Category: Fintech

Digitalization is set to transform most aspects of the financial industry. Far from resisting it, banks should be embracing these fundamental changes.

There is no doubt that, thanks to advances in digital technologies, the financial industry is entering a period of radical change. Transaction and settlement, savings and lending, capital raising, investment management, market provisioning: it is difficult to find any area of banking that is not being disrupted by the current wave of digitalization. With the rise of virtual banks, crowdfunding, alternative payment platforms, robo-advisors and the like, digitalization is also spawning significant new competition for incumbent institutions.

In light of these developments, some have been predicting the demise of traditional banks. This is overstating the case. Digital disruption is by no means only a threat. Quite the contrary, it is spurring industry innovation in a number of very positive ways. It is also encouraging collaboration among industry participants, driving cultural change.

Today’s banks are reaching outside their walls, working with startups, joining innovation platforms and collaborating on new ideas in ways that would have been unfathomable a decade ago. They are also collaborating more internally, for example by using social media-like tools to promote direct communication and the sharing of ideas among staff.

UBS and startups – learning from each other

Inspired by the “permission-to-fail” culture found in startups, banks are becoming much more open to experimentation as well. This is certainly the case at UBS. We have put a strong innovation process in place, one which generates lots of ideas internally and has clear gates to let in good ideas from the outside. We also work closely with the technology community in our innovation labs in Zurich, London and Singapore.

By taking our people out of the bank and immersing them in a lab environment, we give them space to think creatively. We also give them the freedom to make mistakes. In this way we can generate – and test – a far greater number of interesting ideas than would otherwise be the case. In London we have opened our lab in a FinTech accelerator, sharing space with some 150 startups engaged in researching and developing new products and services for the financial industry. This lets our experts be part of the larger conversation, staying on top of developments and helping to shape our industry’s future.

Far from being enemies, FinTechs are very much part of our conscious endeavor to embrace change. While some are looking to compete directly, in our experience the majority of FinTechs are more interested in collaborating with banks. After all, there is more to banking than just bits and bytes. Banks are a storehouse of financial and market expertise of the kind most FinTechs lack. Banking also remains very much a relationship business, and here too FinTechs have much to learn.

For these and other reasons, we are confident that banks will not be going away any time soon. In our opinion, digital disruption should not be seen as a danger, but rather a healthy challenge, driving change and opening up exciting new possibilities.

With this in mind, we also feel it is imperative for the Swiss financial center to promote a strong FinTech ecosystem. Only with close cooperation between the country’s banks, its FinTech startups and the regulator will Switzerland be able to keep pace with today’s strong global competition.

Follow me on twitter @obussmann.

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For a long time now the financial services industry has operated under a cloud, criticised (understandably) for a range of failings since the 2008 banking crisis.  It is clear there are still many areas where the industry needs to improve, but as I reflect on my time at SIBOS in Singapore I am very optimistic about the future.

I am very positive, because I believe technology will play a fundamental role in changing the dynamics.  It will disrupt out-dated practices, provide opportunities for new players and above all dramatically enrich the services offered to clients.  For a long time the industry has needed this shake-up and some institutions may be fall behind, but I am delighted to say UBS is taking a leading role in helping to transform the banking sector.

During my time at Sibos, many banking and finance executives voiced to me their concerns around the pace of change.  It is critical to balance the speed needed to drive competitive advantage against the importance of protecting our clients’ assets and complying with a much stricter regulatory landscape.  To those senior leaders across the industry still hesitant about engaging I would say we are at the start of our journey and business involvement is essential to ensure this technology transformation does not become consumed in its own hyperbole. It is important that a good cross section of business executives engage in this period of change to ensure we reflect the needs of all stakeholders.

For example, mobile banking is already making huge progress, but there are many areas to address.  If I look at its adoption rates it is succeeding faster in markets where it is not rubbing up against well-established transaction structures and users are comfortable with the accessibility mobile offers.  In more mature markets we are yet to provide a completely convincing argument for mobile in banking.  The likes of Apple Pay means it is seeping into the communal consciousness, so I expect to see rapid changes, but we need to temper our enthusiasm and listen to our clients’ needs.

