Traditional financial services firms can beat fintechs at their own game by embarking on innovation with a blank slate, says a report released Tuesday by global consulting firm Oliver Wyman.
Specifically, firms must be willing to leave behind their existing legacy systems, business models and approaches to talent.
“For an industry whose product—the movement and storage of money—is electronic, the processes are still far too manually intensive,” says Ted Moynihan, managing partner and global head of financial services at Oliver Wyman, in a release. “Established firms will look to free themselves from the shackles of their legacy infrastructure and embark on future journeys unencumbered.”
The report highlights such innovation examples as a new digital offering from RBS Group that was built in under a year, a digital lending product offered by National Australia Bank and a consumer banking effort by Goldman Sachs.
The inspiration and motivation for existing firms to embark on these sorts of ventures comes from upstart fintechs that find traction for their innovations among mass affluent clients, the firm says.
To compete, traditional firms must bring their new products and services to market more quickly. “Digital challengers launch new products or services in two weeks, compared to three to six-month release timetables for traditional firms,” the release says.
“Using modern technology, an open platform and third-party services, new banking and insurance platforms can be built within a year, at a cost of between US$10 million and US$60 million,” the release adds.
The report suggests that innovative efforts by traditional firms will, in turn, help modernize other parts of these firms.
“The new will transform the old and create a better financial system overall,” adds Moynihan.