Financial services CEOs seek partnerships to innovate – PwC

Disrupted by regulation, technology.

JOHANNESBURG – A third of CEOs in the banking and capital markets (BCM) sector believe that alliances, with cellular and technology companies for instance, will be an important means of strengthening innovation and giving them access to new markets, according to PwC.

Being able to mine and analyse data in order to sell the right products to the right customers has become an important differentiator for financial services CEOs, particularly when it comes to capturing large youthful populations in emerging markets, according to Victor Muguto, PwC’s long-term insurance leader for Africa.

Addressing media in Johannesburg on Monday, Muguto said there were “huge opportunities” to tap the previously uninsured market in the rest of Africa, where high growth rates are fuelling an increase in wealth, and the growing base of insurable assets and lives that comes with it.

As a result, BCM CEOs are looking increasingly to joint ventures and strategic alliances to gain access to new customers and emerging technologies. “Insurers, banks and financial services organisations need to find new ways of doing business, new ways of arriving at pricing and new products customised to the needs of their customers. This is a stepping stone,” said Muguto, who believes partnering will be an interim solution for financial services firms.

PwC, for instance, has partnered with Google to ensure it can take the digital revolution by the horns and really understand it, noted Johannes Grosskopf, PwC’s BCM leader for Africa.

Grosskopf said that disruptors play a role in placing IT at the top of CEO agendas, as they recognise the need to ensure they deliver for customers. He suggested that Atlas Mara – the financial services firm founded by ex-Barclays CEO Bob Diamond that is looking at acquiring banks in Africa – could be considered a disruptor, as could Capitec.

According to PwC’s 18th Annual Global CEO Survey, which is based on interviews with 410 CEOs in the financial services sector worldwide, 93% of BCM CEOs see mobile technologies as being critical to delivering a multichannel service to customers.

Regulation an ongoing concern 

The survey found that 69% of insurance CEOs are concerned about disruption from changes to distribution channels. The Retail Distribution Review (RDR), which has already been implemented in the UK, will profoundly change the way that financial services products are brought to market in South Africa, regulating fees and commission paid to financial advisors and driving firms to find new ways of distributing their products. 

It’s no surprise then that all financial services CEOs feel “disrupted by regulation and concerned that over-regulation could threaten growth”, according to PwC. 

“CEOs feel regulation is disrupting their businesses but they also see the benefits. To have access to cross-border capital flows you need good regulation,” commented Grosskopf.

Muguto said insurers were currently hurrying to ready their systems for the January 2016 implementation of Solvency Assessment and Management (SAM), South Africa’s equivalent of the UK’s risk-based prudential regulation Solvency II. 

He said many of the regulatory changes currently being implemented in South Africa’s financial services sector, including SAM, RDR, Treating Customers Fairly and Twin Peaks, would come to a head in 2016.

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