,Singapore

KPMG's head of financial services on executing strategies and leveraging technology in the digital economy 

Antony Ruddenklau believes that the financial services industry is at the foothills of change, and is about to undergo a significant transformation.

Antony Ruddenklau is the head of financial services at KPMG in Singapore. He co‐leads KPMG’sGlobal Fintech practice and advises financial institutions, fintech, hyperscale, and investors on strategy, growth, and client development. He also works with clients globally, ranging from firms such as Ant Financial or Google to HSBC, DBS, and CCB.

Antony has led or advised over 200 growth projects across Corporates and Financial Institutions and has extensive experience in assessment and strategy design for emerging business models including embedded finance, marketplace models, e-commerce platforms, market utilities, and joint ventures.

Outside of working with huge organisations about strategic finance and investment, this music lover believes that life doesn't get any better with a nice glass of pinot noir and friends around with him. His extensive skills in finance more than match his extensive vinyl collection, a passion which he also shares with his 16-year old daughter. 

As one of the judges at the Asian Banking and Finance Awards 2021, here are some of his insights about enlightened financial institutions, trends in the financial industry, cloud technology, technical debt, new opportunities for banks during the pandemic, business leadership, the need for differentiation, and why real-time monitoring of liquidity, capital and risk is the next big thing. 

What do you think is your biggest contribution to your industry? Or what do you aspire to contribute to your industry?

Thinking differently. As financial services consultants, creativity, innovation, and "what if?" thinking form the entry point to guide industry players into new business models safely. This is our responsibility. 

The financial services industry is going through significant transformation and we are only at the foothills of change right now. Our contribution to fintech, legacy financial institutions and the real economy of corporations entering financial services can be measured in units of the business model change. As advisers, we are here to challenge, support and bring critical thinking in equal measure. We help our clients navigate by being central to the execution of their strategies as they compete in the digital economy.

What would you say is the biggest impact of COVID-19 in the financial services industry? And how will it likely affect the industry moving forward?

The biggest impact has been the move away from the mental model that physical channels are of prime importance to our customers. Traditional banking has its place but needs to be viewed in the context of lifestyles and business activities. This comes in tandem with a rise in digital payments and online transactions for banking, asset management and other financial activities. 

More enlightened financial institutions now recognise that data is the asset they should have been investing in all along. In Asia, governments are also working towards creating platforms to encourage data sharing to take place under regulated conditions. Efforts are also underway by financial institutions to provide greater ease to consumers as they transact and plan their finances. Personalised dashboards are a norm with spending insights and gamification modes to encourage the habit of saving and wealth planning. 

The function of physical channels has also shifted towards enabling omnichannel transactions to offer more options to consumers. While digital channels have seen a surge in usage, there are other segments of customers who prefer banking physically. Furthermore, with the rise of online scams, we are seeing greater trust towards financial institutions that don't just have a digital platform but a physical presence as well. 

Which trends do you think will define the financial services industry in the years to come?

There are four trends to look out for.

First, Environmental, Social, and Governance (ESG) aspects will be pervasive throughout value chains and will significantly change the allocation of capital across our economies. Financial services will be a prime driver of behavioural economics for ESG as it makes decisions daily on lending, asset management and investments.

Second, governance, risk and compliance (GRC) factors will continue to expand as the industry remains trusted by our communities, regulators and customers. GRC will eventually become data-led. 

Third, data will drive the transformation of our functions, services and business models. In particular, the rise of low-cost data-driven platform businesses (challenger fintech companies) offering differentiated banking and financial services could threaten the cost lines of banks, requiring up to a halving of the cost base for legacy firms to remain commercially viable. They will also challenge cycle times with real-time service provision becoming a table stake, only adding to already rising consumer expectations. 

Finally, financial institutions' operating models will too become digitally connected and more adaptable. Digital's impact on incumbent talent pools, ways of working and organisational design will be much more significant than we currently think. For the industry to remain viable, large pools of talent will need to be injected from other industries into financial services. Some say a third of a financial institutions' talent must not be bankers' - in part due to the need to shake off groupthink and introduce greater diversity. In time to come, we will see a lot more of this due to the scarcity of talent and the need to grow this pipeline.

The financial services industry is going through an incredible transformation these past few months. How can they leverage technology to gain a more competitive edge in the industry?

We need to think far less about the technology and more about the users. Customers, employees, regulators, and partners must be the starting point. Working backward, designing the flows of data around these user journeys will naturally lead you to the technology. The Internet-of-Things (IoT), artificial intelligence (AI), distributed ledger technology, cloud services, and machine learning will then naturally fall into place as underpinning enablers. 

Cloud will be the game-changer, but the cloud only stacks up with transformational use cases and thinking, not as a more efficient database. Big, progressive and transformational thinking for users will drive distinctiveness and superior returns from Cloud.

A few anchors are holding back the industry in the form of technical debt. This is seen where core banking or insurance systems need replacing. Ledgers and enterprise resource planning (ERP) systems are dire and need replacing with thin modern systems of record. We are 21 years into the 21st century and we are still talking about 20th-century technology which tells you much about our industrial infrastructure. Vision and ambition will be required from the boards across financial services if they are to let go of the assets from previous centuries. 

Aside from providing payments services, where are the new opportunities for banks during and after COVID-19? 

Embedded finance and its platform variants are the biggest opportunities. Banks must position themselves to be at the point of need for their customers. This requires rethinking journeys and ensuring they are about the lifestyle activities or business processes that generate demand for any type of financial service. Many banks say they are doing this, but there is still a certain amount of caution that these institutions take when introducing changes - understandably so since consumers and regulators are watching closely. 

Digital lending, microservices across investing, insurance and lending, and e-commerce support also offer big upsides - and some banks are faster than others in getting these services going; while others have resorted to partnerships with fintech companies. 

Such services are important when moving further up the customer journey or repositioning banks as adjacent service providers to other industries. I believe banks also need to start Data-as-a-Service or Platform-as-a-Service businesses to trade on the huge customer trust advantage they have over other industries. The amount of insight that banks can offer customers and push for greater innovation within the industry should be significant. 

In your opinion, what are the most important traits that a business should have to survive the pandemic's challenges? And which traits should they avoid?

The pandemic has caused several uncertainties, and hence leadership is one of the most significant traits needed in a business. This is different from management and relies on being able to communicate effectively, empathetically and with high degrees of conviction. Within the financial services industry, many have been negatively impacted by closures and layoffs. The industry has done a good job in keeping a tight ship and professionals working here have responded with significant reserves of discretionary effort. 

We also need to properly invest in remote working or new working environments as a de facto new reality. Financial services players need to think about what this means as people have been very flexible temporarily. This includes a proper evaluation of our internal supply chains which include talent and client retention. 

What cutting-edge regulations should finance leaders in banking keep track of and how does that impact their road to digitisation? 

The move by regulators for real-time monitoring of liquidity, capital and risk is a good portent of the future. Experiments that regulators have been doing with banks on market risk utilities, digital identities and central bank digital currencies show that our industry is reasonably homogeneous with regards to its data sets. 

As an industry, we need to evaluate the effectiveness of systems and processes and their ability to perform real-time, as well as to consider what is truly proprietary or just standard utility for banks. 

True differentiation will be achieved in the future through the use of data turned into digital products and services. Much of the remaining banks will become a utility or shared financial market infrastructure.

Furthermore, banks will increasingly need to become proficient in intellectual property. This means innovating and scaling new products and services for differentiation and commercial purposes to retain margins, or to embrace low margin, large scale business models.

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