Digital Transformation

In Financial Services

A defining moment for the sector

The financial services sector is at a pivotal point in its evolution. Disruption, new business models, FinTechs, payments, cryptocurrency, cyberthreats, greater collaboration and data legislation are all transforming the sector - and regulators are scrambling to keep up. The sector has made great strides towards digital transformation, but there are still barriers to innovation. How do industry insiders see financial services evolving: which will be the real game-changers, how will the industry transform over the next few years and are institutions and regulators keeping pace?

About this white paper

Our Digital Transformation in Financial Services paper examines five themes transforming the financial services marketplace: the evolution of disruption; collaboration and investment; the shifting landscape of regulation and technology; payments and cryptocurrencies; and cybersecurity and monetizing data.

It is based on an in-depth global survey and interviews with key industry leaders across the financial services landscape, including representation from major retail banks, investment banks, FinTechs, venture capitalists, asset managers, fund managers, insurance companies, other financial institutions and regulators. The findings are supported by analysis and insight from DLA Piper’s global Financial Services sector team and secondary research sources. The white paper highlights the key critical legal, regulatory and commercial challenges and the opportunities on offer. It includes facts, figures and stories on how:

  • Financial services organizations recognize collaboration with FinTech as the route to agile solutions
  • Regulators walk the tightrope of protecting customers while allowing a culture of innovation in financial services
  • The potential of new and emerging technologies is recognized, but the blueprint for collaboration is yet to be established
  • Open banking and GDPR spark a race for better utilization - and monetization - of data in the next two years
  • Cybersecurity is still a significant worry for financial services organisations
  • Digital tokens and cryptocurrencies are rapidly gaining traction in the mainstream of the financial services sector

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Key findings

Financial Services organizations reported that...

52 engaged with FinTechs in the last two years (2016-2018)
81 are planning to engage with FinTechs in the next two years (2018-2020)
75 believe regulation is hindering their use of disruptive technology
82 are worried about a cyberattack
7 offer a strategy for cryptocurrencies and other digital assets
17 have developed or plan to develop a strategy for cryptocurrencies and other digital assets
31 expect banks to add cryptocurrencies to their balance sheets in the next five years
18 expect banks to establish their own cryptocurrencies in the next five years

Client interviews

Digital transformation is more than just embracing the latest FinTech. We are also focusing on working out how we deliver what our clients want, when they want it and how they want it, and delivering this in a really frictionless way. Lots of this is about reducing clunky customer onboarding, identifying people, and making regulatory and compliance processes easier.

Roland Emmans UK Technology Sector Head, HSBC

PSD2 and open banking are extremely transformative, because they allow clients to pick and choose how they wish to interact with services, rather than services interacting with them.

Khalid Talukder Director and Head of Fintech, IFX Payments

The establishment of the NPSO has been driven by a mandate from participants and end users to design and deliver a 'New Payments Architecture'. This marks a generational shift in retail payments with the introduction of a new layered infrastructure and new standards. The NPA is designed to keep payments safe in a world of evolving threats while catalyzing competitive innovation and introducing new overlay services to the market, unmatched anywhere else in the world.

Chet Behl General Counsel, NPSO

Banks always need to consider the regulatory aspects of partnering with fintechs or procuring fintech services given the landscape is changing rapidly, and regulators want to be sure the risks are properly thought through.

Stephen Albrecht General Counsel for the Strategy and Operations group, Barclays

There is so much tech-enabled innovation going on within our own business areas, but it just isn’t practical for us to try to cover everything ourselves. There are obviously startups that are developing focused solutions to specific problems, and it makes sense to partner with them.

Charlotte Wood Head of Innovation and FinTech Alliances, Schroders

Banks have not really got involved with ICOs and cryptocurrencies more widely yet because it is new, and regulators are working out their approach to it.

John Ho Head of Legal, Financial Markets, Standard Chartered Bank

One of the most disruptive developments in payments is that regulation is changing around open banking and PSD2. Regulators are telling banks to open up their systems, and this helps third parties and FinTechs to offer solutions to banking APIs. This is a huge change.

Nilesh Dusane Chief Revenue Officer, nanoPay

Podcast