Is ICT spending slowing down?
A recent survey showed that big banks are holding back on new technology spending.
This news is indeed not surprising since the banks are going through difficult times. On one side, there has been a substantial reduction in the earnings due to the reduction of the interest rates. On the other side, for the crisis of the economy the number of delinquent accounts has increased.
It is a bad news for the Information and Communication Technology firms. It is indeed a bad news for the economy as well since traditionally financial services and banks have been the biggest spenders in ICT technologies.
It is also bad news for the financial services themselves, since in difficult times, innovation is important. More and more, new solutions require the support of ICT, especially in sectors like the financial services where the products are essentially information.
In this situation, it is interesting to try to understand how new technologies can help in improving the situation.
Cloud computing is a very interesting new solution. But cloud computing and outsourcing will not help in increasing ICT spending. Actually, they could contribute to reduce ICT spending even further thanks to the economics inherent in those solutions.
In the case of banks, certainly it should be very interesting to exploit that treasure throve of the data they have available on their customers or which are available in the web world, such as in the social networks. More and more solutions are indeed available to manage Big Data but also to exploit analytical tools which can help extract useful information from a large amount of data. Big data analytics is the process of examining large data sets containing a variety of data types – the so-called big data — to uncover hidden patterns, unknown correlations, market trends, customer preferences and other useful business information. The analytical findings can lead to a more effective marketing, new revenue opportunities, better customer service, improved operational efficiency, competitive advantages over rival organizations and other business benefits. Big data Analytics could help in improving services to the customers and to achieve their increased satisfaction or even their delight.
Mobile devices are another opportunity to help in reaching unbanked or underbanked sectors of the economy. Mobility payments, like Mpesa in Kenya, have demonstrated that mobile communication can help in providing to large but covert sectors of the population new and advanced solutions, especially in the payments area.
Another sector which should, and we expect will, increase spending in ICT is Insurance. Both Commercial but especially Retail insurance could greatly benefit from more investments in ICT.
Here too mobility can help, but even more the Internet of Things (IoT). IoT is a novel paradigm that is rapidly gaining ground in the scenario of Internet communications. The basic idea of this concept is the pervasive presence of a variety of objects (the Things), such as Radio-Frequency IDentification (RFID) tags, sensors, actuators, mobile phones, and so on, that through unique addressing schemes, are able to interact with each other and cooperate with their neighbors to reach common goals. IoT could help in different sectors. In the case of motor insurance it can help in allowing pay per use insurance policies. IoT can also help in spotting good customers from bad customers analyzing their use of the cars. IoT, combined with wearable devices, such as digital watches, digital bracelets or similar, can also help in monitoring the health of the individuals and their life style. Once again, the insurance policies can be discounted for an healthy behavior.
The future of financial services is what I call mass personal financial services. Until now there have been excellent private banking for few wealthy individuals and personalized insurance for few individuals and large corporations. The new ICT solutions can help in personalizing more and more the financial services, be them banking or insurance, in what I call mass personal financial services.
Incumbent financial services institutions should follow these innovative paths. If they will not follow them new Fintech start-ups will put even more in dire straits old and conservative financial services institutions.