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Financial Services

Technology 2020 and Beyond:

Embracing disruption

To succeed in this rapidly changing landscape, IT executives will need to agree with the rest of the
management team on the posture they wish to adopt. Will they try to be industry leaders, fast
followers, or will they just react? Whichever direction they choose, they will need to devise a clear
strategy to move forward.
Foreword 3
Executive Summary 5
The ten technology forces that matter: how to compete in the financial services industry 7
in 2020 and beyond
1 FinTech will drive the new business model 8
2 The sharing economy will be embedded in every part of the financial system 11
3 Blockchain will shake things up 12
4 Digital becomes mainstream 15
5 Customer intelligence will be the most important predictor of revenue growth and profitability 17
6 Advances in robotics and AI will start a wave of re-shoring and localisation 20
7 The public cloud will become the dominant infrastructure model 22
8 Cyber-security will be one of the top risks facing financial institutions 23
9 Asia will emerge as a key centre of technology-driven innovation 25
10 Regulators will turn to technology, too 27

Six priorities for 2020 28

1 Update your IT operating model to get ready for the new normal 29
2 Slash costs by simplifying legacy systems, taking SaaS beyond the cloud, and adopting robotics/AI 32
3 Build the technology capabilities to get more intelligent about your customers needs 35
4 Prepare your architecture to connect to anything, anywhere 37
5 You cant pay enough attention to cyber-security 40
6 Make sure you have access to the necessary talent and skills to execute and win 42

Conclusion 45

Is your business equipped to compete? global financial system: Will blockchain be

as significant to the future of banking as the
We are pleased to introduce Financial Services Technology 2020 and Beyond: Internet was to physical stores? Or will fraud
Embracing disruption. and technical complications marginalise its
application? Will the public cloud be safe and
reliable enough to outcompete on-premises
Julien Courbe
This paper complements PwCs Project Blue1 Can you envision branches and operation solutions? Could cyber-attacks really cause
Global FS Technology Leader
and the PwC Megatrends framework2, which centres staffed by sophisticated robots worldwide panic and loss of confidence in
examines the forces that are disrupting the instead of human tellers? Or picture the financial system?
+1 646 471 4771
role, structure, and competitive environment everyone from high net worth investors to The post-crisis regulatory frameworks have
for financial institutions and the markets high school teachers taking financial advice been gradually settling into place, and
and societies in which they operate. It from artificially intelligent apps and then financial institutions have been adjusting
also continues our series of publications investing across asset classes, currencies and their business models accordingly. It is now
examining the future of financial services, geographies on a real-time basis? Or imagine becoming obvious that the accelerating pace
including: if launching a bank, an asset manager or of technological change is the most creative
an insurance company was as simple as force and also the most destructive in the
 etail Banking 2020: Evolution or plugging in an appliance?
1 h

Revolution?3 financial services ecosystem today. In this projectblue

We can. This is not fantasy; it is where paper, we set out to capture the real world
3 h
 apital Markets 2020: Will it Change for things are headed. We have been looking at implications of these technological advances services/banking-capital-markets/banking-2020.
Good?4 the financial services landscape and asking on the financial services industry and those html

some tough questions about what comes who must supervise and use it. 4 h

Asset Management 2020: A Brave New services/banking-capital-markets/capital-

World5 next. These are some agenda items for the markets-2020.html

leaders who operate and supervise the 5 h


PwC 3
Project Blue Each of these forces will shape our lives
There are huge forces at work in the global in many ways. But for the financial services
economy today from a shift in global industry, as the post-Financial Crisis
economic power and climate change to regulatory wave retreats, technology stands
urbanisation, demographic shifts, and more. above the rest. In this paper, we look at
Many of our clients have been using our these changes, and offer some suggestions
Project Blue framework to help assess how on how to prepare for the opportunities and
these megatrends will affect their strategies threats ahead.
and business models for 2020 and beyond.
Project Blue offers a structured process for
adapting to these changes. Seeing the future
clearly and developing a proactive, strategic
response rather than simply reacting to
events will set apart the winners from
the losers in a fast-evolving market. There
is no single best answer; whether these
developments are threats or opportunities
depends on the nature of the organisation
and where in the world it sits. The results
will help your institution better target
investment, identify talent requirements
and develop the necessary operational
capabilities needed to make the most of its
competitive potential.

4 PwC Financial Services Technology 2020 and Beyond

You are a bank executive. Imagine
that you are competing against a
truly global, multi-service, low-cost,
digital bank: customers accessing
their accounts through their mobile

Executive Summary phones, paying with a tap on their

wearables, sweeping savings to an
ETF portfolio

A glimpse of what is to come The financial services industry has seen In our latest Global CEO Survey, across all
Lets say you are a bank executive. Imagine drastic technology-led changes over the past sectors business leaders told us the speed of
that you are competing against a truly few years. Many executives look to their technological change is one of their biggest
global, multi-service, low-cost, digital bank: IT departments to improve efficiency and concerns. In fact, in financial services, 70%
customers accessing their accounts through facilitate game-changing innovation while of the leaders told us the speed of change in
their mobile phones, paying with a tap on somehow also lowering costs and continuing technology was a concern.6 One factor is that
their wearables, sweeping savings to an to support legacy systems. Meanwhile, the time it takes to go from breakthrough
ETF portfolio (designed by an AI (artificial FinTech start-ups are encroaching upon technology to mass-market application
intelligence) engine based on their savings established markets, leading with customer- is collapsing. For example, in the United
goals and risk appetite profile) offering friendly solutions developed from the ground States, it took the telephone 76 years to be
no-fee, cross-border payments. Imagine if up and unencumbered by legacy systems. adopted by half the population. By contrast,
you faced a competitor bank like this, with Customers have had their expectations set the smartphone did it in under ten years. We
a low and nimble footprint, prototyping by other industries; they are now demanding are now watching blockchain move from a
new services quickly, managing regulatory better services, seamless experiences notebook sketch to an established technology
compliance transparently, using an AI system regardless of channel, and more value for in a tiny fraction of the time it took for the
to limit fraud losses, and hedging currency their money. Regulators demand more from Internet to be accepted as a standard tool.
risk using cryptocurrencies. the industry too, and have started to adopt Indeed, technology-driven change is so
new technologies that will revolutionise their pervasive that no financial institution is
This competitor does not exist today. But in ability to collect and analyse information. immune. In Section 2, we address how these
the next few years, it is a very real possibility. And the pace of change shows no signs of and other global megatrends are affecting
Now what? slowing. the financial services industry, with a
particular focus on the IT department.

6 S
 ource: PwCs 19th Annual 19th Annual Global CEO
Survey, Jan 2016

PwC Financial Services Technology 2020 and Beyond 5

Ten competitive technology- Each of these themes is likely to affect We see six priorities for success for 2020 from other industries. They will certainly
driven influencers for 2020 financial services companies and their and beyond, based on our research and our need to maintain laser-sharp focus on their
It is clear that technology is affecting leadership teams in far-reaching ways. And experience in the field: customers preferences, both stated and
financial services in a multitude of ways. while each may have a disproportionately unstated.
strong effect on a given geography, customer 1. Update your IT operating model to get
In the following section, we discuss ten key
set or industry segment, they all present ready for the new normal Frankly, each priority is important. The good
themes that we believe IT executives will
opportunities for the thinking executive news is that each one is also achievable.
need to address as they begin their strategic 2. Slash costs by simplifying legacy systems,
to get ahead. When you know a robotics The answer: combining tactical short-term
planning for 2020 and beyond. These ten taking SaaS beyond the cloud, and
movement is coming, for example, you have actions with long-term initiatives that tie to a
themes include: adopting robotics/AI
a choice: to lead the charge, to make sure larger, strategic vision. This is how financial
FinTech will drive the new business model your organisation has the right listening 3. Build the technology capabilities to get services firms will succeed in 2020 and
capabilities and agile architecture to be more intelligent about your customers beyond.
 he sharing economy will be embedded in
a fast follower, or to watch others take needs
every part of the financial system
advantage of a generational shift. This
section sets up a challenge around the ten 4. Prepare your architecture to connect to
Blockchain will shake things up
themes: to understand them, prepare for anything, anywhere
Digital becomes mainstream them and see how to use them to get a
5. You cant pay enough attention to
competitive advantage.

Customer intelligence will be the most cyber-security
important predictor of revenue growth Priorities for 2020 6. Make sure you have access to the talent
and profitability The pace of change is increasing and shows
and skills necessary to execute and win
no sign of slowing. Financial institutions

Advances in robotics and AI will start a
are looking to the IT organisation to do To succeed in this rapidly changing
wave of re-shoring and localisation
more to help make sure they are well- landscape, IT executives will need to agree
 he public cloud will become the positioned to succeed in the future. There are with the rest of the management team on
dominant infrastructure model macroeconomic trends sweeping the world, the posture they wish to adopt. Will they
and technology-driven influences buffeting try to be industry leaders, fast followers, or
 yber-security will be one of the top risks the industry. What is the best approach to will they just react? Whichever direction
facing financial institutions moving forward? they choose, they will need to devise a
clear strategy to move forward. Most
 sia will emerge as a key centre of
likely, there will be a need to partner with
technology-driven innovation
innovative FinTech start-ups and change
Regulators will turn to technology as well their business practices based on lessons

6 PwC Financial Services Technology 2020 and Beyond

The ten technology forces that matter:
how to compete in the financial services
industry in 2020 and beyond
There are many large forces sweeping society, from demographic and social
changes to shifts in global economic power. But one force in particular
namely, technological breakthroughs is having a disproportionate affect on
financial services. Here we look at the ten most important technology-driven
influencers that will shape competition in this industry by the decades end.

PwC Financial Services Technology 2020 and Beyond 7

FinTech will drive the
new business model
For a long time, new market Where is the epicentre of
entrants found it difficult to break disruption?
into the financial services industry. Most disrupted FS sectors
The large, well-established
financial institution that we call
incumbents had advantages in
size, and their networks added
a multiplier effect. They had
strong compliance systems in
place to manage ever-increasing
regulations, and they had the
client base and resources to
prosper even in tough economic

Up to 28% Banking
of business and
at risk by Payments

Up to 22% Insurance,
of business Asset Management
Source: PwC Global FinTech Survey 2016
at risk by and Wealth
2020 Management

8 PwC
Well, not any more. FinTech disruptors have the financial services industry. We identified
been finding a way in. Disruptors are fast- several thousand companies that are new
moving companies, often start-ups, focused market entrants to various components
on a particular innovative technology or of these chains. Here is what we have seen
process in everything from mobile payments so far:
to insurance. And, they have been attacking
some of the most profitable elements of the S
 uccessful disruptors typically offer a
financial services value chain. This has been better customer experience and greater
particularly damaging to the incumbents convenience at a much lower price.
who have historically subsidised important T
 he effects of disruptors vary significantly
but less profitable service offerings. In our across countries and value chains, largely
recent PwC Global FinTech Survey, industry because of differences in regulatory
respondents told us that a quarter of their barriers and the robustness of local
business, or more, could be at risk of being FinTech ecosystems.
lost to standalone FinTech companies within
five years.7 
Regulatory authorities are caught
between wanting to encourage
Global investments in FinTech more than competition and innovation and wanting
tripled in 2014, reaching more than $12 to provide meaningful oversight of these
billion. In comparison, banks spent an disruptors.
estimated $215 billion on IT worldwide in
2014, including hardware, software, and Despite regulation and other potential
internal and external services.8 This is a
material number, and because it is so highly
barriers to entry, we see tremendous demand
for FinTech-related services in areas such as 81%
targeted, the FinTech spending will really consumer banking and wealth management. of banking CEOs are concerned about the speed of technological change,
make an impact. This will open up new opportunities for both more than any other industry sector.10
incumbents and disruptors. For example,
A cast of thousands (of start-ups) consider the rise of robo-investing platforms
PwC created a tool to allow ourselves (and offered by both online-only and traditional
others) to analyse the size and complexity of wealth management companies. New players 7  PwC Global FinTech Survey 2016
the challenge to incumbents and the speed are using the online-only model to reach 8
of change facing the industry.9 Our online millennials and increasingly other segments
platform, which we call DeNovo, defines too. Meanwhile, traditional players are 9
approximately 40 different value chains for employing this approach to significantly 10  PwCs 19th Annual Global CEO Survey

