As the pace of change in technology and business continues to increase, the financial services industry must evolve to keep up. Dave Zager, senior manager, and Dan Sundt, principal, at Deloitte Consulting LLP, took the time to talk with me about technology trends in financial services. They also shared their 30-second elevator pitches from their respective HR and finance perspectives on what today’s financial services leaders need to do to stay innovative. Take a listen here:
Do you prefer reading? Here’s the full transcript, edited for clarity.
Greg Thomas: Do you want to see how technology really drives change? Look no further than the financial services industry. Mature, well-established firms suddenly find themselves head-to-head with newer competitors. Some of those competitors don’t even fundamentally see themselves as finserv companies. They might see themselves as tech companies. Coupled with shifts in technology and in consumer tastes, and operating in a heavily regulated industry, what’s the right path forward?
Hi, and welcome to the Workday Podcast. I’m Greg Thomas. Today we’re going to talk about those forces shaping the finserv industry. To do that, I’m joined by Dan Sundt, principal, and Dave Zager, senior manager, both from Deloitte Consulting LLP. Dan helps with HR, and Dave works for the office of finance. Welcome to you both.
Dan Sundt: Thank you very much.
Thomas: So, Dan, starting with you, what are some of the biggest challenges facing the financial services industry today?
Sundt: Well, we can’t go any further without saying that regulation is an ever-present and constant. And the amount of change that comes not only on a year-to-year basis, but also monthly and weekly, from a regulatory perspective is something that impacts every sector of financial services. And it’s something that clients are generally worried about. Everything they do they need to make sure that they have the processes, the people, and the solutions in place to be able to deal with the changes that are coming.
I’d say the biggest thing that we’re also starting to see is maybe a bit more of an inward look somewhat from an innovation perspective with some of the financial services companies. For the longest time, if you think about banking, banks were very focused on their external customers, and the pace of innovation was brisk in terms of the products and services they brought to their external customers. I think there is an acknowledgement that banks need to look internally and at their own employees as being customers as well. And we’re seeing that they’re starting to turn some of that pace of innovation back in, at least from a human capital perspective.
Thomas: Dave, what would you add to that?
Dave Zager: I would just say, overall in the world we live in today, the pace of change is exponential. And when we look at this from a business perspective, and specifically in financial services, it’s very hard for companies to keep up. We’ve seen a lot of innovation that started more on the customer side and has evolved into, for example, home loan applications that can be provided in an app, and insurance policies that can be signed up for in an app and over the phone.
And I think intrinsically, within the four walls of a business today and especially in the financial services space, customers expect that innovation from the business as well. And the demands of that are changing the expectations of what the leaders need to deliver.
Sundt: I’d say there’s one other thing I might add about innovation that we probably didn’t see in financial services three years ago—suddenly, all these firms have the office of the customer, which has now really started to be reflected inward as well. What’s interesting is that with the pace in financial services, people know they have to be more mindful of the overall experience of what they’re delivering—not just from an external brand perspective, but from an internal perspective as well.
Thomas: So when you think about those challenges that are facing them, what does that mean? Where do they go from there to really succeed in the face of that regulatory change, in the face of those consumer expectations? And maybe we parse it out a little bit in terms of talent trends and finance trends—but where do you see those biggest opportunities? Dave, let’s start with you.
Zager: The educational side of this is crucial. Now, in this industry, which is a heavily regulated industry, keeping pace with changes in reform, regulations, etc., from a financial perspective is probably a bit easier now that the communication is out there. But when we position that toward the consumer, I think the traditional aspect of taking a long-term strategy view and taking a long time to try to innovate and put something out to the market—it, quite frankly, no longer works.
Unfortunately, this is an industry that’s made up of a lot of distrust, especially at the millennial, Gen-Z level. So to help in that case, especially on the consumer side, is having innovative ideas and bringing them out to the marketplace to truly test it out because unlike reform, it’s very hard to get a read on what customers are really going to take in, what they’re going to adapt.
So I think especially for long-standing financial insurance institutions that’ve been around 100-plus years, it’s a very big shift for them to move from the more traditional approach to an agile, nimble approach and a fail-early type of MVP—minimal viable product—concept.
