Getting back to growth

How the latest technologies can help drive growth in Canadas financial services industry

The global economy is bouncing back and financial services businesses in Canada are renewing their focus on growth. One way to do that is by exploring new technologies such as social media, mobile devices, business analytics and cloud computing. These technologies are rapidly gaining momentum in the marketplace, and offer the promise of almost limitless growth. The risk is that companies may get so caught up in the hype that they end up pursuing technology for its own sake, without a clear understanding of what they are trying to accomplish from a business perspective. Three of the top priorities for companies today are customers, talent and cost discipline1. If a new technology does not provide tangible value in one or more of these areas, it may not be worth pursuing. New technologies can help drive both short-term revenue and a sustainable competitive advantage. Heres a look at some of todays hottest technologies, and what they could mean for the financial services industry.

Getting back to growth

Social media Attract new customers and talent if you know how to use it
Financial services institutions are taking an increasingly active role in social media applications such as Facebook, Twitter and blogs. Yet most are still trying to figure out how to use social media to create real business value. Is the purpose to attract new customers? Solicit feedback? Generate new ideas and innovations? Promote the brand? Recruit new talent? The answer is yes; social media can do all of these things and more. But merely participating in social media is not enough. You need to identify clear business objectives and implement formal programs to achieve them. Social media can help you connect and interact with customers and prospects to a degree that simply wasnt possible before. You can find out what people really think about your products, services and brand. These online discussions are already taking place with or without you. But by getting actively involved, you can help shape the discussion and tackle potential problems while there is still time to fix them. The key is to apply a light touch and to put your customers interests on par with your own. Using social media to blatantly promote your companys agenda is likely to do more harm than good. Social media is also an important tool for attracting top talent, particularly for younger generations that are the workforce of the future. Young people view social media the same way the rest of us view telephones or face-to-face conversations as standard tools for communicating and gathering information. Companies with talent programs specifically designed to capitalize on social media generally have greater recruiting success than those that simply dabble. Allowing employees to participate in social media conversations and pull down interesting content can help an organization improve its performance by enabling people to connect in ways that increase their understanding and effectiveness2. Through social media, companies are able to harvest new ideas and innovations from their employees, customers and suppliers. Of course, social media is not without risks. In particular, the technology is still maturing and the behavioural etiquette continues to evolve. Employees who are allowed to use social media must be constantly reminded about appropriate behaviours and levels of information sharing. Otherwise, they could become overly accustomed to the casual nature of social media and might inadvertently say or do things that hurt the company. Companies must find ways to actively manage such risks through appropriate monitoring and control, without stifling the flow of communication that makes social media effective in the first place.

The bottom line Develop formal strategies and programs for using social media to build your brand, attract top talent and drive innovation. Clearly define which social media channels will be targeted, exactly how your company will participate, and who will be responsible for executing and managing social media activities. Your strategies and programs must be flexible enough to adapt to changes, since the social media market is still maturing and no one knows which channels will be most important in the future.