PwC Financial Services Technology 2020 and Beyond 9

reduce their operational costs. They are also proprietary blockchain-based cryptocurrency
The DeNovo platform using it to find more cost-effective ways to and the cross-border payments model to
comply with regulatory mandates such as route foreign-exchange payments between
DeNovo is a new platform to help leading financial institutions get better strategic the UK Retail Distribution Review rules. virtually any currency pair for free. And
advice about the disruptive technologies, new business models, and other FinTech In Asia, a new wealth-management app the disruption is just beginning in capital
forces that are shaking up the industry. It is a resource for financial services CEOs, was launched with almost one thousand markets.
CTOs, business unit heads, heads of strategy, and other key decision makers who products, all without commissions or fees.
need a trusted, objective resource to help them make better strategic and operational The bottom line: there are many smart
decisions. This experience is being repeated across people with good ideas and abundant
virtually every sector within financial funding trying to disrupt and improve the
The platform includes a dashboard with regular updates to explain developments in key services. Disruptors in retail banking are industry. If you work for an incumbent,
industry segments; dossiers that provide information on companies differentiations, using this online-only model to grow market scanning the market for new competitors,
strategic focus, leadership, and investment information; technical information; a share by offering a highly customised user studying how they think about infrastructure
comprehensive view of where innovation is most aggressive (or not); competitive experience combined with lower fixed and regulation, and considering what
considerations; and other resources. costs. We have also seen emerging FinTech defense or collaboration approaches make
companies targeting customers using sense are all business imperatives.
The content is developed and curated by PwCs Strategy& FinTech subject matter
so-called closed-loop interactions (bi-
specialists, leading a dedicated team of over 50 strategists, equity analysts, engineers,
directional messaging between institutions
and technologists. Using both public and proprietary data from over 40,000 sources,
and their clients) that avoid the costs of
as well as research from across PwCs global
larger public-facing platforms. There are
network of over 200,000 professionals,
new high-tech, low-footprint companies
DeNovo helps clients determine which
with huge potential to drive down costs
startups, technologies, trends, and new
and offer better customer experience in
market entrants are most relevant to
the marketplace lending arena. And we
them and why.
are seeing upstarts jumping into the global
payments and foreign exchange sectors,
sidestepping existing costly networks by
leveraging innovations such as digital
currencies. In one such example, an
increasingly well-known start-up is using a

10 PwC Financial Services Technology 2020 and Beyond

The sharing economy
will be embedded
in every part of the Today, we tend to think of financial A number of enabler companies target Financial institutions should seriously
financial system institutions as the entities that initiate specific verticals like student debt, or consider sharing economy opportunities such
and manage transactions from end to end, connecting debtors and investors. They are as partnerships with digital intermediaries
By 2020, consumers will need typically putting their own capital at risk. building platforms that enable ordinary or even end users with an eye towards how
banking services, but they may Increasingly, financial institutions may individuals to raise funds and draw credit they might deliver services at much lower
play either an intermediary role, with less lines from retail investors. Apple has costs. With their relatively informal profiles,
not turn to a bank to get them.
at stake, or just be one node in a network. filed a patent application for person-to- start-ups may not, at first, seem like a threat.
Or, at least, maybe not what we This evolution will be driven by peer-to- person payments using electronic devices But in the new digital age, when businesses
think of as a bank today. The peer transactions, enabled by partnerships that could allow iPhone users to transfer as well as individuals are increasingly tech-
so-called sharing economy may between todays financial services firms and money more easily. This could potentially savvy, new customers will gravitate toward
have started with cars, taxis, and a new breed of FinTech companies. We have commoditise retail banking even further. lower fees, convenience, and ease-of-use.
hotel rooms, but financial services already witnessed this with peer-to-peer Instead of using relatively high cost bankers And once there is enough critical mass and
will follow soon enough. In this lending platforms, often in partnership with to broker the connection between those who liquidity, the network effect takes over, and
traditional banks, which exist today in places have and those who want, the disruptors are the disruptors market share could grow
case, the sharing economy refers such as the UK, US and China. Many of these using technology to make the match: faster, exponentially, as it has in Kenya.
to decentralised asset ownership new companies are designing and building cheaper, and maybe even better.
and using information technology services that focus on a specific sliver of the
to find efficient matches between value chain, or a specific subset of customers. In developing markets, where branch
networks are typically less dense, particularly
providers and users of capital, Consumers are getting smarter about their
options, too. Recent PwC research shows that in rural areas, physical distribution will
rather than automatically turning continue to evolve, and banks are more
44% of those who earn less than $75,000
to a bank as an intermediary. likely to partner with new entrants to
per year would trust a technology company
for peer-to-peer payments, and this rises create alternative distribution channels. For
to 68% among earners making more than example, M-PESA in Kenya, handles deposits
$100,000.11 and payments using customers cellphones
and a network of agents. According to a
recent report, the service is now being
11 PwCs 2015 Consumer Banking Survey used by 90% of the adult population in the
12 The Future of Money which aired on Nov. 22, country.12
2015, 60 Minutes, CBS.

PwC Financial Services Technology 2020 and Beyond 11

Blockchain will
shake things up
In the late 1990s, when companies
began to realise the Internets
Last year alone, 13 blockchain companies
obtained over $365 million in funding.13 56%
According to multiple sources, by the start of survey respondents
potential power, e-commerce of 2016, blockchain companies had raised recognise its importance,
investment and experimentation well over a billion dollars to fund their but...
soared. And despite the dot com development and operations.14
crash, it is unlikely that anyone
would deny just how revolutionary
say they are unsure about
the technology has proved to Is the impact of blockchain or unlikely to respond to
technology taken into account?
be. Today, there are curious this trend
similarities with blockchain Source: PwC Global FinTech Survey 2016
both in how companies are being
funded and how they are exploring
use cases.


12 PwC
We have written primers to explain uses is almost limitless, from financial In blockchain we trust? Still, this is a participatory sport and there
what blockchain is15 and how strategists transactions to automated contractual Of course, trust does not occur overnight. is a lot to lose from sitting on the sidelines.
see it16, and even some thoughts on our agreements and more. This is the challenge facing both individual Now is the time for testing, planning and
own approach to the technology. But we institutions and the industry as a whole. For learning. Given the extraordinary range of
are hardly alone. Many major financial Blockchain systems could be far cheaper options and potential technology partners,
blockchain to be adopted on a large scale,
institutions have some form of blockchain than existing platforms because they one of the bigger challenges is to sort
we will need to experience a migration of
research effort underway. In our recent remove an entire layer of overhead through the hype. Once you have a clear
trust from todays effective-yet-expensive
PwC Global FinTech Survey, we found that dedicated to confirming authenticity. In a vision of where to apply the technology and
central counterparty utilities to the
56% of survey respondents recognised the distributed ledger system, confirmation is why, it will be easier to create a workable
distributed model. The business benefits
importance of blockchain. At the same time, effectively performed by everyone on the implementation plan for building blockchain
for many players, or even the industry,
however, 57% say that they are unsure or network, simultaneously. This so-called into your infrastructure.
will not materialise if the trust issue is not
unlikely to respond to this trend. So, what consensus process reduces the need for
addressed effectively. Some of the hurdles
should you do? existing intermediaries who touch the
that lie ahead: understanding whether or not
transaction and extract a toll in the process.
the public ledger can be hacked, addressing
Several industry groups have come together In financial services, that includes those
Bitcoins negative reputation, and navigating
to commercialise technology and apply who move money, adjudicate contracts, tax
potential regulatory challenges related to
it to real financial services scenarios. We transactions, store information and so on.
blockchains adoption. For example, while
expect this surge in funding and innovation
The sheer range of applications has attracted confirmation is effectively performed by
to continue as blockchain and FinTech
FinTech providers and legacy firms who everyone on the network simultaneously,
move from a largely retail focus to include
hope to develop solutions both narrow and if a majority of the participants forming
more institutional uses. And while many
broad. In the next three to five years, we the network consensus model were to
of these companies may not survive the
see transaction volumes and the associated collude to transact a fraud, a ledger might
next three to five years, we believe the use
profit pools shifting from intermediaries be manipulated. This might be an issue
of the blockchain public ledger will go
toward the owners of new highly efficient in a relatively small network without
on to become an integral part of financial
blockchain platforms. These transactions proper vetting procedures. We also see a
institutions technology and operational
could include transferring digital or physical need to address security limitations with
assets, protecting intellectual property, linked technologies, like the external
Why blockchain matters and verifying the chain of custody. In an systems that monitor events to trigger
There are two aspects of blockchain era of cyber-crime and stringent regulatory blockchain transactions once conditions
technology that have captivated so many requirements, a highly fraud-resistant have been met.
C-level executives, start-up founders and system for protecting and authenticating 15
private equity firms around the world. almost any kind of transaction could have publications/qa-what-is-blockchain.html

First, blockchain could make the financial a revolutionary impact on the financial 16
services industrys infrastructure much less services industry.
expensive. And second, the list of potential PwC Financial Services Technology 2020 and Beyond 13
A look at blockchain technology
What is it? The blockchain is a decentralised ledger, or list, of all transactions across a peer-to-peer network. Using this technology, participants can transfer value across the Internet without
the need for a central third party.

How it works: Cryptocurrency

Unknowns Benefits
Cryptocurrency is a medium of
exchange, such as the US dollar,
created and stored electronically in Complex Increased
the blockchain, using encryption technology transparency
techniques to control the creation
of monetary units and to verify Regulatory Accurate
The requested the transfer of funds. implications tracking
transaction is A verified transaction
Someone requests a broadcast to a P2P Authentication can involve Implementation Permanent
transaction. network consisting cryptocurrency, challenges ledger
of computers, The network of nodes contracts, records,
known as nodes validate the transaction Competing Cost
or other information. platforms reduction
using cryptography.
Has no Has no Its supply
intrinsic physical form is not
value in that and is not determined Potential applications
it is not currently by a central
Once verified, this redeemable backed by any bank and the
transaction is for another government or network is
represented as a commodity, legal entity. completely
new block. such as decentralised.
The transaction is The new block is then added to the
complete. existing blockchain.

Automotive services Voting Healthcare
Consumers can use the blockchain to manage Faster, cheaper settlements could shave billions Using a blockchain code, constituents could cast votes Patients' encrypted health information can be shared
fractional ownership in autonomous cars. of dollars from transaction costs while improving via smartphone, tablet or computer, resulting in with multiple providers without the risk of privacy
transparency. immediately verifiable results. breaches.

