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1 The Hunt for Growth Across LatAm Are you ready to rise? THE FIS™ READINESS REPORT
1
The Hunt for Growth Across LatAm
Are you ready to rise?
THE FIS™ READINESS REPORT
2 The FIS™ Readiness Report: The Hunt for Growth | Contents2
Contents
3 Introduction
4 Regional growth outlook
6 FIS Readiness Index
9 Mastering data management
10 Embracing emerging technologies
12 Expediting digital innovation
13 Redefining the customer experience
14 Rethinking the talent mix
16 Six steps to becoming growth ready
18 Appendix
3
Automation Data management Emerging technology Digital innovation Customer experience Talent
Our research includes the FIS Readiness Index, which rates firms’ performance on each of these key growth enablers. Its message is clear: firms that are closest to achieving operational excellence are reaping the rewards, growing more rapidly than their rivals.
Introduction
After tough times for many Latin American economies and despite continued political and economic challenges in some countries, there is a sense of bullishness among financial services firms in the region. This is perhaps spurred by a moderate improvement in the economic outlook projected for the year ahead across a number of countries in the region.
However, while many firms highlight significant opportunities associated with improved regional growth, they are also conscious of ongoing threats presented by pressure on fees, an unrelenting regulatory burden and the impact of disruptive new technologies. They recognize that they must enhance their operational and technological capabilities if they are to capitalize on the improving growth outlook amid these varied pressures.
What are the Readiness Leaders doing differently, and how can others follow their lead?
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1. The vast majority of LatAm institutions are optimistic about the outlook for growth.
More than three-quarters (78 percent) of LatAm institutions are somewhat or highly confident about hitting their growth targets for the next 12 months. Only 8 percent of firms are pessimistic about their prospects.
LatAm firms are more optimistic about hitting their growth targets than institutions in any other region, including their North American counterparts, where 64 percent expect to hit their targets.
2. New customer acquisition is by far the greatest ambition of LatAm institutions.
Acquiring new customers is the most important growth focus for LatAm institutions, with 65 percent citing this as one of their top three growth objectives for the next 12 months. This is ahead of their peers in other regions.
In addition to this, LatAm firms will be on a cost reduction and efficiency drive, as 43 percent cite improving operating margins as a growth priority.
Figure 1. Growth objectives for the year ahead
Improve operating margins
Acquire new
customers
Improve investment
performance
The FIS™ Readiness Report: The Hunt for Growth | Regional Growth Outlook
Regional growth outlook
65%
43%
35% 33% 33% 31% 31%
20%
Improve customer retention
rates
Expand into new
developed markets
Enter newbusiness linesof products
Expand into new
emergingmarkets
Merger/acquisition
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3. As they seek to capture new growth opportunities, LatAm firms must react to regulatory change, downward pressure on fees and the rapid evolution of technology.
LatAm firms see economic growth in their key markets as their biggest potential opportunity over the next three to five years, with 51 percent citing this as one of the three external factors they are most optimistic about. Yet firms in the region recognize the challenging nature of the growth environment: 31 percent cite fee pressure as a threat to growth, versus just 16 percent of firms globally, and 37 percent are worried about government spending policy in their key markets – recent fiscal reforms in Brazil may go some way to explaining this.
LatAm firms are also more concerned about the threat posed by emerging technologies than institutions globally, with 24 percent citing this as a threat, versus just 18 percent of all respondents.
51% of LatAm firms say the economic outlook in their key markets represents a growth opportunity over the next three to five years.
Figure 2. Opportunities and threats over the next three to five years
A majority of LatAm firms also say that regulation will remain a significant hindrance to their organization’s growth plans over the next 12 months.
Countries implementingprotectionist
policies
Divergence in central
bank interest rates
Projected economic
growth in mykey market(s)
Brexit – the U.K.leaving theEuropean
Union
Politicaloutlook
in my keymarket(s)
Governmentspending
policy in my keymarket(s)
Tax policy in my keymarket(s)
Disruptive new
marketentrants
Emerging technologies
Cybersecurity Feepressure
ThreatOpportunity
14%
35%
51%
22% 24%
47%
31% 29%
37%
29%
18%
27%31%
24%
16% 16%10%
31%27%
10%
22%27%
The FIS Readiness IndexThe FIS Readiness Index reveals how LatAm institutions rate against the rest of the world today on six key operational enablers of growth. It indicates where capability gaps remain as institutions prepare their operating models to support growth.