Sundt: Yeah, and I would say that from a talent perspective, with the organizations that I’m working with, they’re seeing the need to be able to deploy their talent in agile methods. There’s the concept of agile teams, which is incredibly important in terms of being able to quickly get a group of people to attack one business problem. And they need the processes, the solutions that will be able to support the ability to quickly reorganize.
I think also there’s such a large competition for talent across FSI that the ability for organizations to be able to get insights into that talent, who they need, and then for their own employees to have knowledge of the opportunities they have within their organizations, that’s another big trend that we’re seeing from an HR, human capital perspective as well.
Thomas: Do you guys see that there really is a dichotomy between more established firms and up-starts, those companies that maybe don’t even necessarily see themselves first and foremost in the financial services industry? It’s more of a consumer-facing finance technology product almost?
Zager: Yes, absolutely. I’ll say the whole fintech movement, insuretech movement—companies that are coming out of not having traditional finance background but a concept and an idea, especially to take to the market of that distrust I was mentioning before, it’s a huge game-changer. What we notice with a lot of our clients that are extremely mature and have been in the industry a long time is that they’re sitting on top of a lot of technical debt.
And to shift the boat, the juggernaut, so to speak, even a percent is very tough, whereas newer companies born in the cloud, leveraging all of the technologies we have in the marketplace today, can be a bit more nimble and try things and develop new products, and if they don’t work, kind of shut them down and be nimble in the marketplace.
So I definitely notice that dichotomy between the large, established companies versus some of the new entrants in that space.
Sundt: I would completely agree. I think the one interesting trend that we’ll see is these fintech firms, smaller firms, their pace of innovation is so rapid out of the gate, but then they start to reach that size where regulation and other external factors start to encroach on them, or they start to think about their globalization strategy and how they’re going to effectively move out into different countries, how they’re going to effectively recruit and draw on that talent. And they’re coming against different labor laws. That’s at the point where all of a sudden, it’s the innovation curve and they want to keep going, but for some it can lock up.
So they have to be mindful of what those changes are, especially when they’re hitting those critical inflection points of growth, regulation, growing outside of their particular geographic regions as well.
Thomas: So let’s talk about technology a little bit more and the way that it’s changing things. You touched on this a little bit that consumer-facing technology adoption has been pretty strong. What can we do to capture more of that share of wallet, less so on that internal-facing technology side? Talk about that a little bit. Why do you think that is? Do you think firms recognize that’s something they need to tackle?
Sundt: I think it is something they need to tackle because of a number of different factors. I had an opportunity to sit down with a CIO of a regional bank a few weeks ago. He said they have reduced their loan processing times for their more simple loan products to under a day. It can be within hours in some senses, whereas the processes they have right now to be able to onboard a new employee can take weeks—let’s say until the person can come in the door, their laptop comes to them, their email gets provisioned.
There’s something fundamentally wrong with that, that they can do things in a matter of hours or a day for a business, but yet they can’t service their own employees. And if they want to continue to increase that pace of innovation in some of those other products in order to get down to an hour-long loan processing time, they’re going to need to focus that investment back into their employees—the way they’re feeding them, and the innovations and the solutions as well.
So I think that’s what we’re seeing with that competitiveness, that trend, that’s probably causing a little bit of that, “Alright, we have to feed the beast as well, too, to make sure that we’re getting those same returns.”
Zager: I’ve been working in finance transformation for about 15 years now. And what started out as very tech-led-oriented programs to meet acquired business needs has shifted. The whole marketplace has really shifted to a lot more of the power being in the business due to cloud platforms and easy-to-use applications.
So with that being said, where I see companies scaling even faster than they did in the past is around leveraging the open footprints that they have. They’re no longer saying, “We’re unique in everything we do. So let’s build out our business processes the way we think it should be done.” Especially in finance, a lot of the finance operation is pretty standard.
That being said, there’s always that unique secret sauce to a company. That’s what makes them a company that people are going to invest in or buy from. But that’s where the focus should be, on the specific components of what makes that company unique.
So I’ve definitely seen, especially by way of finance, that the business is no longer beholden to constraints in IT to “keep the lights on.” Now, the CIO can become a better business partner with the CFO, drive innovation, drive business partnership internally and externally, to Dan’s point, to service their own organization the same way that they service the customer needs on the outside.
Thomas: Let’s stay with finance for a second. So what are some examples of initiatives that you see out there that really speak to that kind of shift that you were just talking about?