Sources: Money is no object: Understanding the evolving cryptocurrency market, PwC, 2015/A Strategists Guide to Blockchain, strategy+business, January, 2016/How Blockchain Technology Is Disrupting Everything, TechDay, 2016

14 PwC Financial Services Technology 2020 and Beyond

Digital becomes
Two decades ago, many large Todays digital wave has the same markers: to replace magnetic stripe technology, into mobile operating systems. Now that
separate teams, budgets and resources many consumers are now turning to the adoption has grown, banks want greater
financial institutions built
to advance a digital agenda. This agenda smartphone as the preferred tool for making control over alternative channels. They want
e-business units to ride a wave of extends from customer experience and online and proximity payments. Mobile to manage the security, user experience,
e-commerce interest. Eventually, operational efficiency to big data and devices offer more convenience and greater and customer connectivity at the point of
the initial e went away, and this analytics. In financial services, we have seen security than plastic cards, many of which purchase. Of course, controlling the digital
became the new normal. Internet this approach applied to payments, retail still include magnetic stripes. The tap-and- wallet also gives a bank a better chance of
development and large technology banking, insurance and wealth management, pay mobile payment user experience can also protecting top-of-wallet status for its card
investments drove unprecedented and migrating toward institutional areas be faster and easier than typical plastic card products, and the interchange fees that
such as capital markets and commercial transactions. follow. And this matters: for most banks,
advances in efficiency.
banking. even a modest 3%5% reduction
Who is using digital wallet technology? Most (or increase) of interchange fees from
The digital wallet: a case study studies show that millennials are the key debit and credit cards would represent a
Consider the evolution of the digital wallet, early adopters of mobile payments.17 In a material change.
which is rapidly just becoming the wallet. recent study, roughly half of millennials said
Digital wallets typically housed within they would rather pay for small items with And then there is the data. A wallet creates
a mobile phone are now at the core of their mobile phone than with cash; a similar real-time connectivity that the bank can use
a battle between traditional financial share want to use mobile tools to split bills to send valuable information like balances
services providers and disruptors. They give with their peers and track spending.18 This and alerts. If handled properly, it can also
consumers a fast, secure, low-cost method to is a new generation of consumers, and they successfully present revenue-generating,
use, store and send money over the Internet. are growing up associating core transactional point-of-sale offers and promotions to
It is a service they value as well as a front- services with technology and start-up customers. For example, real-time financing
door to many lucrative bank offerings. brands, neither of which have historically offers could be directed to debit card only
been associated with financial services. customers who have expressed interest in
Should banks care? Well, the trend toward building their credit profiles but who do not
greater acceptance of the mobile device as Who wins? want to carry credit card debt. Fee income
17 Incidentally, high net worth consumers are
early adopters too: another group that financial a banking channel also converges with the In recent years, the banking sector has seen from these offers could be worth twice as
institutions cannot afford to lose. billions of payment cards issued globally and a rapid rise of non-traditional competitors, much as average deposit revenue, making
the transactions they generate. Ironically, through alternative payment methods such this a very lucrative source of income for
must-161163 given the expense of deploying EMV chips as gift cards and contactless payments built

PwC Financial Services Technology 2020 and Beyond 15

banks. Non-standard providers also hope to how we do things. Institutions will need
use point-of-sale data to get valuable insights to balance the need for separate change
into consumer behaviour. the bank transformation teams with the
inevitability that digital will become the
Finally, there are other security benefits platform. Practically, this means you have to
from owning and controlling the digital keep the change-the-bank and the run-the-
wallet. By setting the terms of engagement, bank teams on the same page, operationally
banks can demand stronger authentication, and strategically. At the same time, we know
identification and verification processes. all organisations have a natural resistance to
Without this, they are at the mercy of change, especially after years of a relatively
partners who may not have the same protected status. To ward off a determined
priorities. User data also helps banks to FinTech opponent, consider challenger
improve real-time fraud detection. models in banking, insurance and wealth
Change the bank becomes management that try to anticipate what a
the bank fierce competitor would look like.
Over the next three to five years, digital
efforts will advance in areas as diverse as
robo-investing, automation of consumer
lending and clearing and settlement of cash
and securities transactions. As they do,
they will stop being exotic, and will just be

Institutions will need to balance the

need for separate change the bank
transformation teams with the
inevitability that digital will become
the platform.

16 PwC Financial Services Technology 2020 and Beyond

Customer intelligence
will be the most
important predictor For example, consider millennials: a key for the best deal, much as affinity groups with far greater precision than ever before.
of revenue growth demographic, and one that banks generally already do. Within asset management, The benefits would include not only keener
have targeted through digital channels. hyper-connectivity will also pave the way pricing and sharper customer targeting, but
and profitability Financial institutions should look below the for greater product customisation. For life a decisive shift in insurers value model from
surface to examine the behavioural attributes and health insurers, wearable computing reactive claims payer to preventative risk
Do you know what your customers that drive consumer decisions. The following (building on the technology already widely advisor. But it also implies that we will see a
value? Are you sure? Customer are key to millennial behaviour: they tend used in fitness sensors), could make the divergence between companies who use data
intelligence used to be based on to build wealth as a result of owning a underwriting process more collaborative. to their advantage and those who do not.
some relatively simple heuristics, small business, investments, or real estate; For example, insurers may use the real- The winners will be able to price products
built from focus groups and they turn to social networks for content, time insights into policyholder health and based on a deeper understanding of risk; the
surveys. These were proxies for product reviews, opinions and referrals; behaviour to offer discounts, eliminate the losers will merely compete on price,
and they look for opportunities to improve need for lengthy medical checks compressing their margins
real, individualised data about
their financial health. Financial institutions and simplify the contract with lower revenues
consumer behaviour, and the that sift through available data can engage process. and proportionately
results were pretty hazy. Now, millennials by being ready with the right higher payouts.
technology advances have given offer when relevant life events present With other
developments, this
businesses access to exponentially buying opportunities.
will also intensify
more data about what users The data is everywhere, and over the next price competition
do and want. It is an amazing
opportunity for whomever
five years, hyper-connectivity will give
financial institutions the opportunity to use
and pressure on
cost. Big data By 2020
can use analytics to unlock
the information inside, to give
it. It will not only be computers and smart
devices that record and communicate data,
analytics, sensor
technology and
there will be times more useable data than today.19

customers what they really want. but everything from cars to coffee machines. the communicating
This is referred to as the Internet of Things. networks that
Customers are learning more about the make up the Internet
value of their personal data. We expect to of Things will allow
see them tendering out their information to insurers to anticipate
19 The Digital Universe in 2020: Big Data, Bigger Digital
Shadows, and Biggest Growth in the Far East, banks, insurers and asset managers in return risks and customer demands
International Data Corporation, December 2012

PwC Financial Services Technology 2020 and Beyond 17

The era of mass customisation Consumers now compare financial
As customers become more connected institutions to digital leaders across all
through social media, they are becoming industries, as well as to their industry peers,
more demanding and less loyal. Easier and they are falling short. Customers have
comparison and faster switching mean experienced first-hand that digital commerce

63% that relationships can be brief and largely delivers speed and personalisation, and this
transactional. We are already seeing one- shapes their expectation of financial services,
of insurance CEOs believe that the Internet of Things will be click transfer, which moves all funds, direct too. Instead of a mortgage, insurance policy,
strategically important to their organisation. debit instructions and other services to the or investment plan that broadly meets their
new provider with very little effort on behalf needs, buyers want customised, adaptive
of the customer. And the demographic trends solutions that evolve and deliver specified
have scary implications for conventional outcomes. For example, target-date funds
financial services companies because the automatically adjust the asset mix to a
youngest users are the least loyal. Recent users expected retirement age. Personalised
research has found that one in three service and tailored solutions were once
millennials in the United States are open to the preserve of high net worth clients. Now,
Source: PwCs 18th Annual Global CEO Survey
switching banks in the next 90 days and a technology is opening it up to mass affluent
similar proportion believe they will not even consumers, and beyond.
need a bank in the future.20 What explains
In the insurance industry, advances in
this decline in customer stickiness? Service
processing capacity, customer profiling,
offerings that feel generic and tools that have
and risk analytics are now opening the way
made switching less painful.
for a new generation of smart policies.
While being as affordable and easy to
understand and compare as todays off-the-
One in three millennials in the United shelf products, these policies could be both
fully customised to individuals and able to
States are open to switching banks adapt to their changing needs. Crucially,
in the next 90 days and a similar the technological developments that are
proportion believe they will not even making this new generation of policies
need a bank in the future. possible would also making it easier for new
entrants to break into the market at relatively
Source: Viacom Media Networks The Millennial Disruption Index
little cost.
20 Viacom Media Networks The Millennial Disruption

18 PwC Financial Services Technology 2020 and Beyond

Smarter service, smarter sales of how they have traditionally managed A repository for large quantities and varieties of data, both structured
Financial institutions are already using IT. There are four building blocks for this and unstructured
artificial intelligence (AI) to experiment emerging solution architecture. At the
The lake can serve
with service that is far more personalised. visualisation layer, the customer interacts Data generalists/programmers can tap as a staging area for
with a self-service dashboard and search the stream data for real-time analytics.
Many banks in the United States are piloting the data warehouse,
the location of more
AI-based client advisors, where the AI engine capabilities, displayed through advanced carefully treated
is primed with the entire product manual, visualisation tools that generate and present data for reporting
and analysis in batch
past call history, policy and procedures rapid insights. In the application layer, mode.
guidelines, and more, to provide context- the visualisation layer is integrated into
based service to their customers. the business processes management with
capabilities such as case management,
We expect AI, machine learning, and alerting and reporting. The analytics layer
customer analytics to become the driver of does the thinking, using advanced AI The data lake accepts input
client engagement over the next decade. techniques to profile and predict behaviour, from various sources and can
Certainly, financial institutions will need to detect anomalies and discover hidden
preserve both the original data
fidelity and lineage of data
deliver instantaneous, seamless transactions, relationships. And, data lakes will form the transformations. Data models
but speed is just the baseline requirement. key layer of the solution, acquiring data emerge with usage over time
rather than being imposed
Smart businesses will develop new forms of rapidly from disparate sources and ingesting up front.
virtual engagement capable of integrating it so it can be used productively. Data lakes
themselves into customers lives. They are a new take on data warehousing, taking
will stick because they will be personal: advantage of cheaper tools to distribute
Data scientists use the lake Data lakes take advantage of commodity cluster computing
informed by intelligence gathered from data storage and processing. They offer a scalable for discovery and ideation. techniques for massively scalable, low-cost storage of data
about consumer behaviours, choices, and platform that can store a wide range of data files in any format.
volunteered preferences. models, enabling analysis of both structured
and unstructured data. Unlike the existing
Rethinking the service Source: PwC Technology Forecast (Issue 1, 2014); The enterprise data lake: Better integration and deeper analytics
systems that many firms use today, they
wont buckle under the much larger volumes
Before firms can engage customers like this,
that will soon arrive.
they will have to make sense of a torrent of
data that defies human comprehension and
that will require gathering, interpreting
and presenting massive quantities of data
in real-time. Few firms are ready. In fact,
most will need to change many aspects

