses. The team draws on the worldwide network of Capgemini experts and works closely with academic and technology partners. The Institute has dedicated research centres in India, the United Kingdom and the United States. It was recently ranked Number 1 in the world for the quality of its research by independent analysts.
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