Getting back to growth

Mobile devices Create opportunities for new value-added products and services
Mobile devices such as smartphones and tablets seem to be everywhere nowadays, and their popularity is growing all the time. In fact, in this years edition of Deloittes annual TMT Predictions3, authors Duncan Stewart and Paul Lee predict that in 2011, mobile devices will for the first time account for more than half of all computing devices sold. These devices are especially popular among the young and affluent a market segment with obvious appeal for the financial services industry. To woo these customers, financial services firms are developing mobile applications that enable people to view account information and conduct basic transactions. However, many of these applications are simply scaled down, mobile versions of the firms websites. This thin veneer does not fully capitalize on the potential of mobile devices. To achieve a sustainable competitive advantage, companies must create new business models, applications and infrastructures, geared towards mobile devices. Location-based applications that take advantage of integrated GPS capabilities and emerging technologies such as augmented reality represent some of the most promising opportunities. In one scenario, a customer could use a smartphone application to take a picture of a house she is interested in buying. The application would then use image recognition and location services to identify the appropriate MLS listing and provide additional details about the house, including images and video of the interior. The application could also provide current mortgage rates and allow the customer to apply for pre-approval based on the listing price. These kinds of technology innovations would enable financial institutions to develop deeper relationships with customers and improve the overall customer experience. The rise of tablet computers is another important trend particularly within the enterprise. Deloitte predicts that 50 million tablets will be sold in 2011, with more than 25 percent purchased for use within the enterprise4. In financial services, tablets are increasingly being used in customer service as a way to access internal banking applications from anywhere within the branch, and by mobile workers such as mortgage specialists. With the right applications, mobile devices could have an even greater impact on financial services than ATMs had on banking dramatically streamlining the industrys cost structure, and creating opportunities for new value-added products and services to drive the next wave of growth. In fact, we may soon see increased convergence of mobile operators and financial services firms as the content and touch points on mobile devices become a primary channel for interacting with clients.

The bottom line Review your current mobile strategies and development efforts to ensure all of the pieces fit together. Look at what other industries are doing to harness the power of mobile devices. This can help inspire new ideas and game-changing innovations. Offering an on-the-go version of your website is a good start, but its not enough.

Getting back to growth

Business analytics Turn business data into valuable insight

The volume of business data is exploding thanks to technical innovations such as smartphones, cheap mass storage and the internet. Todays consumers are constantly generating data, whether they are surfing the web, interacting with friends on Facebook, or simply walking around with a smartphone. Of course, all of this raw data isnt very useful on its own. In fact, a larger haystack often just makes it harder to find the needles of insight. Business analytics can help financial services firms harness the power of data to drive growth and competitive advantage. However, many business leaders find themselves struggling to understand what the term business analytics really means. It is a multi-faceted concept that involves the extensive use of data, statistical and quantitative analysis, explanatory and predictive models, and fact-based management to drive decisions and actions5. The methods and tools associated with business analytics range from commonplace to cutting-edge. Many institutions already use analytics to identify early signs of credit card fraud, or to customize their web banner ads in response to a customers particular needs. A growing number of firms are also taking advantage of emerging predictive capabilities, such as the ability to anticipate customer needs based on social media activity. For example, if a Facebook user changes their relationship status or announces a wedding engagement on the site, financial institutions with the ability to analyze unstructured social media data could get a big jump on slower competitors who are stuck waiting for an official change of legal status. Network analysis can help a company use individuals relationships and connections to predict how influential they are, resulting in improved targeting for viral and word-of-mouth marketing and advertising. Advancements in data visualization techniques, such as self-organizing maps and animated time series, make it easier to quickly interpret data at a glance to identify actionable insight. Business analytics tends to be more of a business challenge than an IT challenge. Often, figuring out what questions to ask is the hardest part, while implementing the technology to answer those questions is relatively easy. Privacy regulations are another critical business challenge. Finding a safe path through this ever-changing minefield requires deep expertise, as well as constant monitoring of privacy issues and requirements. There is more to business analytics than software, data and models. Successful analytics projects start with business strategy, and then deliver models and analytic insights that enable companies to refine their strategies and improve their operational decision-making.

The bottom line Business analytics can be a powerful growth engine; however, technology tools alone are not sufficient to harness the power of information. To get started, find people with the deep business expertise to know which questions to ask. Make sure your data is accurate, reliable and consistent across the enterprise. Deploy analytic tools that can not only handle structured data from traditional files and databases, but also unstructured data from social media and the web. Unstructured data is where some of the biggest opportunities are likely to be found.

