The one constant in regard to the demands of retail investors is that they are constantly and quickly changing. But the issue is this is that the finance industry as a whole needs to continue innovating in order to keep up with the rate at which customers’ demands evolve. In other words, the industry needs to become digitally agile. Here at ETFmatic, we believe that the five key characteristics in considering whether an industry is digitally agile are: 

1. The speed at which key players are developing new innovative products and solutions.
2. The degree to which such institutions are able to test, measure and adapt their new solutions throughout the duration of the project implementation, rather than post-development.
3. The frequency with which new useful products and solutions are being developed and launched.
4. Incumbents ability to take advantage of opportunities in the market.
5. The Corporate’s willingness to improve every aspect of its business processes including both the customer’s user journey and its operations team’s efficiency.

 

“Companies with an agile methodology also are able to scale their operations in a cheaper and easier way.”

 

Digital agility offers one highly sought after advantage to companies–the ability to pivot its product offering as it pleases. For example, ETFmatic was launched with a D2C proposition back in 2014. Utilizing our modular, proprietary technology stack developed in-house, we were able to relatively easily alter our products and services to make them viable and attractive for partners under a B2B2C model in under 3 years. Being able to carry out such pivots whether in a particular product or service, or with an entire company’s strategy can prove invaluable.

Companies with an agile methodology also are able to scale their operations in a cheaper and easier way. As most agile companies are tech-based (and thus have integrated some semi- or fully-automated processes), these companies can achieve economies of scale much quicker than their competitors that remain heavily dependent on human labour. These more antiquated companies are suffering from reduced growth, tightened regulations, a high fixed cost base and a loss of customer confidence due to recent economic volatility under the present market conditions. On the other hand, a digitally agile company is able to outsource processes that lower fixed cost structures and therefore lower prices products and services.

However, due to the ease of expanding product offerings and scaling the business, it’s easy for a digitally agile company to become isolationist and lack regular engagement with clients and potential customers. Due to this “tunnel-vision curse,” there is a subsequent reduction in client face-to-face interactions which can cause a high turnover of long-standing or traditional customers. Additionally, the transition from a traditional institution to a digitally agile company can be time-consuming and expensive. The average legacy system in a European bank is 38 years old which makes all major changes complex, expensive and threatening to existing operations.

Institutions in the financial industry specifically have some difficulties with innovation and becoming digitally agile. Because of their size and hierarchical nature, banks struggle to implement change. New entrants in the industry have begun thinking like start-ups (i.e. experimental, collaborative and adaptable) and will eventually push out traditional institutions if they don’t innovate and evolve their entire technology stacks and hierarchical structure. They also need to change the culture of risk and failure inside their companies, as many workers in these traditional institutions are afraid to innovate and take risks due to the fear of failure (and thus losing their bonuses or jobs).In order to nurture creativity and experimentation and quicken the innovation process, these institutions have now developed their own start-up accelerators, incubators, VC funds and talent internally to develop their own self-funded start-ups.