Innovation is not a new concept but embracing it rapidly and adapting to the disruption it brings is going to be key in 2019. Those that fail to innovate, and in particular quickly embrace technological innovations as part of their core offerings, risk being left behind in the race to triumph in the financial markets.

As we look back on 2018, the year was pretty much as Brickendon expected. High aspirations of innovation were hindered by resources being channeled into regulations such as MiFID and GDPR, as well as large investment decisions being delayed by the uncertainty surrounding the outcome of the Brexit debate. Digitalisation, data analytics and increased automation dominated, but failed to reach their climax.  

“While the financial markets managed to shake off the effect of the credit crunch and the following regulatory curfew on resources, they have not been able to shift their investment to innovations that create value for clients and make a major difference in their businesses,” says Brickendon Director and Strategy Specialist Cagri Onur. 

Christopher Burke, Brickendon’s CEO, agrees. “Brickendon has always been at the forefront of organisational change,” he says. “Looking forward the focus is on digitalisation and technological innovation rather than the structure of the business.

“At Brickendon we have been working hard to make a difference to our clients’ lives, using the latest technology and development processes to create innovative solutions to their complex business problems. Much of the delayed investment in 2018 will need to be made at a faster pace in the year ahead. 

“Firms face changing political landscapes on both sides of the Atlantic and need to fend off fintech challengers who are starting to make inroads into our clients’ core business areas. As a result, firms will need to refine their strategy and leverage the latest technologies if they are going to survive in the decade ahead.”

 

Artificial Intelligence and machine learning

With a focus on innovation for business growth rather than just for cost cutting, Artificial Intelligence (AI) and machine learning are likely to be important topics in 2019. Those who embrace these concepts are more likely to be successful in the transition from just surviving, to thriving in the business world of the future. 

“AI and machine learning will be a game changer in 2019,” says Burke, adding that the quality of available data will need to be significantly improved before either can make their full impact. The impact of data regulation could have a significant influence on the effectiveness of machine learning, but leveraged properly it will provide significant revenue and cost-cutting opportunities and a more personalised and superior service for customers. Effective usage of machine learning will also enable financial services companies to free up some of their resources and channel them into other areas.

Operationally, IT spending and cost optimisation is expected to be the main focus to empower technology. 

This should help firms move out of legacy platforms, which in many cases are hindering growth, says Hazar Sbinati, a Brickendon director and architecture specialist. Geoff Cooper, another director who specialises in technology, agrees, adding that there is also a trend for businesses to address technical debt that has become too expensive to maintain and is negatively impacting businesses’ ability to deliver software faster and more securely.

 

Data

Data will continue to play an important role in 2019, though like in other areas, the focus is expected to shift to innovation. The holy grail is no longer about predictive or prescriptive analytics. Businesses need to go one step further to decode the black box of algorithms and provide an explanation to the user and give context around predictions.

“Explainability will become a key feature in the data world,” says Evangelos Tzimopoulos, a senior manager and data analytics expert at Brickendon. “This is already happening at the smaller start-ups, where innovation really happens.”

In addition, businesses that focus on developing data as a business unit will also find themselves ahead of the competition, according to Tzimopoulos. Along with technology, algorithms and architecture, the key going forward will be for organisations to focus on actions and solutions that can be rolled out into production. In the areas of data science and big data there have been a lot of proof-of-concepts (POCs) and siloed implementations, which now need to be turned into scalable solutions in the production environment. As such, developing a mature software house capability for their data business will be paramount in delivering the business vision.

Financial regulation

Financial regulation has in a sense become excessive over the past few years, with the majority of it emerging as a knee-jerk reaction to unexpected financial issues, errors and misconduct. Having said that, there are still areas, products and players, where regulators are having an impact. Asset managers who managed to escape the attention of the regulators for many years are now seeing the impact on their businesses.

On the one hand, we expect the impact of regulators on the financial services sector to decrease in 2019, with the regulatory agenda taking on a more business-as-usual form and focusing on conduct. On the other hand, regulators are also expected to take a more pro-active approach and apply their experiences to some of the as-of-yet relatively untouched areas of business. Reducing the focus on regulation will also open up new opportunities for business, says Brickendon Executive Director and Regulatory Data Specialist Harpreet Singh.

“As the number of new regulations decreases, the agility to migrate and allocate resources to growth areas will be equivalent to first mover advantage,” he says. “It is the institutions that manage to adapt innovative technologies as part of their core offerings that will set themselves apart from their peers.” 

 

Brexit

A peek into the crystal ball for 2019 cannot be complete without a nod to Brexit. While progress appears to be being made in the overall debate, Brexit will continue to dominate the agendas and minds of businesses on all sides. It will, without doubt, evolve significantly in 2019, with clarification on today’s unknowns providing certainty in some areas and new mysteries in others, says Onur.

The biggest risk to any business is uncertainty and the longer the process takes, the more likely firms are to look for jurisdictions where they can make long-term decisions with confidence. All businesses, but especially those in financial services, should be prepared not only for multiple scenarios and ongoing change, but also to survive any potential crisis caused by major uncertainties which come out of the finalisation of the Brexit deal. 

Future workforce

The expected increase in automation will reduce the need for as many repetitive jobs, shifting the focus to the workforce’s ability to innovate or disrupt. “We will see more automation through machine learning and robotics, changing the need in the workforce from repetitive and predictable tasks to more strategic and value-adding roles,” says Onur.

“This will not necessarily lead to a significant reduction in the workforce as the increased ability via AI and Robotic Process Automation (RPA) will also proportionally increase the expectations from customers, regulators and agents.” The partnership between financial services and technology firms is expected to become closer, but also more complicated, with each side trying to capture market share from the other. This will lead to more interchange in the workforces between the two.

 

Major shocks

To conclude, the biggest unknown in 2019 is Brexit and its outcome is impossible to predict. Excluding this elephant in the room, 2019 is likely to see a continuation of momentum in some of the areas that have come under the spotlight in 2018. Digitalisation, data analytics and machine learning will continue to be hot topics. The focus on regulation and compliance will continue to taper away and be replaced by the need to embrace technological innovaton quickly and efficiently. How things will play out precisely remains to be seen. But there is no doubt that those who want to win need to embrace the innovations on offer if they are to succeed and gain first mover advantage in what is becoming an increasingly tight and competitive marketplace.

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