How to build a future-proof distribution model? This was the question with which clients, staff and a host of innovators from across the technology sector grappled, over the two days of BNP Paribas Securities Services’ recent London hackathon
Consider, if you think your business is safe from the sort of sudden disruption that has become the hallmark of technological innovation, the example of EDF. The leading French energy provider has developed a supply model for electricity based on central generation and local distribution.
But has it reckoned with the vision of Elon Musk, CEO of Tesla Motors? The US electric car manufacturer is plunging resources into the development of more efficient batteries for its cars, and earlier this year the firm developed a range for homes and businesses. Musk also has his finger on the pulse of a technology that is developing at an impressive rate: solar panels, which over the last five years have become five times as efficient and are a fifth the price they once were.
Is Musk eying a future where home-located batteries, charged by solar panels, store energy that powers not only two electric cars but meets the rest of the household’s electricity needs as well?
“Musk doesn’t want to kill EDF. But EDF may be killed just by accident,” warned François Bourdoncle, CEO of digital strategist FB&Cie, in his keynote address at the BNP Paribas October hackathon.
The moral – that an existential threat to a firm’s business could come from where it is least expected – provided a suitable starting point for the hackathon, in part because the distribution of financial products is a prime candidate for this type of sudden, wholesale assault.
Funds distribution is challenged by a fast-moving regulatory environment and changing client expectations; it faces big pressures on prices and internal competition; and is a prime target for innovations like blockchain, data visualization and the social web that are shaping the new era of technology.
The landscape will be characterised by co-operation; a new feature in this environment. Increasing pressure on time-to-market, the need to leverage fast-moving technologies and renewed client expectations are all triggers for a fresh approach to management innovation. This is true within BNP Paribas Securities Services, where open innovation has been pushed for some time, while allowing employees to promote and develop their innovative ideas in an entrepreneurial way. The company is also working with clients on early phases of product development and the hackathon is a new step in this process of co-creation.
The meeting created an instant ecosystem made up of BNP Paribas leaders, clients, partners, consultants, start-up veterans and fin-tech innovators, and tasked them with considering how a major disruptive threat could be turned into an opportunity. The challenge was put yourself at the head of today’s internet giants – Google, Amazon, eBay, Apple or Facebook – and build the service that will corner the market for distribution of financial products.
This meant occupying the shoes of the sector’s different stakeholders – from fund managers and custodians, distributors and customers to fintech innovators and the banks that frequently fund them. Tellingly, the solutions of the five separate teams under the banner of each company all shared three important common themes:
Advice would be delivered, at least in part, through peer-to-peer networks, loosening the grip of individual professional advisors. Socialisation of the investment environment is already being pioneered by firms like Etoro, which provides members with trade mirroring (the ability to copy the leading traders in the community automatically).
2. User-centric and online
Tomorrow’s solutions would be born and developed online, where the user experience is at the heart of effective delivery: “I want to be more empowered, I want to feel unique, I want you to save my time and I want to be excited by you,” was how Thierry Grouès and Pierre Borg of EY summarised the exacting expectations of consumers.
The principles of simplicity and ease are shaping a technology-empowered on-boarding process that will dominate future solutions. This means finding smart ways to manage regulatory compliance, an approach pioneered by Nutmeg, the UK’s first online discretionary investment management company. Nutmeg collects all the information it needs through 14 simple questions over its website.
Attendees also believed a new solution could include the electronic uploading of key documents by customers, which could be extended to authentication through voice recognition, e-signatures and biometrics.
3. Intelligent data
Artificial intelligence and machine learning, the engines of the data revolution, would enrich this data wherever the opportunity presented.
Social media readers already have the power to enhance customer suitability analysis and provide peer-generated recommendations of the type pioneered by Amazon. Using technology to generate more personalised advice and customise investment goals has already helped Betterment, the US-based automated investing service, gather USD 1.6 billion of assets under management.
Attendees envisioned a more integrated processing architecture that aggregates data from multiple sources – customers’ social profiles, historical product performance, peer recommendations and purchasing behaviour – and minimises the time customers have to spend on providing the information themselves.
The hackathon has already spawned calls for a forum in which to develop subsequent thinking. Concrete outcomes will vary with attendees’ particular business priorities, but by collecting efforts attendees have helped defend themselves against tomorrow’s assault, wherever, and whomever, it comes from.
Read this article as it appeared in Quintessence magazine (Winter 2016)
"Cooperation - the new way to be competitive"