Getting back to growth

Cloud computing Provide efficiencies and competitive advantage under the right circumstances
Cloud computing is one of todays hottest technology trends, and for good reason. Under the right circumstances, it is a fundamentally more efficient way to deliver and manage IT services, offering key benefits such as lower costs, reduced capital investment, faster start-up and improved business flexibility. In financial services, cloud computing is already gaining popularity in the form of Software as a Service (SaaS) for non-core solution areas such as collaboration, CRM and HR. Broader adoption is currently being hindered by a number of barriers. However, none of these obstacles are insurmountable. Large financial services organizations are starting to expand their use of cloud computing by experimenting with Infrastructure as a Service (IaaS) solutions for development and test environments for noncritical applications. One of the main barriers to cloud adoption in financial services is the issue of privacy and security. With pure cloud computing, companies dont have direct control over their applications and data. In fact, they might not even know where their applications and data are physically located. Everything simply exists in the cloud and is accessed through the network. Compliance is another critical issue. Regulations often require specific controls, processes and audits for handling financial and personal data possibly dictating where data is stored, and requiring financial institutions to maintain direct, first-hand control. In many cases, workarounds have been developed for these barriers. Private clouds enable a company to take advantage of cloud computing technology, but are implemented entirely within the companys own facilities and IT environment in order to improve security and control. Although cloud computing in financial services remains in its infancy, companies cant afford to stand still. If the technology takes off, it could happen very quickly and be highly disruptive. There are two phases of impact. In the first phase, cloud computing helps companies do many of the same tasks theyve always done just better, faster and cheaper. In the second phase, cloud computing reshapes the competitive landscape by enabling companies to do things that simply werent possible before6. To avoid getting caught unprepared, financial institutions should look for opportunities to build their cloud computing capabilities and experience in areas that are not directly affected by the current barriers. Rather than focusing on core banking systems, which are mission-critical and highly sensitive, banks could initially look at areas where cloud-based solutions are already popular and proven, such as customer relationship management, email, and enterprise content management. Financial institutions may also consider the future impact of cloud computing when they make major business and IT decisions. For example, when selecting a new technology platform, consider choosing a cloud-ready platform even if current applications are not cloud-based.

The bottom line Given the unique barriers to cloud computing in financial services, it would probably be a mistake to jump in with both feet. But that doesnt mean you should stand by and do nothing. By carefully picking your spots, you can start capturing some of the benefits of cloud computing while building valuable experience and capabilities that could give you a competitive edge if the technology takes off.

Getting back to growth

As the financial services sector shifts back into growth mode, you must find ways to capitalize on new and emerging technologies. But you need to be selective. Scrutinize every opportunity to ensure it can deliver real value for your business. Implementing the latest technology just because everyone else is doing it is ultimately a losing strategy. Look for ways to create a sustainable competitive advantage, rather than settle for me too solutions that only focus on short-term revenue.

1 Winning in a Flat Market, What IT organizations can do to help their companies thrive in the months to come, Deloitte, 2009 2 The Power of Pull, How small moves, smartly made, can set big things in motion, John Hagel III, John Seely Brown and Lang Davison, Basic Books, April 13 2010 3 TMT Predictions 2011, Duncan Stewart and Paul Lee, Deloitte, 2011 4 TMT Predictions 2011, Duncan Stewart and Paul Lee, Deloitte, 2011 5 Competing on Analytics: The new science of winning, Thomas H. Davenport and Jeanne G. Harris, Harvard Business School Press; 1 edition (March 6, 2007) 6 Cloud Revolution, Cloud services from technology evolution to business revolution, Deloitte, 2010

Getting back to growth

www.deloitte.ca
Deloitte, one of Canadas leading professional services firms, provides audit, tax, consulting, and financial advisory services through more than 7,600 people in 57 offices. Deloitte operates in Qubec as Samson Blair/ Deloitte & Touche s.e.n.c.r.l. Deloitte & Touche LLP, an Ontario Limited Liability Partnership, is the Canadian member firm of Deloitte Touche Tohmatsu Limited. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. Deloitte & Touche LLP and affiliated entities. Designed and produced by National Design Studio, Canada 11-2307