Equally digitisation of services means data privacy becomes an even more important issue than it already is for every financial services institution. Recent malware incidents show how fast changing cyber-security threats are and how important it is for any new technology to place data protection above everything else.

The regulatory landscape is also becoming tougher and any new developments must be integrated.  Consequently IT systems need to have the flexibility and agility to respond to new demands from financial authorities.  This is challenging, particularly for smaller entrants to the market, because resources are finite.

Indeed the whole question of skills is a major one for the industry, because the wide range of exciting new technologies demands new skills many of which cannot be found in today’s institutions.  This is a big opportunity for more agile start-ups, but as an industry we have a responsibility to build a future workforce who will have the ability to design and build robust, reliable systems.

I started out saying there has never been a more exciting time to be in banking. I am sure that all the Regional Finalists of our Future of Finance Challenge are going to open our eyes to many more opportunities.

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I’ve spoken to many entrepreneurs and quite a few have admitted that if you spent your time worrying about the consequences of failure you would never start your own business.

There is certainly a lot of evidence to back up the fact that most start-ups are destined to fail.  For instance a study by Shikhar Ghosh, a senior lecturer at Harvard Business School, estimated that more than 95% of start-ups would be seen as failures if it were defined as failing to see return on investment (ROI).  Another successful Silicon Valley seed venture capital firm, Y-Combinator, has said that a company in its portfolio only had a 1 in 10 chance of success. And according to CB Insights, start-ups typically die around 20 months after their last financing round and having raised $1.3 million, citing the main reason as an inability to identify a market need for a product or idea.

And yet I passionately believe there is no more important time to be an entrepreneur.  These well documented failure rates are at least partly due to too many start-ups focusing on finding finance, and not enough on building a customer base.

And yes, I speak as someone with a vested self-interest, because it is not just start-ups that are facing major challenges. The study by Richard N. Foster (of “Creative Destruction” fame), suggested that companies in the S&P 500 could also be facing serious threat.  He stated that only 14% of companies in the Fortune 500 from 1955 were still alive today and that an S&P 500 company was now being replaced about once every two weeks.  At the current churn rate, 75% of the S&P 500 firms in 2011 would be replaced in 2027 by new firms entering the S&P500.

Therefore, for my organisation, it is just as important to be embracing innovation in order to stay ahead of the competition.

For me, much of it boils down to commercialisation at scale. Over the years there has been a lot of debate about the potential of Fintech startups, but one aspect that it not emphasised often enough is how ideas are taken to market. It is an obvious, but logical fact that if a start-up cannot convince a customer to buy its product then it will very quickly join the long list of “nice ideas.”  Having that invaluable feedback and endorsement from a customer during the early stage of a company’s existence is critical to long-term survival.

Many small companies prioritise chasing investment before customers. However getting a big company as a reference client, not only provides money, it also provides a route to market, and lots of valuable real time insight into what the market needs and wants.

Getting that first customer is much easier said than done, but this is why I am so positive about initiatives such as UBS’s Future of Finance Challenge.  Today there is growing recognition in industries, such as financial services, that open innovation models offer significant mutual benefits to entrepreneurial start-ups and established players collaborating on new ideas and technologies.

Large and small companies need each other more than ever. Established companies have access to disruptive, agile start-ups with ideas that can open up new market opportunities, improve operational efficiency and strengthen customer loyalty.  While conversely entrepreneurs have access to a wealth of experience about product development, customer business needs and go to market models.  Personally I am convinced that this collaborative model is critical, because digital transformation demands faster responses to customer needs.

In 10 years time I’d like to think we could look at a very different and more positive set of statistics on the failure rate of start-ups, showing how the collaborative sharing of ideas, experience and expertise enriches the opportunities for all.  Would love to hear your thoughts!

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Today is a very exciting day for UBS. In case you haven’t seen the news, we have launched the UBS Future of Finance Challenge, a competition which is open to entrepreneurs and startups around the world with potentially disruptive technological ideas and solutions to support the transformation of the banking industry. As the executive with responsibility for our innovation strategy I am obviously delighted that we have taken this step. It underlines our corporate commitment to innovation as a key priority of our long-term strategy and more importantly, demonstrates our determination to support and learn from the global FinTech community.

