The banking and insurance industries around the world aren't keeping up with other sectors in terms of embracing digital changes and there's a lack of leadership, according to the consultancy.

Banks and other financial organisations lag behind other sectors when it comes to digitally transforming how they operate, with a lack of skills and leadership evident, a report by global consultancy Capgemini said.

The report examines opinions about digital and leadership abilities among bank and insurance executives, comparing them with an equivalent study from 2012. More than 360 executives were surveyed from 213 companies whose combined 2017 revenue represents about $1.67 trillion.

From where matters stood in 2012, a smaller proportion of financial services executives now said that their organisations had the necessary digital capabilities to succeed - with the confident few falling from 41 per cent to 37 per cent. 

Although more executives felt that they had the required digital capabilities in customer experience (40 per cent compared with 35 per cent), confidence in operations fell sharply. Only 33 per cent of executives said that they had the necessary operations capabilities, from 46 per cent from six years ago.

“This research shows that a reality check has taken place across the financial services industry, as incumbents now understand the true extent of the digital transformation challenge,” Anirban Bose, chief executive off Capgemini’s Financial Services and member, said. 

The private banking and wealth management industry is being affected by forces such as robo-advisors, artificial intelligence-driven asset allocation, use of Big Data analytics, and the rollout of mobile access channels. Often a tradition-bound sector and affected by a rise in compliance costs since the 2008 financial crisis, wealth management’s embrace of new technology has sometimes fallen behind that of the retail banking sector, as far as this publication can judge. (To view recent research by the publisher of this website on such matters, click here.)

The Capgemini report also identified a lack of leadership in the tech issues, with only 41 per cent of executives saying that their organisations have the right capabilities, down from 51 per cent in 2012. In some specific areas, confidence in leadership fell significantly, including governance (45 per cent to 32 per cent), engagement (54 per cent to 33 per cent) and IT-business relationships (63 per cent to 35 per cent).

Who’s the master?
The report also found that 31 per cent of banks and 27 per cent of insurers are deemed to be “digital masters”, while 50 per cent and 56 per cent respectively are classified as “beginners”.

The industry appears to lack vision around digital change, the report said. Some 34 per cent of banking and 24 per cent of insurance respondents agreed with the statement that “our digital transformation vision crosses internal organisational units”, with just 40 per cent and 26 per cent respectively saying that “there is a high-level roadmap for digital transformation”.

Banking transformation has taken centre stage, while insurance places focus on automation

Lighter note
The banking sector does, however, outpace non-financial services sectors on capabilities such as customer experience, workforce enablement and technology and business alignment. Fifty-six per cent of the banking firms said they use analytics for more effective target marketing (compared with 34 per cent in insurance and 44 per cent in the non-financial services sector). 

More than half (53 per cent) of banking organisations also said that upskilling and reskilling their digital skills is a top priority for them (32 per cent for insurance and 44 per cent for the non-financial services sector).

Survey respondents frowned on the sector’s prowess for bringing out new business models. Only 33 per cent of insurance and 39 per cent of banking organisations have launched new businesses based on digital technologies (41 per cent in the non-financial services sector). 

While banking is in line with the non-financial services average, only around a third (34 per cent) of banks had a digital vision that crossed organisational units, the study found.