With the digital domain redefining the financial services industry, several emerging technologies promise firms more agility and more profits.
But fulfilling that promise will take experimentation, execution, and cultural change. And it will take quicker corporate metabolism that two emerging technologies - service-oriented architecture and Web services - can promote.
Service-oriented architecture is a blueprint for added flexibility. Whether because of regulatory compliance and transparency driven by Sarbanes-Oxley or the need to provide straight-through processing, financial companies will have to respond to expectations in real time or nearly real time, and SOA will allow them to do so.
Web services are pieces of business functionality that can be shared by homogenous or heterogeneous systems. Examples include mortgage application workflow, annuity or mutual fund yield calculations, and the automatic flow of tax deductions or other external information into the firm's operational processes. Web services are limited only by human imagination rather than by any system constraints.
Financial firms cannot afford to acquire or keep unprofitable customers. Another pair of emerging technologies - business rules and predictive analytics - will help firms get the most out of customer information and weed out bad customers in the process.
Business rules are the expressions of logic firms use to implement a given transaction, such as accepting or rejecting a client or paying an insurance claim. IDC recently characterized business rules management systems as "discrete systems that define, manage, and execute conditional logic in concert with other information technology-driven processes."
Predictive analytics, which financial service firms are using to project customer lifetime value, are designed to determine the outcome of an event. IDC estimates that predictive analytics will generate nearly $3 billion of revenue in 2008.
Technologies that can reduce communication costs are available now or in testing. Those that should be considered include:
Voice-over Internet Protocol. Transmitting the digitized representation of the human voice enables unified messaging and a fuller set of capabilities from conferencing to calendaring than is now possible using analog capabilities.
Natural language. Voice recognition combined with the ability to understand natural language will free customers from the seemingly ceaseless nested menus of today's voice-response systems. On the flip side, financial firms can develop virtual agents that can guide customer requests from checking account balances to changing addresses without human intervention.
Really simple syndication. Financial services firms should use really simple syndication as a mechanism to release notices of changes in operations, company guidelines, or compliance requirements to field personnel and employees scattered around the globe.
Financial services firms need to ask three questions about such new technology. Will it:
- Make processes more efficient?
- Make it easier for customers, prospects, staff, or other stakeholders to do business with the firm?
- And most important, will it change the rules of the game? That is, will it significantly alter the market or competitive dynamics?
Cost savings and process improvements are important. But financial services firms must take advantage of technology that can effect this dynamic change if they are to remain profitable rather than merely remain.