PwC Financial Services Technology 2020 and Beyond 19

Advances in robotics
and AI will start a
wave of re-shoring ATMs are robots. They are very simplistic, Here are some of the capabilities shaping hurdles. In the next three to five years, we
and localisation purpose-built robots but they provide these sophisticated machines: expect modest, evolutionary gains. After
consistent, convenient, low-cost service and that, though, we anticipate rapid gains, as
 ognition: The robots ability to perceive,
When ATMs were first introduced, customers have grown to trust them. The new models combine increasingly powerful
same principles will apply to other, more understand, plan and navigate in the and standard modular platforms with the
many customers refused to use real world. Better cognitive ability means
sophisticated financial services applications. ability to learn. To take an even broader
them. Gradually though, after robots can work autonomously in diverse,
There have been astonishing advances view, robotic process automation is already
time and training, they came to in robotics and AI, machine learning and dynamic and complex environments. making inroads in financial services digital
see that ATMs could offer a better pattern recognition in recent years. Over operations, too. There are whole categories
 anipulation: Precise control and
service experience. And trust the next five years, we will see a shift from dexterity for manipulating objects in of work that had not been seen as cost-
followed. standalone uses to full integration into a the environment. With improvements effective to automate. However, with
companys business-as-usual activities. in manipulation, robots will take on a lightweight software bots, workers are freed
greater diversity of tasks and use cases. up to focus on higher value activities.
What robots can do
We are already seeing alliances between 
Interaction: The robots ability to learn Talented people, talented
leading incumbent financial services and from and collaborate with humans. machines
technology companies, using robotics and Progress here such as support for In the last 20 years, US companies have
AI to address key pressure points, reduce verbal and nonverbal communications, offshored repetitive tasks to lower-cost
costs and mitigate risks. They are targeting observing and copying human behaviour, locations such as India, China and Poland.
a specific combination of capabilities such and learning from experiences means However, relative costs for labour in those
as social and emotional intelligence, natural robots will increasingly be able to work regions have started to rise. Combine this
language processing, logical reasoning, alongside humans. with improvements in robotics and AI
identification of patterns and self-supervised capabilities and machines will soon become
learning, physical sensors, mobility, Already, some robots can sense the details credible substitutes for many human
navigation and more. And they are looking of their environments, recognise objects, workers. As the capabilities continue to
far beyond replacing the bank teller. and respond to information and objects with improve and technology continues to drive
safe, useful behaviours. Over time, they will down the cost of machines, these forces will
be able to perform not only more tasks, but combine to spur re-shoring, as more tasks
more complex tasks. Service robots are in can now be performed at a competitive
the early stages of a long development cycle, cost on-shore. Even functions that seem
20 PwC
and they still face some big technological dependent on human input, such as product
design, fraud prevention and underwriting, readily available. Even in situations where AI
will be affected. At the same time, the need does not completely replace an underwriter,
for software engineering talent will continue greater automation would allow humans to
to expand. concentrate on assessing and pricing risks in
the less data-rich emerging markets. It would
The B2B robot that is already also free up underwriters to provide more
down the hall risk management, product development
AI already plays a prominent role in the advice and other higher value support for
capital markets sector, starting with clients.
algorithmic triggers in high-speed trading.
Next generation algorithmic trading systems Of course, banks already use AI to detect
are already moving from descriptive and payments fraud. Now, they are using AIs
predictive to prescriptive analysis, improving ability to spot abnormal behaviour to detect
their ability to anticipate and respond to market abuse and rogue trading. As hyper-
emerging trends. And while algo trading connectivity accelerates and more business
programs were once limited to hedge funds moves over to digital channels, the risk of
and institutional investors, private investors fraud, hacking, data compromise and other
can now get access to them too. cyber-vulnerabilities will continue to grow.
In response, firms will use AI to fight back A core component of the fund design
AI is also prominent in investment activity. with methods like predictive analytics process, particularly around trading
The technology will become a core
component of the fund design process,
(past and forecast spending behaviour) authorisations and hand-offs with
and location data from customers smart
particularly around trading authorisations phones and wearables.
human investors.
and hand-offs with human investors. AI
systems already drive investment strategies Thinking machines Banks already use AI to detect
that complement active management, We urge financial institutions to rapidly ramp
governing the decisions of passive funds up their efforts to understand and develop
payments fraud. Now, they are
and driving greater returns in active ones. a vision for their use of robotics and AI. using AIs ability to spot abnormal
This, along with the increasing body of They will need to find and integrate more behaviour to detect market abuse and
research citing the relative advantages of industrial engineers into their talent plan. rogue trading.
passive funds, could force asset managers to And they will need to learn from industries
radically rethink active fund management. such as manufacturing and technology that
have used robots extensively for decades.
By 2020, AI will also automate a
considerable amount of underwriting,
especially in mature markets where data is PwC Financial Services Technology 2020 and Beyond 21
The public cloud will
become the dominant
infrastructure model Today, many financial institutions use estimates that public cloud investments model. What are the best ways to manage
cloud-based software-as-a-service (SaaS) increased by 32% in 2015 to US$21.7 billion an architecture that is more diffused and
As significant as the shift toward applications for business processes that and private cloud investments grew in 2015 fragmented than ever? How can you juggle
cloud-based computing has been, might be considered non-core, such as CRM, by 17%, reaching US$11.7 billion. Overall, security, data protection and commercial
it is just getting started. HR and financial accounting. They also turn total cloud IT infrastructure spending grew confidentiality? There are even regulatory
to SaaS for point solutions on the fringes of 26% in 2015, reaching US$33.4 billion. To ramifications, as some countries have
their operations, including security analytics put that in perspective, this is approximately imposed considerable restrictions on the
and KYC verification. But as application one-third of all IT spending.22 transfer of client data to the public cloud.
offerings improve and as COOs and CIOs As a result of this, many financial institutions

52% get comfortable with the arrangements, Curiously, the sharing economy also plays today are leaning towards adoption of a
the technology is rapidly becoming the way a role here. After all, some companies that private-cloud solution.
of asset management CEOs... that core activity is processed. By 2020, have a demonstrated competence in an area
core service infrastructures in areas such are choosing to sell it to others who need it. Despite the cautionary note, we expect
as consumer payments, credit scoring, and For example, the payments infrastructure that the next several years will result in
statements and billings for asset managers of many industrial, healthcare and smaller an increasing adoption of the public cloud
basic current account functions will be well FinTech institutions are being provided by within the financial services industry. Like
on the way to becoming utilities. conventional banks. These banks are selling FinTech, robotics and digital, this will require
their infrastructure as a service to others, new ways of thinking for organisations
Using the cloud to scale and leveraging the cloud to do it. In our view, and IT departments. But the benefits will
What is behind this shift? Data storage this provides an important source of revenue certainly be significant too.
costs have plummeted, facilitated by to these institutions.
...believe that cloud computing will be cloud-based infrastructure. This has made
strategically important to their organisation.21 it easier to manage big data and apply Bring an umbrella, just in case
sophisticated analytics, and it has also With customers demanding a flexible,
reduced the barriers to entry for new FinTech personalised system experience, and with
21 155 asset management CEOs interviewed
disruptors. According to the International costs continuing to drop, the cloud is here
for PwCs 18th Annual Global CEO Survey: A
marketplace without boundaries? Responding to Data Corporation (IDC), public cloud to stay. It is the sensible way to deliver
disruption (
investments are growing quickly, spending innovation within a target return on equity.
on private cloud is increasing, and traditional But there are many challenges in shifting
negotiators/2015-07-23 infrastructure spending has plateaued. IDC from an on-premises model to a cloud-based

22 PwC
Cyber-security will
be one of the top
risks facing financial Unfortunately, it is not likely to change for that maintains the dishwasher may not
institutions the better in the coming years, due to the be as passionate about patching software
following forces: vulnerabilities as you are.
Financial services executives are
Use of third-party vendors Some industry sources see the number
already depressingly familiar of IoT devices deployed across the world
with the impact that cyber-threats R
 apidly evolving, sophisticated and reaching about 25 billion by 2020.23 Until
have had on their industry. complex technologies now, IoT growth in financial services has
In PwCs 19th Annual Global CEO Cross-border data exchanges primarily occurred in payments, insurance
Survey, 69% of financial services and banking. Banks are forming partnerships

Increased use of mobile technologies by with wearable technology manufacturers
CEOs reported that they are either
customers, including the rapid growth of to allow customers to make mobile payments
somewhat or extremely concerned using watches or fitness trackers. Insurers
the Internet of Things
about cyber-threats, compared to are using telematics technology to monitor
61% of CEOs across all sectors. 
Heightened cross-border information driving habits and provide discounts to safe
security threats drivers.
The Internet of Things (IoT): Cyber-security is the leading challenge to the 65%
a case study adoption of IoT technology because insecure of FS companies said they have adopted
Expected IoT growth introduces a new interfaces increase the risk of unauthorised cloud-based security.24
set of security risks and challenges that access. Here are some of the concerns:
will require serious attention. IoT refers
to the proliferation of physical objects 
Attack surface: Hackers can gain entry
(devices, cars, houses, wearables) that to a corporate network through an IoT
contain sensors, software and the ability device.
to communicate. The opportunities are
fascinating, like dishwashers that can 
Perimeter security: IoT technology
schedule a repair visit at the sense of an relies on cloud-based services, so it will
23 impending part failure. But every chain be challenging to implement effective
24 PwCs Global State of Information Security Survey
has its weakest link, and the company perimeter defenses.

PwC Financial Services Technology 2020 and Beyond 23

 rivacy concerns: The pervasiveness of external and internal security risks and react
IoT data collection coupled with advanced much more quickly. And the miniaturisation
analytic capabilities could potentially of technology that has driven smartphone
result in consumer privacy violations. growth has also made biometric security
more practical. For example, some banks

Device management: Many IoT devices allow customers to access their accounts
currently do not support implementation using thumbprints, or even voice and facial
of strong security controls, and recognition an approach that is more
maintaining a security baseline will only convenient for consumers and improves
get harder as IoT devices proliferate. security.
Fighting back Cyber-security is already important, and
As guardians of value, financial institutions it will become even more significant for
have long dealt with sophisticated threats. institutions and their regulators in the
However, cyber-crime is making the targets future. The challenge will be to balance
more appealing than ever. Earlier this year, safety with customer convenience. For full-
hackers made off with tens of millions of scale providers who are trying to maintain
dollars from Bangladeshs central bank by visibility across channels, this is harder than
using malware to gain access to accounts. it looks. But there are guidelines which
With incentives like these, criminals will can help financial institutions identify and
continue to look for similar vulnerabilities prioritise threats, quickly detect and mitigate
in the future. And there are ominous signs risks and understand security gaps. With
that things could get worse, as certain threat a risk-based framework, companies can
actors now appear to be working together to communicate and collaborate as necessary,
carry out attacks. decide how to design, monitor and measure
Fortunately, the same capabilities that make their cyber-security goals, and keep their
networks more vulnerable can strengthen data safe.
defenses as well. Financial institutions can
use big data analytics to monitor for covert
threats. This helps them identify evolving

