Posted August 8, 2017 by Luke Nardella
Technology as a Service (as discussed in Part 1 of this series) is much more than a than a new form of IT provisioning. It opens the door to new opportunities that can transform the way superannuation funds operate and set them up for the future.
For superannuation funds, the demands for change are everywhere. From…
If ever there was a ‘perfect storm’ this is it.
As is widely known, technology provides the pathway to not only navigate, but embrace and leverage success from, these changes. The challenge has always been that digital transformation is disruptive, expensive, and risky. As such, the ‘cost of entry’ has been prohibitive for many funds.
Technology as a Service (TaaS) substantially reduces this cost of entry, as was discussed in Part 1.
But, there’s more to it than that. TaaS also opens the door for small, mid-size, and large funds to step ahead of both the challenges and the market.
The first opportunity – particularly for small to mid-sized funds – is to integrate TaaS and third-party administration to create a next-generation hybrid operating model. This hybrid model allows funds to gain the cost and efficiency benefits associated with high-volume, low-value activities, while maintaining control over those services and activities that have the potential to impact customer experience.
Essentially, there are two steps to creating this model:
In some respects, this model creates the best of both worlds. It minimises high-volume transaction costs, while allowing direct access to, and control of, the customer-facing functions, operating processes, data, and reporting.
And, critically, TaaS puts this model within any fund’s reach. The enormous roadblocks to in-house management of the customer function no longer exist. The ‘cost of entry’, as already mentioned, is no longer prohibitive.
It’s widely understood that the emergence of FinTech is both disrupting and empowering the finance sector. An important component of the FinTech revolution is the growth of open APIs, which allow data and applications to be shared freely across different platforms, organisations, and countries.
Back in May, the Australian Federal Government revealed a new “Open Banking” scheme as part of the 2017-18 budget. This flows off the back of the Productivity Commission inquiry into the availability and use of public and private data. The action is in line with a broader global push for similar ‘open banking’ models. For example, the PSD2 directive in Europe and the Open Banking Project in Germany are both enabled by open API functionality.
Many superannuation funds are now familiar with the world of open APIs and their ability to deliver a more seamless, innovative, and high-quality user experience. However, knowing and doing are two different things. The opportunity to integrate FinTech applications and open APIs into their operations are simply beyond the technical capabilities of many super firms.
TaaS alleviates this issue by giving superannuation funds access to leading-edge technology and control over their customer function and data. As a result, funds can drive better customer outcomes and new business models for growth by leveraging open APIs to:
The success of FinTech doesn’t come down simply to technology. A critical ingredient is the culture that underlies the FinTech community. FinTechs tend to be intensely customer focused and they’re not afraid of technology or change. In fact, they welcome them as opportunities.
To be successful, superannuation funds need to adopt the same, positive culture. For many, this has been difficult. The intense challenges created by digital transformations have helped to make people wary of change and, in some cases, downright resistant.
By simplifying the transformation process, reducing the disruption and allowing an approach that’s more evolutionary than evolutionary, TaaS provides an opportunity for funds to remove the stigma and free their people to embrace technological change as an opportunity.
This, together with a greater focus on customer needs, will help to create funds that are more aware of the opportunities, open to innovation and collaboration and far more likely to succeed in the changing world that is now upon us.
A world that’s full of opportunity for those who are willing and able to grab it.
The views expressed in this publication are solely those of the author and do not necessarily reflect the position or policy of DST Systems, Inc. or its affiliates, subsidiaries, joint ventures, officers, directors, or management.