Zager: Yeah, so I’ll talk about one in the investment management space. I’ve been working with a client around this lately. So just the whole component of front-office trading systems, etc., to back-office just core finance systems, a lot of the innovation in the past and a lot of where the revenue is generated in the company is from the front office. And due to that, and finance being a catch-all so to speak, I’ve noticed that finance is becoming an enabler for change, especially in the aspect of saying we have all the data. We don’t necessarily create that data, but it all ends up in our area.
Now, instead of just saying, “We’re going to close the books on time, we’re going to process transactions efficiently,” that’s just table stakes nowadays. Now, they’re able to actually glean insights and use technologies to not only provide insights back to the business, but also start predicting other insights and trends that maybe they don’t even recognize as a human, but a technology is telling them, “We’re seeing correlations based on these 200 variables.”
So I think that’s a big change that I didn’t see in the past. It was a lot of front office and what gets inherited in finance. I think finance has now been empowered to help drive some of those changes.
Thomas: And turning to HR challenges, you mentioned the competition for talent. It’s a hugely booming industry, right? Where do you see that kind of innovation on the HR side where people are really doing some interesting things?
Sundt: Some of our most forward-looking clients are truly embracing the concepts of having a somewhat mobile overall employee population, and making sure that their employees really understand that a career can have multiple paths within the organization, that they want to be able to provide them with the opportunities to proceed and try different things. Or if they gain different experiences, let’s say working in the U.S., that maybe there’s an ideal role for them that’s going to be in Brazil that’s going to give them experience then to take an executive leadership role maybe back in the United States.
But that’s hard. It’s hard harnessing all those connections and making sure that people are aware of that. So not only do you need the systems that support it, the processes, but culturally then, you have to be able to encourage managers to help their employees own their careers, that managers have to help empower that, and that overall executive leadership has to instill that culture as well, too.
So that’s really hard, and that’s really forward-leaning. But the companies that do that the best, they’re going to get the best overall return from their workforce.
Thomas: I think some of these things are connected, too. You mentioned agile teams earlier, right? It’s hard to envision that working really well if people can’t go and do those experiences or those tours of duty and learn something new and bring it back.
Sundt: Yeah, the concept of a management land-grab of people, and just controlling this group for years—that paradigm doesn’t work anymore. Talent needs to be able to move fluidly throughout the business to attack the biggest business problems. And they have to both see those opportunities, and those opportunities have to come to them as well.
Thomas: So you each work with two of the critical roles in the C-suite: CFO and CHRO. Do you see opportunities or examples of those two roles working together to address maybe not these specific challenges we’ve been talking about, but to bring their firms forward to where they want to go?
Zager: Yeah, I do see an ever-increasing roundtable of CHROs, CFOs, even CIOs, which I didn’t see as much in the past when it was one office running a project. I think to a lot of what Dan’s points were earlier around talent, we often get very focused on fixing a problem, and what’s the problem at hand? How are those parties going to address the problem?
What I’m seeing ever more consistently in the market is strategically planning what moves we are going to take as an organization to make a splash in the market or open up a new product area. We say all the time every company today is a technology company. And the things that they’re innovating have to be focused once again on the consumer.
But it’s very hard to do that nowadays in a silo. And you need to understand the ramifications of what that’s going to mean from a people perspective within your organization, how we’re going to scale a specific area with a product lead or marketing, from an IT perspective, how they’re going to support it in the ecosystem and harness data. And from a CFO’s perspective, as I said before, how are you going to glean insights not only to say, “This is how we’re controlling costs,” which is a bar-none requirement for a CFO, but also how do you bring the CFO more to the catalyst, the strategist’s role to say, “This is finance’s role in our innovation as a company”?
That requires all those parties talking together. So I think it’s of utmost importance.
Sundt: The shift comes from HR and finance working together in the past, with HR saying, “Okay, finance, I’m just control. I’m just controlling head count,” to the point that it has to be a strategic partnership of working together, looking at all overall business results, tying it back into what are we seeing out in the market. What are our most critical needs? How do we then need to most plan so that we can drive value into the market through our workforce? Where are we seeing the greatest amount of returns when we invest back from a compensation perspective?
So all of those elements really have to be brought together and discussed within the C-suite in order to have the most effective organization.