24 PwC Financial Services Technology 2020 and Beyond

Asia will emerge
as a key centre of
technology-driven Asias rising demographics Global middle class statistics population in millions
innovation Around the world, the middle class is
projected to grow by 180% between 2010 2009 2020 2030
Americas reputation (and and 2040; Asias middle class is already
North America 338 18% 333 10% 322 7%
Silicon Valleys, in particular) larger than Europes. By 2020, the majority
as a technology juggernaut is share of the population considered middle Europe 664 36% 703 22% 680 14%
class is expected to shift from North America
so ingrained that it can be easy and Europe to Asia-Pacific. And over the next Central and South America 181 10% 251 8% 313 6%
to miss the globalisation of 30 years, some 1.8 billion people will move Asia Pacific 525 28% 1740 54% 3228 66%
innovation. But if you happen to into cities, mostly in Africa and Asia, creating
look behind the social network or one of the most important new opportunities Sub-Saharan Africa 32 2% 57 2% 107 2%
the router that sends your email, for financial institutions.25
Middle East and North Africa 105 6% 165 5% 234 5%
you will quickly see how rapidly These trends are directly linked to
things are changing everywhere. World 1845 100% 3249 100% 4884 100%
technology-driven innovation. Initially, as
developments in agricultural technology Source: Organisation for Economic Cooperation and Development

improved labour productivity, rural

The middle class in Asia-Pacific countries is expanding rapidly as
workers began migrating to cities in
incomes rise across the region26
search of better opportunities. At first they
found jobs in capital-intensive industries
like manufacturing for the local market become self-reinforcing: more jobs in cities televisions, mobile phones and more.
and then, as technology drove quality have led to better technology infrastructures Asia-Pacific countries, with the worlds
improvements, for the global market. in cities, which has attracted employers who largest middle class growth, will also see
Meanwhile, advances in computing and can now serve global markets. The result: the largest demand for technology-driven
telecommunications made it possible for more urbanisation and a growing middle innovation. There are other demographic
Western companies to offshore certain class across the emerging markets. shifts to support this growth. Asia has
support functions to places like the a comparatively young population of
25 PwCs Retail Banking 2020: Evolution or revoluton
Philippines and India, creating relatively A rapidly growing middle class tends
26 Source: PwCs Retailing 2020: Winning in a digital natives, the post-millennials who
polarized world, well-paying jobs. Over time, the trend has to drive higher consumption: scooters,
have grown up in a world in which digital

PwC Financial Services Technology 2020 and Beyond 25

technology was already prevalent. Asia also technology priority across the Asia region, And in FinTech, the market is second only to
China now has the has the largest inter-connectivity of flows with more than 50% of institutions reporting the United States in investors interest.
with other emerging economies, and an public cloud as a critical or high priority.27 As we have noted elsewhere, Asia offers
worlds largest peer- average GDP growth that outperforms its They are not necessarily doing it on their some key advantages to Western-based
to-peer (P2P) lending peers in the West. As consumption grows, own, though; banks in the region typically companies looking for innovation, including
market, and has more people become more sophisticated buyers partner with third parties to develop, lower-cost but highly skilled resources
mobile smartphone of services, and they learn to continuously implement, and integrate mobile payment (arguably on a level with those in the
evaluate the price vs. value equation. For technologies. West), and a large market for testing and
users than any other consumer-oriented companies, including launching new products and services.
country in the world. those in financial services, any free ride in Investors have been quick to follow, and Disruptive innovations typically begin as
the Asia-Pacific countries is now over; they investments in AsiaPac FinTech grew faster low-cost products and services that target
will need to rely on technology innovations in 2015 than previously predicted.28 There the most price sensitive customers. Asia,
to get and keep customers. were four times as many investments in with its wealth constraints, vast population
FinTech companies in the region relative and favourable regulatory environment,
Where the venture to the previous year. In the first nine represents an ideal fertile ground for
Many US financial capitalists go months of 2015, investors poured in a disruptive innovation, as many industries
Here are two statistics that may staggering US$3.5 billion. Payments and
institutions will have have discovered.29
surprise some readers: China lending account for nearly two out of every
fully functional Asian now has the worlds largest three dollars invested in AsiaPac FinTech By 2020, we expect that many US financial
hubs that can act as a peer-to-peer (P2P) lending companies, and they drove much of this institutions will have fully functional Asian
catalyst for technology market, and has more mobile growth. But while payments and lending hubs that can act as a catalyst for technology
smartphone users than any have dominated the scene thus far, Asian innovations, for both local and global
innovations, for other country in the world. start-ups are now starting to focus on deployment. As specialised technology
both local and global In fact, across Asia, we are blockchain, cloud, and cyber-security as skills become harder to find, companies that
deployment. seeing companies jumping untapped niches in the FinTech industry have a foothold in Asia may see recruiting
to meet their customers much like their counterparts in Silicon advantages, too.
rapidly rising expectations for Valley.
financial services offerings often, ahead
of other markets. This includes embracing Why Asia FinTech matters
mobile innovations and creating a seamless, According to our research, Asia has now
27 Source: Forrester Research,
The+Asia+Pacific+Public+Cloud+Market+Will+Reach+ omnichannel customer experience. They are become the global leader in research
using mobile analytics to serve customers and development across all industries,
in context of their transactions. Cloud accounting for about one of every three
29 dollars spent on corporate R&D spending.
disruptive-innovation-head-east/ computing is gaining traction as a top

26 PwC Financial Services Technology 2020 and Beyond

Regulators will turn
to technology, too
The use of technology and its Regulators are rapidly adopting a wide SECs Office of Compliance Inspections and Financial institutions can do
implications are not limited to range of data gathering and analytical tools Examinations (OCIE) has invested significant their part
too. They are trying to learn more about resources to enhance its data mining and This is only the beginning. As financial
financial institutions. individual institutions activities and overall analysis capabilities, such as its National institutions themselves continue to automate
systemic activity. They also hope to monitor Exam Analytics Tool. This tool, known controls and monitoring in KYC/AML, trade
the industry more effectively and to predict as NEAT, combs through data to identify surveillance, reconciliations and other areas,
potential problems instead of regulating potential insider trading, improper allocation regulators will seek direct access to these
after the fact. Examples of this include the of investment opportunities, and other tools either on an ongoing basis or during
supervisory procedures and data requests infractions. supervisory reviews. As a result, firms will
tied to stress tests, asset quality reviews and need to make data and control transparency
enhanced reporting requirements coming as do the Europeans priorities as they implement these tools and
out of Washington, London and Basel. In Europe, the regulators have put quite a
comply with data requests. It is shortsighted
Using sophisticated analytical tools on large bit of emphasis on how technology is used.
to focus solely on compliance with current
volumes of data, regulators can compare In the UK, the Financial Conduct Authority
regulations. Rather, firms should develop a
scenarios and address potential issues before (FCA) is stepping in to make sure that
better understanding of where their data and
they become full-scale market problems. financial institutions do not abuse their
associated controls live. This will let them
newfound big data power. For example, the
work with a growing range of interested
The US regulators plug in FCA is looking into how insurance firms use
regulatory bodies more quickly, easily and
In United States, the Consumer Financial their own large data collections with web
accurately, on everything from stress tests
Protection Bureau (CFPB), which focuses on analytics and social media data. Other EU
and periodic exams to individual requests.
consumer protection, has invested heavily regulators are looking into the opportunities
By doing so, they will improve their
in analytics and digital technology. For and challenges related to the use of big data
credibility with regulators today and be
example, the agency created eRegulations, to see if current regulations and supervisory
ready for the future.
an online tool to help users find, research, measures are sufficient.
and understand regulations.30 Also from
the CFPB, Project Qu is an open source
data platform that lets users query complex
data about mortgage loans, combine it with
other data, and then summarise it. The

PwC Financial Services Technology 2020 and Beyond 27

Six priorities
for 2020
To benefit from these technology developments, we recommend that financial institutions
focus on six key priorities:

1. Update your IT operating model to get ready for the new normal

2. Slash costs by simplifying legacy systems, taking SaaS beyond the cloud and adopting

3. Build the technology capabilities to get more intelligent about your customers needs

4. Prepare your architecture to connect to anything, anywhere

5. Pay more attention to cyber-security before it becomes urgent

6. Make sure you have access to the talent and skills necessary to execute and win

You may feel that you have already seen this movie. After all, in broad terms, these have
always been good things to do. But it is not a rerun; how you will do it, and why, is quite
different from what you may have thought about until now. What worked for the client-
server world will not work for cloud. What worked to secure card-not-present transactions
will not work with the Internet of Things. And while any given institution will find some
priorities more urgent than others, they all matter if you want to stay ahead of the changes
sweeping through the industry. The alternative playing catch-up in the very different
financial services marketplace of 2020 is a bad plan for anyone.

28 PwC Financial Services Technology 2020 and Beyond

Update your IT
operating model to
get ready for the You may need different hardware, software, The overriding principle is that financial
new normal or storage technology. You may also institutions and their IT organisations must
need to rethink the way you network the be prepared for a world where change is
By 2020, your operating model components. Of course, that is just a start. constant and where digital comes first.
is probably going to look quite Will you build or buy? Does location matter? For this to happen, it is time to really put
How will you make decisions on what to do, legacy assumptions on the table. It may
stale, even if it is serving you well
as well as what not to do? Do you have the appear logical to continue to support core
today. That is because what your proper organisation to fit the new program, mainframe systems, given the potential
financial institution offers to your now and as it continues to evolve? How will disruption and perceived cost of transition
customers is almost certain to you know if you are getting it right? to something different. But if the existing
change, in ways both large and platform could be replicated at half the cost,
All companies have to balance where they would the logic still apply? Or at one tenth
small. This will require important are with where they are going. In IT, this
changes across, and around, the the cost?
means supporting both core keep-the-lights-
entire IT stack. on functions and large transformation
initiatives. Financial institutions have a
unique struggle though. Among other things,
these are IT-heavy companies,
built over generations of technology.
They have often grown through acquisition, All companies have to balance where
operating with relatively static products they are with where they are going.
and geographies. Typically, these operating In IT, this means supporting both core
models just are not nimble enough to support
where things are headed.
keep-the-lights-on functions and
large transformation initiatives.

PwC Financial Services Technology 2020 and Beyond 29

Governance Now more than ever, IT is expected to
Empower employees within parameters
to protect the organisation from risk understand business issues and help the
Professional services organisation with broader organisation achieve its goals
versatile generalists reshaping the brand, creating new markets,
and outperforming rivals. But poor
Mandate broker Mandate broker
of services of services governance can get in the way. Governance
Mandate is not just a control or compliance function.
Broker and orchestration with focus on
liers Partn innovation Ideally, it looks at how IT can support the
organisations strategy: how decisions are
made, what should be worked on and why.
IDEATE ASSEMBLE CONSUME It helps everyone understand how much
Process value IT creates (and for whom), measure
Fluid and iterative assemble-to-order approach
day-to-day performance, and improve how
Architecture risks and resources are managed. The right
Secure integration fabric with architectural governance program keeps both business
H H H guardrails and guidance
and IT initiatives on track. Finally, it provides
Robotics process automation Private a framework for dialogue that links business
and technology capabilities, furthering
End user computing Cloud organisation-wide goals. An effective IT
Tradational data center Applications
governance program will not make up for
a bad strategy, but it can help everyone
work together to get the most out of IT

31 We have discussed IT governance in greater detail in

our FS Viewpoint, Great by Governance: Improve IT
performance and value while managing risk (https://

