Global FS leaders surveyed in PwC's 2016 Global CEO survey
Damian Neylin examines the key concerns of global banking, insurance and asset management CEOs as the rise of new technologies, non traditional competitors and changing regulatory requirements begin to change the global financial services landscape.
Due to technological, political, tax and regulatory developments, the world of financial services can expect a period of turbulence in the future. However, these changes bring lots of opportunities, according to PwC's 2016 recently issued Global CEO survey. Let’s look at the key highlights by sector:
Damian Neylin
Damian Neylin

• The majority of global banking & capital market leaders plan significant changes in the way they define and manage risk in response to customer and stakeholder expectations. The scope of risk management is broadening to adapt to fundamental changes in markets, business models and transactions. The key differentiator is being able to see risk coming, contain it early and adapt quickly. They see over-regulation (87%), geopolitical uncertainty (81%) and exchange rate volatility (76%) as the greatest barriers to growth. The combination of higher capital charges, liquidity demands and compliance costs is forcing many to abandon what had once been profitable mainstays in their business.

Tax is also high on the agenda with over 69% of global leaders saying increasing tax burdens are a concern. This is not surprising given the global corporate tax debate and the high-profile initiatives on corporate tax reform from the OECD and the EU over the past year.

More than 66% plan further cost cutting initiatives over the next twelve months. Restructuring across the market will continue with more than one in ten indicating they plan to sell a majority interest in a business or exit a significant market over the next 12 months.

Technology is transforming customer expectations, lowering barriers to market entry and opening up growing competition from FinTech entrants. Almost every banking & capital market CEO believes that this is the trend most likely to transform customer, regulator and other key stakeholder expectations over the next five years. New technology development should help those banks who embrace the technology to foster a more engaged relationship with customers. It will also cause radical changes to operational processes. Some banks are already acting fast on this while others, seem barely to have started. Executing on this successfully should be front of mind for all banking CEOs.

• Technology is also top of mind for global insurance CEOs. Nearly three-quarters are making significant changes to the way they use technology to assess and meet customer expectations. An overwhelming majority cite data and analytics and relationship management systems as providing the greatest potential contribution to improving engagement with customers. Technology and innovation will be critical in delivering the outcomes stakeholders want at a cost which customers and investors are willing to pay. The insurers developing pre-emptive protection against cyber attacks, annual premiums of which PwC estimates could reach $7.5 billion by the end of the decade, or safer road usage through sensor-based pay-as-you-drive insurance, show that it is possible to deliver more for less.

A new generation of analytics is enabling insurers to anticipate what will happen (predictive analytics) and also to shape outcomes such as reduced accident rates or improved health and well-being (prescriptive analytics). This more proactive and preventative approach marks a change in purpose for insurers, which will deliver considerable social as well as financial value.

Many of these new competitive benchmarks are also being set by FinTech entrants, which are constantly probing for gaps and weak points in this marketplace, applying digital insights to sharpen customer understanding, and utilising cost-efficient digital distribution to undercut incumbent competitors.

• Almost all global asset management CEOs (92%) are responding to changing stakeholder expectations by looking at how they define and manage risks. In the past, the main focus was on investment risk. Now there is a much more holistic review of all risks.

There is a revolution underway within marketing departments for asset managers. A large majority (89%) say that changes in stakeholders’ expectations mean they are reviewing how they manage brand, marketing and communications. Leading asset managers around the world are refocusing the brand on investor outcomes while reorienting communication towards digital and social media. Digital content marketing is beginning to have concrete results for the firms pioneering this.

Well over three-quarters (85%) of those surveyed are also examining how they use technology to improve the stakeholder experience. Indeed, asset managers have an opportunity to learn from e-commerce firms that have harnessed ‘big data’ so successfully.

This is a time of great opportunities for growth, yet asset managers need to become more innovative, leverage technology, manage a wider range of risks and use digital communication intelligently if they are to remain competitive. In ten years’ time the sector is likely to be far bigger, but asset management companies will look very different from today.

All of the above reflect global FS C-Suite thinking and will no doubt resonate with the local marketplace, either through domestic players revisiting their business models or through changes cascading within the international FS groups who operate out of Ireland.
Damian Neylin is partner and Ireland FS Leader at PwC.
This article appeared in the April 2016 edition.