6 The FIS™ Readiness Report: The Hunt for Growth | FIS Readiness Index
Emerging Technology
Customer ExperienceDigital Innovation
Talent
Data ManagementAutomation
Rest of the industry (excluding Leaders)Readiness Leaders
2 4 6 8 10
Six operational principles are critical levers of growth in the years ahead:
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Automation: The level of process automation across the transaction lifecycle; artificial intelligence (AI) in combination with exception-based workflow is the highest parameter
Data management: Data management capability, including integration of data across the organization, predictive analytics and visualization
Emerging technology: Maturity of emerging technology adoption across mobile, AI and distributed ledger solutions
Digital innovation: Level of activity directed at strengthening digital innovation and propensity of organizational culture for innovation
Customer experience: Performance across customer service metrics, including customization of products and services, mobile delivery, responsiveness and transparency
Talent: Level of digital competencies in data analytics, software development, digital distribution and digital transformation
DUE TO A LOW NUMBER OF RESPONDENTS TO QUESTIONS ABOUT AUTOMATION, WE ARE UNABLE TO ANALYZE LATAM FIRMS’ AUTOMATION CAPABILITIES.
Accelerating growth readiness: Rise to meet the future faster
LatAm firms are more optimistic about hitting their growth targets than institutions in any other region. What’s their approach to the principles of growth readiness?
8 The FIS™ Readiness Report: The Hunt for Growth | Accelerating Growth Readiness
9The FIS™ Readiness Report: The Hunt for Growth | Mastering Data Management
Mastering data management
LatAm institutions show greater maturity than peers in other regions when it comes to unifying data sources across the organization, with 80 percent of firms saying they are effective at this. In addition, 84 percent say they are effective at using visual tools such as dashboards to help support decision-making.
There is also some catching up to do on big data capabilities: 73 percent say they are effective at combining external unstructured data with internal data to better inform decision-making, and only 22 percent believe they are highly effective at this.
LatAm firms have begun to put their data to work: 83 percent can visualize and simplify complex data for decision-making purposes, while 75 percent are employing predictive analytics tools.
Figure 4. Data management capability
Highly effective
Ineffective
Highly ineffective
Don’t know
Effective
Neither effective nor ineffective
Unifying data sources across the organization
Combining external data with internal data to better inform our decision-making
Ability to visualize and simplify complex organizational data for decision-making
Advanced analytics for predictive identification of risk and opportunities
8%
4%6%
6%
14%
8%
4%
51%
61%
8% 12% 55%
22%
22%
20%
10% 55% 24%
2%
2%
2%
As LatAm firms seek to develop their capabilities, we may see talent gravitating from the more developed regions toward LatAm.
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LatAm firms have made some progress in deploying AI solutions, with 20 percent saying they have implemented such solutions in their business. The main AI applications being explored in the region are performance analytics (58 percent) and risk management (55 percent).
However, progress on blockchain has been slower. Only 8 percent of respondents have undertaken any kind of implementation of distributed ledger technology (DLT), though 29 percent say they are currently piloting or testing DLT solutions.
LatAm firms are most likely to pick out regulatory reporting as the business application being explored by their blockchain development teams (cited by 49 percent), followed by collateral management (46 percent), and clearing and settlement (38 percent).
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Firms that can marry enabling technologies with new business models can create a compelling new value proposition.
Embracing emerging technology
The FIS™ Readiness Report: The Hunt for Growth | Embracing Emerging Technology
Mobile customer services
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Figure 5. Progress on implementing emerging technology
Distributed ledger technology
Artificial intelligence/ machine learning
Advanced customer relationship management software
eDelivery/online customer services
Mobile customer services
2%
3%
Some live implementation
Considering its potential application
No plans to implement
Don’t know
Piloting/testing
Researching/developing
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8%
20%
24%
27%
39%
29%
20%
33%
30%
21%
39%
37%
27%
30%
30%
16%
12%
12%
12%
9%
10%
6%
121212
As LatAm institutions pursue digital innovation, 35 percent say that talent gaps are an impediment – more than in any other region. Further, 29 percent are concerned about potential cybersecurity risks associated with digital innovation.
More than half (53 percent) of LatAm firms have recruited digital technology expertise over the past 12 months, while 49 percent say they have worked to encourage a more open culture of innovation.
Firms are also looking outward for inspiration: 30 percent have conducted collaborations with innovative third parties, and 25 percent have purchased third-party technologies.
The innovation drive is set to continue, with 43 percent of firms planning further recruitment of digital skills over the next 12 months and 31 percent anticipating more third-party collaborations.
LatAm businesses are attempting various approaches to kick-start digital innovation.
Figure 6. Strategies to expedite digital innovation
Expediting digital innovation
The FIS™ Readiness Report: The Hunt for Growth | Expediting Digital Innovation
Outsourcing non-core
services to free up resources
Acquiring innovative
firms
Setting up incubator or accelerator
programs
Recruiting digital
technology expertise
31% 31%22%
29%18% 14%
20%27%
53%43%
37%
24%33%
24%
39%49%
Appointing board-level
roles with responsibility
for digital innovation
Encouraging a more open
innovation culture across
functions
Purchasing third-party technology
Collaborating with innovative
third parties
Past 12 months Next 12 months
13The FIS™ Readiness Report: The Hunt for Growth | Redefining the Customer Experience
Redefining the customer experience
LatAm firms have recognized the need to differentiate on the basis of the customer experience. For example, 41 percent say they are highly effective at delivering a personalized service, and 37 percent say this about customization of products.