30 PwC Financial Services Technology 2020 and Beyond

Mandate cyber-security and integration. These Flow: are the tasks, activities and
Even the nature of the keep-the-lights-on specialists will need to be able to consult with outcomes clearly defined, staged and
vs. reinvention distinction is changing, the business in order to better understand delivered?
because business-as-usual is no longer usual. what the business is trying to accomplish and
agree on the best way forward. Similarly, 
Resilience: have you anticipated how you
The traditional IT group will keep existing
IT will likely be the ones who help business will need to flex as a result of mistakes,
capabilities moving, but this will start to
teams become more comfortable with new faults, attacks or failures?
look more like a sophisticated supply chain
function than a manufacturing operation. forms of AI-driven decision making. Huge 
Insight: do you have adequate visibility
In this view, IT success will depend on amounts of data will be available, but it will into everything that you are doing? Is how
brokering and orchestration. Because not help you without the resources to extract your services are actually being used tied
information will increasingly be processed meaningful conclusions. Firms will turn to IT into real-time visibility?
anywhere, financial institutions will need teams for non-IT skills too; there is no way
to manage the flows and processes that to separate out project management and risk 
Culture: are you oriented in a way that
occur within your facilities as well as across management. And, of course, all individual promotes collaboration and trust with
domains. Switching can be automated, projects will need to be consistent with the your stakeholders?
but humans will need to think through the overall IT and business strategy.
exception handling, provisioning, billing Architecture
and more.
Process In 2020, hardware, software and data could
It is no surprise that the rate of IT change is reside anywhere. You will be expected to
Organisation rising quickly or that FinTech has raised make a virtually limitless combination
Increasingly, financial services and FinTech the ante. Expect even more by 2020, as of inputs and work together, quickly and
are becoming inseparable, putting IT into deployment gets cheaper and connectivity securely. For this to happen, you will need
a critical position. A product team may continues to scale. Unfortunately, most to (1) anticipate it, (2) make sure that your
want to build visualisation and AI logic into financial institutions already struggle to keep infrastructure is aligned with applications so
its customer service function, but it is not up, and process is a key part of the problem. it can scale up or down in real time, and (3) be
qualified to assess how to do it, let alone Fortunately, there are ways to work faster prepared to integrate anything. We have come
how this would work with the rest of the IT across the full range of steps that convert a long way from the early days of middleware;
infrastructure. So, along with its new revised ideas into technology services, by borrowing we now have higher expectations and
supply chain mandate, your IT team will also the same techniques that first sped up the demands for systems integration. This allows
need to advise marketing, sales, operations, development process. We encourage teams new flexibility in how financial institutions
product management and other business to look at four broad areas where processes interact beyond their traditional borders,
functions, either by embedding or aligning often break down under pressure. and it is a key part of updating the operating
facilitators. IT will require specialists with model. We cover this in more detail in #4,
expertise in everything from data analytics, Prepare your architecture to connect to
robotics, and user-experience design to anything, anywhere.
PwC Financial Services Technology 2020 and Beyond 31
Slash costs by
simplifying legacy
systems, taking The ever-spreading cost base leaves less extensive branches and sales forces. So, of work. By replacing outdated systems,
SaaS beyond the budget available for capital investment into legacy systems may be limiting your ability to blockchain could remove costs associated
new technology, driving a vicious cycle of roll out new competitive features or service with an entire layer of overhead
cloud, and adopting increased operating costs. This is in clear offerings, and they are also limiting the
robotics/AI contrast to the would-be disruptors, who ability to compete on cost. Adopt an aggressive SaaS-based
typically have far lower operating costs, only model
One of the starkest differences buying what they need when they need it. The key question for core systems and With the proliferation of network end-points,
infrastructure executives: how to offer we now have access to an unprecedented
between a legacy financial services
It does not have to be that way. In fact, from the best services to the business at the amount of data. Enterprise architects see
institution and a FinTech upstart our experience working with a wide variety lowest cost? To stay competitive, this will the cloud as a way to access actionable
comes down to fixed assets. of clients in banking and capital markets, invariably mean that they will selectively customer information on a large scale,
Incumbents carry a huge burden of insurance and asset management, we think decommission legacy systems and providing insights across geographies,
IT operating costs, stemming from many financial institutions are spending up integration infrastructure. They will also brands and products. And because the
layer upon layer of systems and to twice as much as they need to on IT. need to develop new capabilities that run in cloud can help break down data silos across
code. They have bolted on a range parallel. We are hardly suggesting that this customer channels and marketing service
While every company is different, we is a trivial problem; at many larger financial providers, companies often find that it
of one-time regulatory fixes, fraud generally see large savings opportunities for institutions, this could involve a three-to-five reduces fragmentation and the overall cost
prevention and cyber-security firms that do the following: simplify legacy year timetable. These initiatives are capital of IT ownership. In theory, it allows a firm
efforts, too. systems, adopt an aggressive SaaS-based intensive and they force a firm to decide to break out of the organisational structures
model and deploy robotics and AI-based if they will be buyers or providers of core that legacy systems have helped create.
automation. services. But this is all the more reason to But this can only happen if IT can make a
Simplify legacy systems act now, because waiting to start a three- disparate set of hardware, software, data
Legacy core systems and their related to-five year transition until 2020 could be and networks cooperate.
integration architecture are expensive to disastrous.
Fortunately, there has been a revolution
maintain and complex to modify. They also In some cases, FinTech will drive underway, reshaping the way we think
make it hard to stay ahead of changing simplification. For example, as we discussed about systems integration. Better still: the
market needs, given how long it takes to earlier, blockchain has the potential to shake cost-savings from switching to cloud-based
develop and release functionality changes up the financial services industry specifically computing can be dramatic. In fact, one of
and upgrades. At financial institutions, this is because it eliminates entire categories the drivers behind the public-cloud-becomes-
made worse because of the need to maintain
32 PwC
Current state Enterprise integration
Human-centric Application 1
business processes
contained within the P1 P2 P3 P4
walls of enterprise
and constrained App 2 App 3 App 4 Monolithic
by monolithic and legacy core
complex legacy core Bank systems
systems. staff
Human and robotics- Component Account opening
enabled business Integration systems
Future state processes that reside fabric Customer
within the enterprise Underwriting
Account statement
or in cloud, liberated Analytics
by component-based Deposit processing
P1 P2
modern core system. Payment processing
Bank Robotics process
Customer Loan processing
staff automation

the-dominant-infrastructure-model trend is financial institutions to bring innovations

how much cheaper it is than maintaining a to market quickly and test and adapt as
legacy, physical infrastructure. they go. These developments provide many
opportunities to reduce costs, through
These days, the concept of service-oriented economies of scale and new application
architecture can be used more broadly than support models.
ever, starting with how systems are linked.
We encourage you to think big: essentially, Deploy robotics and AI-based
setting expectations for a systems design that automation
allows IT to plug anything into anything. Our estimates suggest more than half of the
Core systems of record and processing will activities people are paid to perform can be
need to plug into an integrated architecture automated by adopting advanced robotics
fabric. Cloud-based platforms will allow and AI either now, or surprisingly soon.
PwC Financial Services Technology 2020 and Beyond 33
In the United States, these activities advances that are being made in robotics and
represent about US$2 trillion in annual AI technology. By learning now about the
wages. And while many observers think of technical and culture issues, you will be able
automation primarily affecting low-skill, to gradually increase adoption across the
low-wage roles, we have seen that even the enterprise, rather than doing it under duress.
highest-paid occupations in our economy
can be enhanced through automation. As Finally, we note that robotics and AI will
we have said, these technologies are likely require new skills in the teams that support
to unleash a wave of re-shoring, as firms them. You will need to find or develop people
discover that this approach is even cheaper with enterprise and integration architecture
than outsourcing or offshoring. (Indeed, skills who can bring together legacy systems
this is also linked to Asias rise as a centre with the new generation of cloud services in
of technology-driven innovation; the a flexible and resilient way. Similarly, teams
emergence of Asias middle class may drive with robotics and AI solution architecture
up costs, making Asian outsourcing less skills to deploy automation effectively will
appealing to Western buyers.) be required. External contractors can be
a way to augment internal staff, allowing
The growth of robotics and AI automation is companies to adjust headcount numbers
not a matter of if; it is a matter of when. as the legacy architecture is gradually
As such, we strongly urge financial replaced and resources are shared across
institutions to act now. Look for the organisation.
opportunities to selectively pilot the

Our estimates suggest more than

half of the activities people are paid
to perform can be automated by
adopting advanced robotics and AI
either now, or surprisingly soon.

34 PwC Financial Services Technology 2020 and Beyond

Build the technology
capabilities to get
more intelligent By 2020, we expect that the new normal PwCs Retail Banking 2020 survey Understand the natural limits
about your operating model will be customer- and indicates a growing awareness to of artificial intelligence
context-centred. That is, companies will develop a more customer-centric Artificial intelligence will transform
customers needs change the way they interact with their business model, but a significant gap customer interactions, and all users across
customers based on the context of the in preparedness remains. companies, market segments, and individual
As we have noted, customer exchange. They will offer a seamless customers will value different things. But
intelligence and the ability to act
in real-time on that intelligence
omnichannel experience, through a smart
balance of human and machines.
61% two issues will be common to everyone,
regardless of where they fall in the financial
of bank executives
is one of the key trends affecting say that a customer-
services industry: privacy and risk. For
This will require the integration of massive
the financial services industry, amounts of situational data, much of it from centric model is
financial institutions that integrate AI into
and it will drive revenue and business processes, these need to be at the
mobile sources smartphones, sensors, very important
top of any priority list.
profitability more directly in the wearables and so on and the ability to tie
future. As this happens, many of it to operational data such as transaction
AI has huge potential because of its ability
the attributes that drive todays history and risk profiling. If that is not to learn and adapt. But this introduces
brands, from design to delivery, difficult enough, you will need to make these of banks are making new kinds of risk, depending on how much
connections in (or near) real-time, so you investments in this autonomy the systems are given when they
could become less important.
can deliver next-action recommendations area (this pattern is make decisions. Accordingly, it is critical
and advice. Until now, most financial consistent globally) to have a clear strategy on what role AI
institutions have focused on building their will have and what checks and balances to
mobile presence. Going forward, we expect maintain over your systems. This raises some
market leaders to build on this foundation important questions: Will humans need to
to deliver in-the-moment information, make ultimate decisions outside of certain
advice and decision-making power to their
customers. This represents an important
17% parameters? Will there be spot checks on AI
decisions? How will AI systems be iteratively
feel very prepared
shift. Mobile originally developed as a tested and upgraded? From circuit-breakers
nice-to-have add-on to electronic banking. to configurators, systems can spiral out
However, advances in networks and mobile of control quickly without proper rules.
devices have flipped the hierarchy. Now, you These are complex issues; to strike the right
need to adopt a mobile-first view of features
Source: PwC Retail Banking 2020 Survey
and development. PwC Financial Services Technology 2020 and Beyond 35
balance between AIs risks and rewards, you it is why many financial services firms are These tools go far beyond the customer
will want to engage executives across the appointing chief data officers (CDOs).32 interface; they even have implications for
business. existing physical infrastructure. For example,
When used properly, AI and data analytics as a bank, it is important to consider which
Protect privacy, or else together can help financial institutions locations will house your flagship and full-
Privacy is another critical concern. understand their customers more than ever service branches and where to locate the
Customers must feel their information will before. (And this matters, because FinTech assisted, self-service (or even robot-enabled)
be used to benefit them, and not in a way start-ups will be going down the same path, branches. The long leases on many branch
that intrudes upon their private lives. This is and the first one to get it right will earn the sites mean that this service map needs to be
a sensitive topic; in fact, if handled poorly, customers loyalty.) These new tools provide drawn up today to be ready by 2020.
privacy violations could invite a heavy- access to rich, compelling and personal
handed regulatory response. Companies will service to customers. The service is personal Finally, as these technologies advance,
need strong operational controls in place because it draws on individualised data financial institutions will quickly bump into
so data is not being misused in or across about a consumers behaviours, which is some human capital limitations. AI already
business units. In fact, as we have seen, then used to customise product offerings has practical implications and companies
regulators are getting more comfortable for that specific user. The days of designing need to be investing in it today. We are
with how they use technology to enhance products based on broad demographics or already seeing a high demand for AI experts.
supervision. The US CFPB, for example, survey groups are fading fast. Companies will need to consider how they
recently announced its first enforcement will address this talent gap in the short-term,
action (against a FinTech payment company) This user experience will occur anywhere: even as they develop strategies for the
related to privacy and cyber-security, and either in a branch, online, or through a long-term.
regulators are likely to step up these efforts customers mobile and wearable devices. In
in the future. fact, because digital has become mainstream,
we now see consumers starting to turn to
Use the power of analytics to give mobile devices as their preferred tool for
a customer more making online and proximity payments,
As data proliferates, we encourage executives rather than credit cards or banks. These new
to explore how to get the most value out of capabilities, with seamless transitions among
what they hold: what information is already them, are the essence of what we mean by
being collected, what form it is in, how (or an omnichannel experience: customers will
if) it is being analysed today, how it can be be able to start a transaction in a browser on
32 See our recent paper, Great Expectations: the
adapted to address customer needs and their laptop, continue it on a mobile device,
evolution of the chief data officer, for more information
on this trend. reduce costs and more. These are key and walk into a branch with their tablet, and be
services/publications/viewpoints/assets/pwc-chief- ongoing questions for any business, and greeted by name without needing to explain
why they have come in.
36 PwC Financial Services Technology 2020 and Beyond
Prepare your
architecture to
connect to anything,
The FinTech trends that we Payment Cloud
have discussed in this paper, Billing Payments gateway Analytics Social solution
from the cloud and peer-to-
peer transactions to customer
intelligence and cyber-security $
concerns, all rely on the rapid
transmission and assimilation of
data. Todays systems do this too,
of course, but without the scale
or resilience that the future will
require. To stay cost-competitive,
and to have the flexibility that
innovation requires, financial
institutions will need to update
their infrastructure to make it Integration fabric
more agile and responsive. You
User experience
will need an architecture that can
Process and rules integration
bend as requirements change and
Application and service integration
interact with data and systems
Data integration
that could be anywhere because
they will be. And at most financial Master data integration

