Fintech is more than just a buzzword. Fintech represents the innovation in services and technology that will disrupt business models, business processes and software applications in the coming years, in nearly every financial services business globally. Examples abound in digital strategy and transformation, blockchain and distributed ledgers, and more. But where do industry utilities fit into this exciting new world of innovation?
Utilities are another form of innovation that take the operations and technology processing that is replicated over and over again in the industry and consolidate it into a single, standardized operating model. The goal of utilities is to shift the responsibility for maintaining and investing in non-differentiating processes and technology to vendors, so seeing the words “utility” and “innovation” in the same sentence may seem like a contradiction in terms, but I beg to differ.
Utilities are incentivized to make further investments in technology automation to achieve the single, standardized operating model and deliver it with more efficiency, control and scalability than is possible with today’s operations and technology environments. Utilities also create economies of scale for implementing regulatory changes, market changes and other industry best practices which can all be implemented once, for all clients. By consolidating and standardizing around a single operating model, the challenge of collaborating across industry stakeholders can be also mitigated, creating a path for better and more comprehensive market-wide solutions.
In the years ahead, the capital markets industry will continue to face significant cost challenges with increasing capital pressures for supporting client business, constrained revenue growth because of low interest rates, the ongoing cost of regulatory change, and even market structure evolution because of Brexit. The innovation that utilities deliver will be an important solution to addressing these challenges for years to come.
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