For an industry whose product – the movement and storage of money and the management of risk – is electronic, financial services processes are manually intensive. Surveys show that customers are rarely inspired by the service and yet the consensus is that a digital overhaul of legacy systems will be the work of many years.At the same time, new businesses underpinned by digital capabilities are gaining traction.

Imagine if you could combine what is possible in a new build with the business model advantages of an existing firm. We call this approach greenfield.It means tapping into the same flywheel momentum of growth employed by Big Tech, breaking out of the low-returns cycle. The quality and low cost of new technology, the potential for dramatic change in competitiveness, the reduction in conduct and cyber risks if done correctly, and modern methods for migration, all make this idea compelling right now.

In the 2019 edition of Oliver Wyman's State of Financial Services report we examine the potential for the industry to start again and point to the first steps in the journey – "go build!"

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Who will close the customer value gap in Financial Services and reap the rewards? According to this report from Oliver Wyman, traditional financial services firms will need to accelerate customer value creation or risk conceding an increasing share of customer attention and wallet to other firms, primarily to “big tech.” While financial services incumbents have largely recovered towards relative health 10 years on from the financial crisis and conditions have improved significantly, there is a gnawing sense of concern regarding the prospects for future underlying industry growth.

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In this Oliver Wyman report, we discuss how incumbents can do so by organizing their overall transformation journey using three archetypes inspired by the tech industry: demand aggregator, platform provider, and component supplier. Each archetype describes a differentiated role a firm (or business unit) can play in a modular financial services ecosystem, as well as the capabilities it needs to focus on which will provide it with sustainable competitive advantages. In addition, the report explores the broader organizational implications of each archetype, and management actions that can guide an incumbent’s journey to building competitive advantages and increased shareholder value.

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Financial services companies have gone through major changes over the last 10 years. Nonetheless, while the turmoil in financial services has been dramatic, other industries have been more radically transformed. For example, digital technology has destroyed established business models in music and publishing. Such a transformation may now be on the horizon for financial services.

As recorded in this Oliver Wyman report, we believe financial services are becoming “modular”, with digital distribution platforms, new product providers, alternative sources of capital and a growth in outsourcing fundamentally reshaping the industry.

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