Thomas: It’s really astonishing when I listen to the two of you talk about it to think how successful not just the financial services industry was, but the overall economy was when things were that siloed traditionally, because I want to put some investments here. Well, guess what, that’s going to take some money. It’s going to take some people. It’s probably going to take some capital. Those silos, talk about flattening that innovation curve. There’s no way you’re going to continue to go where you want to go if you can’t unlock all that value these days.
Sundt: Yeah, I absolutely agree. I think that it certainly was an easier world when you could probably walk down the hall and go talk to Jim and Jodie and the CFO and everyone could get together, you can do that. And somewhat that’s the environment in start-ups.
But when you start to scale, when you start to grow, when you have to report out earnings to the Street, when the CFO is halfway around the world while the CHR is in another someplace around the world, those connections have to be brought together in different ways. And the only way you can most effectively do it is by the processes, the people, and the solutions to tie those things back together.
Thomas: So you both spent a lot of time advising clients, working with them on their own transformation initiatives. So when you look ahead, what are you most excited about say over the next three years, five years? And what’s happening in the world of finance?
Zager: I’m most excited by that exponential change that we’ve been talking about. For some it’s a cautionary tale of what we don’t know now that we’re going to find out that might put us out of business. I feel like it’s the most exciting time in the industry right now. There’s so much innovation. There’s a lot of noise out there. And there’s a lot of hype in the market around certain terms.
But I believe that the confluence of technology and how easy it is to spin up certain solutions and leverage business processes that are more open-source, and the only limitation being the strategy that someone can think of in their mind, and combine it together, I think it’s incredible to think about what companies are going to get spawned out. Who is the next Airbnb? Who’s the next Uber? And when you say three to five years—it’s funny, 20 years ago, that was an eternity.
But today, I think we’ll see two or three huge shifts in the industry even in five years. A simple example, blockchain, which is still I would say coming out of a nascent stage, but I believe that that’s going to revolutionize certain components, especially the financial services industry. And while people are laser-focused on it, I still don’t think they understand how crucial that’s going to be in the marketplace. So I believe it’s a really exciting time. It’s important for those leaders to stay very well educated on the trends.
Sundt: I would say that one of the things, and we talk about this a lot from Deloitte perspective, is what is the future of work? And how is the future of work changing? Because we are going through some rapid paradigm shifts from—we talked a bit about the talent mobility, the gig economy, all the different changes—generational changes with millennials, baby boomers coming out of the workforce as well. So just how labor—how people are working is—just changing massively at this point in time.
So I think all of these concepts that we’ve talked about, which right now, people are dipping their toes different ways, but the concept of having talent mobility, the concept of being able to have career marketplaces, the ownership of career, that will be normal, that will be the standard. It will have to be, or organizations will be left in the dust. So I think that’s going to be the biggest thing: How do we make sure our organizations stay in pace with what will be the future of work, which will be all those elements?
Thomas: All right, so elevator round. You’re in the elevator, you got 30 seconds. You’re in there with a CFO. What’s your top piece of advice?
Zager: My top piece of advice would be, as I said before, to stay very educated, read a lot on the trends. Pick your position in one of them. And focus on an area that instead of solving a problem for once, you think you can pivot the organization strategically and spawn up an agile team. Try to develop something, and dabble with it, and see what comes of it. I think especially for the older generation of CFOs, that’s a big, fundamental shift in controlling the finances and controlling the close. To survive today, they really need to step into that strategy role. So that would be my quick 30 seconds.
Thomas: Experiment and fail fast.
Zager: Fail early, fail early.
Thomas: And on the HR side?
Sundt: Invest in your talent. Figure out ways to best cultivate the talent that you have. There’s a lot of low-hanging fruit out there and easy ways to do that. But start to think about how you can best bring up and manage and develop that talent that you have within your organization, because it’s a lot more expensive to go out into the market to find new talent. And often there’s a lot of hidden gems that are out there that just need the proper programs, the culture, those things around it. So that would be my biggest piece of advice.
Thomas: I feel like we’ve just scratched the surface on this topic. That’s all the time we have for today. I want to thank Dan Sundt and Dave Zager from Deloitte for visiting us on the Workday Podcast. If people are interested to learn more, Deloitte’s got a wealth of research on these topics, so go look it up. I’m Greg Thomas. Thanks for listening to the Workday Podcast. And if you’d like to hear more, please subscribe.