Man on the Moon

Two steps in the future of banking and insurance Operations

For several years now, I have had the habit of attending seminars and conferences that deal with future technological and operational developments in the financial sector. I do it because during my career I have verified many times the repetition of a pattern that I now consider consolidated; what happens within two years in the banking sector occurs roughly within four in the insurance sector, and sixth in the insurance sector for large companies. Some of the most successful innovations that I have managed derive from this awareness, and therefore from the possibility of anticipating - adapting them to the needs of the companies in which I operate - the macro-trends in the sector. Generali Global Corporate & Commercial, reasoning in this way, is in fact setting its relationship strategy with Clients and Brokers accordingly. Joking a little, but not too much, I tell my interlocutors in these events, surprised to see a Manager of Corporate Insurance in these contexts, that this is my "annual walk on the Moon", the opportunity to take a peek into the future . And it is with this spirit that this year too I gladly accepted the invitation of Finovate Europe to participate as a speaker at its annual conference, held in Berlin from 11 to 13 February.

As usual, the organization was excellent, and represented an example of innovation in a very stable and mature sector such as that of international conferences. There was a way to listen to the Keynotes of many exponents of the sector, but also to discuss specific sessions with Panel of experts (including myself), listen to the proposals of the main start-ups in the sector (in presentations of the mandatory duration 7 minutes), and finally to organize, through the conference app, the Business speed-date meetings with interlocutors who are themselves participants in the Conference. In short, a very modern way to make everyone's participation effective and useful.

Coming to the contents, I was very interested in some issues in particular, which I think capture the spirit of the moment well and must also be assimilated by those like me who work in decision-making positions within the large organizations of the sector. Here, therefore, listed below in the form of a somewhat provocative handbook, a non-exhaustive but reasoned selection of recommendations to be observed before making choices on the operational future of your company, or area:

1.      Remember that your margin is a goal ... for others! Jeff Bezos says it bluntly, and you should listen to it. The goal of large platforms like Amazon is to compromise consolidated businesses by reducing their operating margins beyond the critical threshold. Increasing efficiency lowers costs, thus forcing competitors to do the same. If they do not succeed, or only partially succeed, they begin to reduce profit margins, and the consequences of this game can only be harmful. This was the case for the commerce sector, it promises to be the same for banks too, and insurance is not excluded. It is the definitive example of how the efficiency of Operations can guarantee, or compromise, Business results. However, the extremely aggressive claim should not be taken literally. The Bezos company or other similar companies will not necessarily attack other sector sectors by entering it; much more reasonably, and subtly, they will develop synergies with Banks and Insurances by developing platforms for them that are able to reduce operating costs, acquiring a huge competitive advantage in mature and competition-oriented sectors on price leverage. I have seen examples of banks that already now think about peer-to-peer exchange logics for small amounts between private and commercial accounts. In practice, the purchase of bread takes place simply by bringing your phone closer to the baker's POS, without intermediation costs, using a blockchain-type technology with no transaction costs for the user. Third parties develop the platform. And there is no defence to this approach for any traditional Operation, historically resistant to spontaneously deconsolidate its operational paradigms to begin building new ones. In addition, be careful, the "cosmetic" interventions to correct the existing help, but do not take note that a technologically structure remained in the 90s is destined to constantly depress profit, and in the medium term to expose the entire production chain to the risk of collapse, it means denying the evidence. Better to start now to think about your operating model to tend, and to start making it by choosing the best travel companions.

2.      If you want to protect your Eden, then change it! There are no market niches that are protected from the destructive - or constructive - effects of new technologies. The Corporate Insurance in which I operate is not exempt. Take for example the exponential increase in Compliance and Audit requirements that has occurred in the last 5 years, and that it is not difficult to predict an increase also for the next five. It is evident that the current structures are not equipped to manage manually the operational load necessary to comply with the requirements (controls, production of material and evidence, reporting, access to databases by verifiers). The opposition to verifiers based on "we are different" due to the specificity of the Corporate business is likely to prove counterproductive. An intelligent attitude, on the other hand, is that of those who - his Eden - prefer to modify it on their own initiative, for example by recognizing the reasons for the verifications and starting to introduce Artificial Intelligence and Robotic Automation to prepare in advance all the materials necessary for any type verification, and proposing them in advance and proactively to the various interlocutors. This is what I have seen done by some very interesting start-ups, one of which, for example, is able to read all the policy documents issued by an Insurance Company by extracting sensitive information for accounting purposes (and thus allowing subsequent checks on the quality of the data in the portfolio) with an error rate of less than 5%.

3.      Platforms are a game for adults, if you are a child do not play it. 69% of the traffic generated on the Internet is managed by six platforms: Apple, Amazon, Google, Facebook, Alibaba, and Tencent. Competing with them is impossible, and generating a cost-benefit ratio for a new platform is an irrational goal, especially for institutions that by nature - like banking and insurance companies - do something else. It is useless to engage in developments that will soon be made obsolete, better to find partnerships with reliable interlocutors able to guarantee that "adherence to reality" that allows programming over time. Much better a well-studied and long-lasting partnership than projects developed at home with limited resources. It is a very clear and well-received message, for example, from a German bank that is starting to use an external platform, consolidated and integrated into its home banking, to offer its customers the following service: the customer accesses the current account through the app, and inside it can request real-time financing as well as order the shopping at prices agreed with a large distribution chain. In both cases, the operation generates a cash-back, which is automatically transferred to the charity chosen by the customer himself, with automatic production of the related tax document to be deducted. Unthinkable for a bank that develops platforms independently, feasible by integrating existing solutions on the market.

4.      If you do not want someone to steal your precious picture, do not buy it. The speed with which new technologies are changing the world is progressively increasing, and being able to manage it represents an imperative that competitive companies cannot avoid. "The world will never be as slow as it is today," some speakers provocatively recite. However, this does not mean chasing any type of evolution trying to insert it as quickly as possible into your business model. On the other hand, it means knowing how to watch all the trains leaving the large innovation station, understand which train is right for us, and get on it as quickly as possible. A good example of this I have seen appreciating the responsiveness of some lenders in relation to the new recognition dynamics. Banks and insurance companies have become accustomed to defending themselves in an environment where the threat consists in acquiring customers' access codes to internet banking. Billionaire investments are destined every year for this war in which the threshold of success, on both sides, moves further every day. But the technology is already ahead, and is working on a different goal, the suppression of passwords and their replacement with a combination of parametric and physical data. Advanced biometrics, immediate effect thermoregulations (some applications are already being seen with the temperature meters at the airport), within 5 years it will probably no longer be necessary to memorize your passwords, because they simply will no longer exist. It will be enough to "be yourself" to access your banking and financial transactions in a safe and secure way. If you buy a valuable painting and keep it at home, you can be sure that someone will be smart enough to take it away from you. But if you don't have it at home, if you don't have a password, it will be difficult or useless to attack you.

(To be continued)