I have said many times before, this is a very interesting time to be in the financial services industry. Technology has the potential to have an immensely positive impact on the sector, whether it is automating, digitizing or evolving the services we offer our customers. However, we know we cannot do this alone. Internally we are embracing the benefits of innovation in many ways through our in-house innovation spaces and the innovation labs we have established in Zurich, London and Singapore.

However, it is critical for us to work in collaboration with the broader FinTech community, because we recognize there is a lot we can learn from entrepreneurs and startups. Hence why we were so pleased to be the first global bank to move into Level39 in London. Ultimately our ambition is to help shape a more open and collaborative financial services industry and to jointly develop new solutions for our clients. We also hope that for those successful participants of the UBS Future of Finance Challenge we can offer a wealth of thought leadership and resources through our global reach. Above all, with our expertise, we hope to provide the opportunity to accelerate and to help you refine your ideas and bring them to fruition.

What does the UBS commitment translate into in practical terms? We are offering the regional and global finalists cash prizes and accelerator places worth over USD $300,000 and over 300 hours of dedicated coaching from UBS mentors and partners. We hope that through our contribution we can help to maintain the momentum of the FinTech startup community.

How do you enter the Challenge? Entries can be submitted by applicants from around the world on our website: www.ubs.com/innovate. The closing date is 23rd September, 2015.

We are looking for applicants to respond to one of four challenges:

• Challenge 1: The Client Experience Challenge: – How will banks deliver the ultimate client experience?
• Challenge 2: The Superior Offering Challenge: – How will banks create superior financial products?
• Challenge 3: The Banking Efficiency Challenge: – How will banks step-change their efficiency?
• Challenge 4: The Secure Banking Challenge: – How will banks secure their operations and their clients’ assets?

The Challenge is open to entrepreneurs and startups who have revenues of less than USD $3m and have received less than USD $10m in funding. We are also only considering startups which were incorporated on or after 1st January 2010.

A maximum of 15 participants per region will be shortlisted to attend Immersion Workshops in Singapore, New York, London and Zurich, whereupon we will chose 3 regional winners from each region to participate at the Global Final in Zurich on 10th December.

Good luck to everyone entering the UBS Future of Finance Challenge! I look forward to hearing more about your transformative technologies!

p.s. please keep an eye open for the launch event in your region end of August! More info and full details on the competition on www.ubs.com/innovate

I have long admired Peter F. Drucker and his works. One of my favorite quotes is” the best way to predict your future is to create it”, which is exactly what I have been doing for the past year.

Since moving to Switzerland, social media has taken a back-seat. I was fully focused on finalizing the dynamics of my new leadership team, reaching out to the business, and establishing myself within UBS. And now it is time to revisit the social media arena.

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Earlier this year, I was surprised and honored to receive the #2 spot on the top 100 most social CIOs on Twitter 2014. My social media activity has been practically non-existent compared to my earlier activities. I still see a significant potential for CIOs to be more active on social media.

When I reflect on the past year I see that the consumerization of IT is important, no matter which industry you are in. I noticed this when I changed from the hi-tech industry to the financial services industry. Getting the right balance for the consumer experience for the end user in the enterprise, in the banking environment and in my case, the level of investment to make in applications for banking mobile applications is critical. Consumer friendly is the way forward. Complexity is an unnecessary hurdle for innovation.

Consumerization of IT is not a one-off event. New devices are entering the market at an unbelievable pace. I am still hungry for the next new trend, most innovative gadget and am eager to see how wearable devices can be put to use at an enterprise level. The key question from an enterprise level always remain the same – should we embrace this gadget/trend or not, no matter which industry.

However, the issue keeping me awake most at night, is securing application services without limiting usability and user experience, whilst fending off cyber threats. The balance that ends this risk and brings usability is an ongoing challenge for CIOs of today. The cloud could be the answer here. Depending on industry, region and security I see a different speed of embracing, which confirms the way IT is delivering services is in the middle of a big change.

Follow me on twitter @obussmann.