However, just one-third feel they are delivering highly effective digital or mobile access to services. Where firms in LatAm feel that customers’ expectations are not being met effectively, they’re most likely to blame talent gaps (50 percent cite this as a problem) or product and service limitations (50 percent).
37% of firms say they are highly effective at delivering customized products.
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14 The FIS™ Readiness Report: The Hunt for Growth | Rethinking the Talent Mix14
As we have seen above, talent shortages are a potential growth inhibitor for LatAm firms, and many in the region recognize that digital skills in particular will be crucial enablers of growth in the year ahead.
The vast majority of firms cite software development skills (86 percent), digital change expertise (84 percent), big data and analytics talent (78 percent) and digital distribution know-how (78 percent) as important or very important in helping them to meet their growth objectives.
Firms in the region are more likely than their peers elsewhere to point to expertise in blockchain applications and AI as important to growth, with 82 percent and 71 percent citing these skills as important.
However, many firms are not satisfied with the in-house talent they have in place across these areas. Only 20 percent see their big data talent as being very good, and this falls to 14 percent for algorithmic and automated trading developers.
Rethinking the talent mix
Figure 8. Importance of digital skills for growth (next 12 months)
Distributed ledger
technology expertise
82%
Algorithmic and
automated trading
developers
74%
Artificial intelligence/
robotics expertise
71%
Digital change/ transformation
expertise
84%
Software development/programming
expertise
86%
Big data analytics/
data science expertise
78%
Digital distribution/
delivery expertise
78%
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Firms in the region are more likely than their peers elsewhere to point to expertise in blockchain applications and AI as important to growth.
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Six steps to becoming growth ready
Despite continuing political and economic changes in some parts of the region, firms in LatAm are more optimistic than any other region surveyed, with many respondents highlighting the significant opportunities stemming from improved regional growth.
Conversely, LatAm firms are conscious of the threat of fee pressure, regulation and disruptive new technologies. Encouragingly, they recognize that they must enhance their operational and technological capabilities if they are to capitalize on the improving growth outlook amid these varied pressures. And our research shows that they can in fact increase their growth readiness by addressing six key areas of their operating model.
16 The FIS™ Readiness Report: The Hunt for Growth | Recommendations
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WHAT’S YOUR GROWTH READINESS?ARE YOU READY TO RISE?
Benchmark your growth readiness FISReadinessReport.com
1. DEEPEN AUTOMATION Institutions must respond to efficiency and data needs by increasing automation across more areas of trading and back-office operations – but also areas of low automation such as middle-office activities. They need to overlay workflow onto exception management before they can implement AI and machine learning solutions.
2. EXCEL WITH DATAAt a minimum, firms need to draw a line under fragmented systems, moving to a single source of truth on data across the organization. But this is just the first step of a multi-tiered approach. Customized real-time data must be available to business users, while advanced AI solutions should be layered on top to create better predictive insights.
3. ADD VALUE WITH EMERGING TECHNOLOGYSenior leaders must take a longer-term outlook on embracing enabling technologies such as AI, blockchain and mobile to create a compelling new value proposition for customers. Our Readiness Leaders are adopting AI to drive automation, performance and risk analytics, but an even more transformative approach may be necessary: players that redefine how they service customers will differentiate themselves the most and capture new opportunities.
4. ACCELERATE INNOVATIONResponding to regulatory requirements, cyber risk and complex legacy IT is stifling progress on digital innovation. Institutions must find ways to overcome these issues to expedite the process. Teaming up with innovative third parties – and finding ways to make these collaborations more effective – will be an increasingly important part of the solution.
5. REIMAGINE THE CUSTOMER EXPERIENCEFinding new digitally-driven mechanisms for engaging customers will be a critical driver of growth in the years ahead. Digital and mobile access to services are the industry’s weakest area of customer servicing. New offerings will need to provide not only greater access to real-time information via online and mobile but through direct market access too, such as enabling trading activity.
6. RECRUIT THE SPECIALIST TALENTThe new operating model for growth will be ineffective unless the financial services workforce is rethought. In particular, this means putting new skills such as data science specialists in place, enabling them to work in close collaboration with the front office to drive more value and better outcomes for customers.
