This issue of Frontiers in Finance addresses the areas where financial institutions should look in order to build competitive advantage and increase profitability.
The financial stories which hit the headlines tend to be those involving global developments or macroeconomic issues: the impact of quantitative easing, low interest rates, rolling waves of regulation and the like. These are traditional and familiar challenges. Nevertheless, the context in which they must be tackled is constantly changing, so the response must change too.
There’s no doubt that strategic thinking is increasingly vital. Technology is evolving more quickly than ever. Reliance on social media is becoming ubiquitous, not only for casual conversation but also for corporate communication and business processes. Consumers are increasingly demanding constant, online access to every service. In turn, the explosive growth of information technology and communication is generating vast quantities of data about customers, markets, products and preferences – which will be invaluable to those companies that learn to exploit it.
These trends are accelerating. So it is more than ever critical to ensure that the vital task of absorbing the current regulatory overhang is not the sole focus of attention. The very real challenge of getting fit for the ‘new normal’ has to run hand-in-hand with preparing both for short-term disruptors and for the impact of long-term megatrends. In the first category, we have already seen significant inroads made into the traditional financial services industry by companies such as Apple, PayPal and others. In the slightly longer term, the industry will see major impacts from demographic and social change, and from the increasing consumer tendency to value ease of transactional operations over enduring relationships and brand loyalty.
It is easy to argue for greater foresight, strategic thinking and preparedness. But it is far from clear how to actually begin engaging with the ‘unknown unknowns’. It is this topic through the lens of finding competitive advantage that the articles within Frontiers attempt to tackle.
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