institutions we know, this will Infrastructure integration

Security and management
require a significant reorientation.
PwC Financial Services Technology 2020 and Beyond 37
Here are just a few of the endpoints that will Work with the cloud For example, banks will rely heavily on 
SaaS data policies: Financial institutions
need to coexist and cooperate: To work this way, you will need to manage payment APIs to facilitate e-commerce. The should work with their vendors to
a lot of different forms of data, and much of global industry has been standardising the understand the data policies and
Enterprise databases, data warehouses, way it handles payments messaging and limitations of APIs. This will let you
it will be beyond your control, in forms and
applications and legacy systems remittance meta-data. These standards will consider what services can be exposed
locations that you have not anticipated. The
Cloud services cloud offers a good use case. For example, define consistent structures for individual and consumed, at the user interface (UI)
you may turn to hybrid cloud brokers to help messages, promoting interoperability and level and beyond.
Business-to-Business (B2B) connections, you improve the way you aggregate data, helping developers define API requirements.
linking to comparable systems at partners 
Transitioning data to the cloud: There
analyse activity, and react to user behaviour
and suppliers But APIs require that financial institutions are various ways to move data into a
through a single customer view for customer
think differently about strategy, given that public or private cloud environment and
banking. This integration is essential
Business-to-Consumer (B2C) connections, the transactions that call them may come financial institutions should understand
for front office applications and channel
linking to apps, wearables and mobile from third parties. The payment transaction the advantages of each strategy. There
architecture domains that expose such
devices at an individual user level may become more of a commodity, but the are cost, risk, and time trade-offs
services to your customers. This is another
data itself that is captured in the process involved, whether you choose a parallel,
Bring-Your-Own-Device (BYOD) reason that cloud computing is becoming
could drive drastically different business incremental, or external cross-referencing
connections, using an enterprise mobility so dominant: it makes it much easier to
models. New business models will influence transition method.
strategy to link to employees and contractors manage and analyse big data. Internally,
how firms think about the data models they
this also allows technology teams to develop 
Security: There is always an element
use, how they aggregate information from
Third party big data sources and test solutions in the cloud without of risk when exposing data for system
other sources, the support structures they
having to rewrite and test code on dedicated consumption. Under most circumstances,
IoT sensors implement and more. This is not just an
machines. It allows businesses to design we recommend that financial institutions
issue for business strategists; it has clear
The systems are diverse, and they are getting and deliver their products more quickly. For only use an integration approach where
technical implications for the teams who are
more complex by the week. Now, financial CIOs, this also significantly reduces capital data is exposed to trusted systems using a
responsible for doing the work.
institutions will need to layer on a more and operating expenditures: a perennial private cloud infrastructure.
sophisticated view of federated identity challenge for all IT departments. Issues in planning a hybrid
integration strategy Of course, if you want to implement a hybrid
management, because companies will be Make an API plan
As financial institutions move to adopt more integration strategy effectively, you have
dealing with new classes of users. Systems Application programming interfaces (APIs)
of a hybrid integration strategy, there are to decide what your end-state application
architecture can be the key to balancing have come of age in financial services.
several factors to consider, including how landscape will look like. This is true even
control and accessibility. That is, the way Similar to online or mobile banking today,
hand-offs works, how data moves and how to during a transition period, where some
you assemble the technical building blocks nearly all financial institutions will provide
address security concerns. banking services will come from cloud-
can protect your institution against cyber- external APIs in the future. (In fact, based SaaS providers and others will come
threats without adding needless barriers to directives from regulators in Europe and the from in-house. So, for example, a bank
discourage interaction. UK mandate access to customer data and might invest in an enterprise service bus
accounts under certain circumstances.)
38 PwC Financial Services Technology 2020 and Beyond
(ESB) infrastructure as it starts to open up
its systems; this alone can offer material
reductions in cost and time for a digital
banking upgrade project.

Given the FinTech trends we have discussed,

we think you will want to build your
hybrid integration platform assuming
true interoperability across multiple
products or suites. By 2020, this will be
the most effective way to share common
infrastructures and maintain architectural
integrity with native, on-premises data

PwC Financial Services Technology 2020 and Beyond 39

You can not pay
enough attention
to cyber-security Many financial institutions still rely on the to a corporate network, can increase the or virtual. We have found that a surprising
same information security model that they security risk for your critical data and number of firms do not put enough effort
Financial institutions have have used for years: one that is controls- and infrastructure. into identifying their infrastructure
been addressing information compliance-based, perimeter-oriented, and weaknesses, let alone remediating them; this
security and technology risks aimed at securing data and the back office. And IoT is just one way in. There are more compromises even the best cybersecurity
layers than ever, and this has expanded
for decades. But a growing But information security risks have evolved program.
dramatically over the past few decades, and the attack surface the points through
number of cybersecurity events which adversaries attempt to access The role of management
the approach that financial institutions use to
in recent years has shown that data. In a sharing economy, there may Cyber-risk management is complex and
manage them has not kept pace.
the traditional approach is no be many different providers touching a rapidly evolving. To stay ahead, you will
longer good enough. In fact, in Finding the weakest link disaggregated transaction that once would need executive management engagement,
PwCs Global State of Information The Internet of Things (IoT) presents a good have been handled by a single bank. And ongoing governance, risk management
example of the pending challenges. On because digital has become mainstream, techniques, threat correlation, collaboration
Security Survey 2016, we found
the one hand, IoT will play an increasingly the technology perimeter has moved far throughout the organisation and adoption of
that there were 38% more security important role in the way that businesses beyond traditional control boundaries, a new operating model. You are not fighting
incidents detected in 2015 than the collect and aggregate previously inaccessible making information security exponentially off a single threat, or even a single class of
year before.33 data, leading to growth and innovation. more difficult. Meanwhile, well-funded threats; next week, you could see an entirely
In financial services, we have already threat actors are launching technically new attack vector. So, the true goal of cyber-
seen IoT growth in payments (wearable sophisticated assaults that, when successful, risk management is to build resiliency.
technology that allows customers to make can siphon off valuable data undetected for You need to make sure that your systems
mobile payments via watches or fitness months, or even years. and operations are designed to detect
trackers), insurance (telematics technology cyber-threats and respond to cyber-events,
that enables insurers to monitor customer Do not forget physical security so you can limit any business disruption or
driving habits and provide discounts to safe With all the risks posed by new, virtual financial losses.
drivers) and banking. At the same time, IoT entry points, it is easy to get distracted
presents some weakest link challenges, and neglect the importance of physical In the financial sector, this takes on an added
because many IoT devices do not support the security management. Physical and virtual dimension, because the perceived rewards
implementation of strong security controls. security must be considered together. for the hackers are so appealing. In fact, a
33 PwC Global State of Information Security Survey
These insecure interfaces, with billions of While information is virtual, it is stored financial institutions cyber-risk management
security/information-security-survey.html potentially vulnerable devices connecting in a physical location, and skilled hackers program should be one of many components
will find the weakest link, either physical of the overall business risk environment that
40 PwC
feeds into the enterprise risk management Build and execute a strategic cyber- Acquire, develop and retain key talent: block attacks more effectively, help different
framework. You may not be able to eliminate security roadmap: Organisations should The organisational model for cyber- teams (or organisations) collaborate and
all cyber-risks, but you have to be able to understand the evolution of cyber-threats protection should be adjusted to focus more learn more effectively, reduce the lag time
manage those risks through an informed and threat actors on an ongoing basis, on enterprise and business risk management. between detection and mediation and create
decision-making process. Instead of seeing leveraging cyber-threat intelligence from Organisations should then determine the secure communication channels. When you
a wire fraud incident or DDoS attack as an a number of internal and external sources. required skills, capabilities and resource factor in potential cost reductions, cloud-
isolated incident, we encourage looking at They should then develop and execute a plan requirements before hiring the necessary enabled cyber-security becomes all the more
them as tips of an iceberg. This is serious to mitigate exposure to these threats, making talent to fill any gaps. compelling.
enough that executive management teams adjustments to their risk control posture as
should use their leadership role to set the the threat landscape changes. Align cyber-security team with business Cyber-security is a large problem and it is
proper tone and structure to enable cyber- risks: Establish governance and reporting not going away. Despite prevention and
resiliency across their organisations. Frankly, Establish a commercially reasonable lines for cyber-security, reflecting its role as a authentication efforts, we can virtually
if you do not mitigate cyber-risks effectively, cyber-security capability: Cyber-protection technology risk function. Make the executive guarantee that anomalous and unauthorised
you could jeopardise the ongoing success of programs should be tailored to the risk team accountable for making decisions activity will continue to occur. But with the
your whole institution. profile of the organisation as well as the about IT risks. Segregate broader budgeting right tools in place, you can see it when
expectations of clients, shareholders and and funding from the technology budget. it happens and remediate it quickly. With
We recommend executive management focus regulators. Organisations should understand Develop appropriate linkages to both the risk a structured approach to cyber-security,
on the following: how they compare to their peers and relevant and technology functions. financial institutions will also be more
industry standards. In 2020, as more services prepared as threats evolve. This will help
Proactively manage cyber-risk and will be provided by vendors, cyber-security New tools for fighting cyber- them to avoid financial damage, negative
regulation: Treat cyber-risk as a strategic programs will need pay more attention to crime publicity, and loss of customers trust, any of
business issue and focus on becoming cyber- third parties, too.34 With the right tools in place, financial which could have catastrophic effects.
resilient. Develop specific cyber-risk appetite, institutions can improve their ability to
both corporate-wide and by business. Develop a world class cyber-response: manage cyber-risk. For example, financial
Understand and incorporate baseline Organisations should adopt an enterprise institutions can deploy state-of-the-art
regulatory requirements into current risk management approach, focusing on data mining tools and other technologies
environment, and include cyber-protection incident response and crisis management as to detect anomalies in security and fraud
as a key priority in the organisations overall a key priority. Scenario planning should take applications, using data from both structured
regulatory program. place with the executive management team and unstructured sources. We also note that
and attack simulations should be conducted while the trend toward cloud-based services
on an ongoing basis. The goal should be can introduce new risks, it can also support
34 For additional information, see PwCs Significant
cyber-resiliency: being able to defend against a financial institutions defensive strategy.
others: How financial firms can manage third party
and respond to cyber-risks that have become Cloud-based cyber-security can improve risk,
a fact of life. intelligence gathering and threat modeling, publications/viewpoints/assets/pwc-third-party-
vendor-risk-management.pdf. May 2015.