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Appendix
The FIS™ Readiness Report: The Hunt for Growth | Appendix
Commercial and investment banks
Broker-dealers
Asset managers
Pension funds
Insurers
Fund administrators 25%
23%16%
15%
14%
6%
C-suite26%
74%
Head of business unit/director-level
Trading and investment
Risk and compliance
Operations
SalesOther
Finance and treasury
IT 15%
18%
18%
18%
4%
7%20%Europe
30%
30%
16%
25%
North America
LAMEA
APAC
Survey Between March and May 2017, FIS and Longitude Research conducted a survey of 1,042 senior-level respondents across the buy and sell side of the financial services market.
Interviews We also conducted more than 20 in-depth qualitative interviews with industry leaders.
About the research
SECTORS
REGIONS
SENIORITY
FUNCTIONS
CHARTS MAY NOT ADD UP TO 100 PERCENT DUE TO ROUNDING.
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AboutThe Readiness Index collates and measures 1,042 executives’ self-assessment of their institutions’ performance in six operational areas that are representative of how firms achieve growth:
QuestionsFor each category, executives were asked to respond to a series of self-assessment questions about their company’s performance within each area (for example, how well their company performs in unifying data sources across the organization or the extent to which it offers customers a tailored service). The questions were tailored to different types of business across the buy and sell sides.
ScoringThe majority of questions included in the index asked executives to rank their businesses on a scale of 1 to 5, where 5 = highly effective/active, etc., and 1 = highly ineffective (respondents who chose “Don’t know” were given a neutral score of 3).
Several questions, such as those related to innovation, asked respondents to choose from a range of activities or strategies that their companies may be involved in, such as M&A, third-party collaborations or incubator programs). For these questions, companies undertaking at least five activities were awarded a top score, with the remaining responses scaled accordingly.
Building the FIS Readiness Index The question scores were aggregated for each individual respondent, first to a category score and then overall. To allow for more refined insights, both category and overall scores were placed on a scale of 1 to 10, where 10 is best. As shown above, as we believe each area accords equal merit, the categories each receive an equal weighting in the index.
FIS Readiness Leaders Based on those scores, the top 20 percent of all respondents were deemed Readiness Leaders. The industry breakdown of the Readiness Leaders versus the total survey responses is as follows:
The FIS™ Readiness Report: The Hunt for Growth | Methodology
Automation
Insurers
Assetmanagers
Broker-dealers
Fundadministrators
Asset managers
Pension funds
Fundadministrators
Commerical and investment Banks
Commerical and investment Banks
Broker-dealer
17%
17%
17%17%
17%
17%
Data management
Emerging technology
Talent
Customer experience
Digital innovation
29%
13%
25%
15%
22%
16%
12%
18%
14%
23%
6%
Pension funds
6%
Insurers
Broker-dealers
12%
15%
ReadinessLeaders
Responsesby industry
Fund administrators
13%
14%
ReadinessLeaders
Responsesby industry
Asset managers
22%
23%
ReadinessLeaders
Responsesby industry
Pension funds
6%
6%
ReadinessLeaders
Responsesby industry
Commercial and investment banks
29%
25%
ReadinessLeaders
Responsesby industry
Insurers
18%
16%
ReadinessLeaders
Responsesby industry
Automation
Insurers
Assetmanagers
Broker-dealers
Fundadministrators
Asset managers
Pension funds
Fundadministrators
Commerical and investment Banks
Commerical and investment Banks
Broker-dealer
17%
17%
17%17%
17%
17%
Data management
Emerging technology
Talent
Customer experience
Digital innovation
29%
13%
25%
15%
22%
16%
12%
18%
14%
23%
6%
Pension funds
6%
Insurers
Broker-dealers
12%
15%
ReadinessLeaders
Responsesby industry
Fund administrators
13%
14%
ReadinessLeaders
Responsesby industry
Asset managers
22%
23%
ReadinessLeaders
Responsesby industry
Pension funds
6%
6%
ReadinessLeaders
Responsesby industry
Commercial and investment banks
29%
25%
ReadinessLeaders
Responsesby industry
Insurers
18%
16%
ReadinessLeaders
Responsesby industry
Methodology – The FIS Readiness Index
©2017 FISFIS and the FIS logo are trademarks or registered trademarks of FIS or its subsidiaries in the U.S. and/or other countries. Other parties’ marks are the property of their respective owners.
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About FISFIS is a global leader in financial services technology, with a focus on retail and institutional banking, payments, asset and wealth management, risk and compliance, consulting and outsourcing solutions. Through the depth and breadth of our solutions portfolio, global capabilities and domain expertise, FIS serves more than 20,000 clients in over 100 countries. Headquartered in Jacksonville, Florida, FIS employs more than 57,000 people worldwide and holds leadership positions in payment processing, financial software and banking solutions. Providing software, services and outsourcing of the technology that empowers the financial world, FIS is a Fortune 500 company and is a member of Standard & Poor’s 500® Index. For more information about FIS, visit www.fisglobal.com