PwC Financial Services Technology 2020 and Beyond 41

Make sure you
have access to the
necessary talent Looking backward, looking across the human capital strategy through and they may serve as a good resources
and skills to execute forward revitalised recruitment, learning and for others. We also expect that some firms
Financial institutions in general simply development, partnering and cultural will establish Innovation Hubs in Asia,
and win do not have the internal knowledge and initiatives. Typically, this could include either looking for opportunities to learn
expertise they will need to implement a efforts such as: from others breakout strategies or looking
As financial institutions look for talent with specialised software and
what do our customers want? approach.
to the future, one of the biggest For example, a COBOL programmer who
Recruiting expert talent from other engineering skills that may not be readily
hurdles will have nothing at all technology organisations and think-tanks, available at home.
maintains a core banking platform may not
to do with technology. For years, rather than staying focused on recruiting
have the skills or interests to learn to code
from within the financial services industry Different generation,
traditional financial institutions artificial intelligence applications. From our
different values
have designed their offerings from discussions with senior IT executives across Developing robust learning modules to Just as changing demographics are
the industry, it is clear that many executives,
the inside out: this is what we enhance the skills of executives, IT and reshaping customer attitudes, we see them
non-IT staff-members, and even technical non-IT staff
will offer, rather than what do personnel do not have the skills needed to
changing employee attitudes as well. This
our customers want? But this build and operate an effective digital channel Taking more active steps to create and has important implications for financial
model no longer works. And the foster a culture of innovative thinking and institutions as they look to attract and
retain a new generation of talent. Incentives
skills and interests of todays IT talent development
Financial institutions are starting to realise that once appealed to top performers may
team members and third-party Engaging more extensively and creatively become less important or not relevant
they will need talent with very different
talent may not be up to the skills by 2020. On the surface, this might with third-party sources of talent, at all. For example, to succeed with the
challenges of tomorrows technical mean finding more industrial engineers for including the use of talent exchanges emerging cohort of millennials, financial
environment, where partnering robotics work, or retraining underwriters institutions will need to reexamine what they
Learning from Asia offer employees in terms of compensation,
with customers will be essential. to do higher value work once AI is used to
automate certain existing functions. But the One way that financial institutions can benefits, flexibility (of both time and
issue runs deeper than developing a different address this priority: turning to the East, location), development opportunities and
competency model. taking advantage of Asias emergence as a more. Will a bank be able to lure away a
key centre of technology-driven innovation. robotics engineer from a FinTech upstart
First, you need to understand what is In some cases, financial institutions and using the current incentives? If not, what
already working and what needs to be done FinTech companies in Asia are already would it take? The answers may not be
differently. This might involve changes addressing issues described in this paper, intuitively obvious.
42 PwC
Current state Future state
Identify skills gaps so you can transform your to a future state in which learning, recruiting
organisation from a current state where learning, and culture help to drive innovative thinking and
recruiting and culture are not enablers of innovation collaboration in a digital financial services industry
and collaboration

Organisation focuses recruiting Firm delivers typical, Culture based primarily on Rethink the talent sourcing Facilitate focused on-the-job Promote a culture of
efforts primarily within bank-focused learning past objectives and instead of process by: training, mentoring, and collaboration and innovation
the industry, from other and development training forward-thinking drivers Seeking creative candidates peer coaching by: by:
competitor banks and financial modules on existing and outside the industry at Implementing communities Encouraging employees
institutions archaic systems, platforms think-tanks, technology of interest and voice of to contribute ideas to
and processes firms, and other non- customer initiatives to drive enhance and advance the
traditional sources digital banking information organisations as part of
Re-branding hiring strategies sharing innovation campaigns
to emphasise opportunities Partnering with skilled and social media driven
to work with innovative professionals, technological initiatives
technology as well as leaders, educational Using guided sessions to find
competitive compensation institutions, and pertinent and share best practices,
Considering flexible professional association to and benchmarking against
workforce alternatives, develop/deliver relevant a hyper-competitor to
like talent exchanges and training materials invigorate thinking
project-based hiring Developing an Innovation
Partner with third parties Centre of Excellence to focus
to get needed talent on a on driving imagination,
short- or long-term basis creative thinking, and
inventiveness more deeply
into the organisations

Recruiting Learning Culture Recruiting Learning Learning

PwC Financial Services Technology 2020 and Beyond 43

Another trend that financial institutions will achieving broader business goals: making As new forces impact the industry and
need to address is the growing preference the customer the top priority; building a attitudes toward work continue to change,
for flexibility and entrepreneurship among healthy risk culture; improving the business; some of the attributes that have benefitted
many in the labour force. In the United promoting innovation; and engaging in financial institutions in the past (such as
States, for example, the US Chamber of corporate responsibility. we are a large, stable employer) may lose
Commerce has found that 27% of the labour their appeal. Refreshing your firms approach
force is currently self-employed35, and some Financial institutions should look to improve to recruiting, learning and development,
believe that this contingent workforce the traditional performance management and culture may offer an effective (if low-
could rise to 40% or more within several model so they are inspiring their teams to do tech) way to address issues that FinTech has
years. Practically, for this reason alone, great work: brought into the open.
financial institutions will need to adopt 
Goal setting: translate purpose and
a talent exchange mindset, leveraging values to link them with common
part-time and/or self-employed individuals enterprise goals
in a creative manner. This may range
from bidding out specific tasks or work to 
Real-time feedback and periodic check-
expanding the use of seasonal or temporary ins: provide on-the-job feedback and
workers. Of course, this will introduce coaching; enhance transparency through
challenges around culture and quality, and informal peer and colleague feedback
this will introduce new opportunities as well.
For example, we might see employers using 
Annual reviews: manage year-end
online platforms to manage confidentiality expectations with more focus on future
and legal risks in new and creative ways. state performance

Getting better results from I ntegrated performance and rewards:

performance management create clearly defined and evidenced links
Ideally, performance management should between performance ratings and rewards
engage and motivate employees. This outcomes
process setting expectations, observing
I nclude all team members: expand
and providing feedback, and appraising
feedback and performance management
results should encourage risk-responsible
processes to third-party labour and
behaviours and a focus on the right
things. Human capital strategy is also key to

44 PwC Financial Services Technology 2020 and Beyond


Financial institutions have a lot on their plate: emerging competitors, coordination. In other cases, we see CIOs This is achievable. In fact, it is what the
shifting demographics, rising customer expectations and changing who are hesitant to bite the bullet on big leaders of 2020 are preparing for right now,
projects, figuring that they can limp along on their own and with outside help.
regulations. Technology offers solutions, allowing financial institutions to cut
with older systems for another year or two
costs and become more efficient at what they do. But this is tricky, because it until technology stabilises and funding may Each financial institution will respond to
is a classic limited time offer. Most technology is not proprietary, so it is a bit be available. Unfortunately, we think that these trends and priorities in their own way,
of a race: if you blink, you might find that your competition has already built strategy will become more dangerous as largely dependent on their unique position
in the market, desired path forward, brand
up advantages that are now harder for you to match. time passes. After all, a core simplification
project really can take three-to-five years. positioning, regulatory circumstances, and
Devising a talent plan for 2020, and getting organisation capabilities.

As we see it, most financial institutions are the right staff in the right places? Creating For our part, we encourage institutions
currently focusing much of their IT attention an innovation hub possibly in Asia, or to take a realistic view of their situation
on the short-term. We understand this: on redesigning your architecture? These can holistically, across the entire IT organisation
any given day, there are fires to fight, with take several years too. To be competitive in to understand the current state, the desired
regulatory fixes, fraud attempts, budget the game in 2020, there are steps to start state, and how to get from here to there.
discussions and so on. But with the trends taking now. With 2020 rapidly approaching, this is no
we have described here, you will not want to time for a piecemeal approach.
Here is what success looks like: when
look up after a few more years of short-term
the next change comes, you are ready. At PwC, we work with clients to build IT
thinking to notice that the calendar says
You have the models and architecture in 2020 Readiness Programs. These start with
place to quickly understand, leverage, a strategic review that lets CIOs and other
In fact, we think that many financial and operationalise emerging technologies executives understand where they stand,
institutions are looking at all of these without creating chaos in the organisation. and what they will need to support business
issues, to some extent. But they are often And you are able to do this while you keep strategy by the end of the decade. We
looking at them reactively, in silos, without the lights on at a fraction of todays expense. examine an institutions operating model,

PwC Financial Services Technology 2020 and Beyond 45

human capital approach, ability to innovate,
and ability to execute, among other things.
We also take into account what we know
about the IT environment of 2020: the Here are some potential questions to get started:
integration themes, advanced analytics, core
and digital systems, cloud adoption, talent How quickly can you innovate when technologies, competitors, and markets change? Do you have a
flexibility, and innovation culture that will methodology in place to help you evaluate how and where you might use emerging technology like
drive our world. blockchain? Can you do this consistently, without creating chaos in the organisation? What is your strategy
for learning from, partnering with, or acquiring FinTech disruptors?
With the results of such an IT Healthcheck
in hand, you can work to determine the gaps Does your IT team understand how they will deploy AI and robotics? Do you use systems to store, process and
you will need to close. With these guiding integrate unstructured data? When users become even more mobile, how will this change your offerings?
principles, you can establish the consensus
Do you have a robust cybersecurity program in place? How will your program adapt to handle security
you will need to support change.
related to IoT? How often do you do update your approach to data privacy? What limits do you put on sharing
Finally, you will want to make a pragmatic information through APIs? How resilient is your organisation to a sustained, aggressive cyber-attack?
roadmap for how you will close the gaps
Do you have a migration plan to take your on-premises technology stack and migrate it to the private
identified. We work with clients to reconcile
(or public) cloud? Whats the optimal role for SaaS, and what changes will you need to make to expand
these against current initiatives, re-prioritise
its use?
as necessary, and define the funding model.
This helps everyone understand how they Can you customise product offerings on an individual basis? How synchronised is your approach to
will execute together, with alignment and omnichannel delivery? Do you have the right physical/virtual mix?
accountability to achieve the 2020 vision.
How will you find the skilled resources you need as you shift from a physical to a more virtual infrastructure?
We hope our perspective is helpful as you What can you learn from competitors in other markets? How would talent exchanges and other contingent
think about refreshing your own strategy for workforce projects affect your existing operations?
2020 and beyond.

46 PwC Financial Services Technology 2020 and Beyond


Julien Courbe Marcus von Engel Chris OHara

Global FS Technology Leader Partner Partner Acknowledgements
PwC US PwC Japan PwC US FS Technology 2020 was a global effort.
+1 646 471 4771 +81 80 4466 1914 +1 646 471 5395 We would like to thank the following people for their contributions: John Abrahams,
Judy Cho, Cathryn Marsh and Ketan Parekh.
John Garvey John Lyons
Principal Partner
+1 646 471 2422 +44 (0) 20 7212 5071

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