The Cloud at Work in Financial Services
Darrel Orsmond, who is passionate about the financial services industry, has as his mandate as Industry Head of Financial Services at SAP Africa, to help the sales and service part of the organisation succeed in the financial services, banking and insurance sectors in Africa. He is responsible for evaluating SAP’s product offerings, determining what trends in the industry are bringing changes, giving guidance to how SAP should be responding to those trends in specific segments of the financial services market. CEO magazine met up with him to gather his perspectives on the fast-moving African financial services industry vis-à-vis SAP.
According to Orsmond, there are quite a number of challenges that financial services companies in Africa are struggling with as they endeavour to operate in an environment that has become dominated by the Cloud. “Good technical skills relating to implementation are in short supply in Africa, and this
tends to push the price up and the demand down. As a result, there is a significant demand for work, but there is a supply shortage. Thus companies spend a lot of money on the implementation of technology systems,” he shares. On the other hand, the scenario has been moulded such that there is an increasing demand for customised solutions from both regulators and clients. Often, this is a dilemma for banks and insurance companies, as these solutions are complicated and could be expensive to implement, something that is made even more cumbersome by the lack of skills, he comments.
The Benefits of the Cloud
However, despite this, the Cloud offers light at the end of the tunnel for those in the financial services industry, for a couple of reasons, Orsmond indicates. For starters, some of the overheads associated with implementing unique solutions in-house go away (such as the purchase and installation of hardware and software), as somebody else is responsible for these, namely the Cloud provider. The Cloud provider offers software which meets industry standards. “The Cloud also means that an organisation does not have to worry about maintenance and upgrade issues, as the service provider takes care of this. Most banks and insurance companies in South Africa, and elsewhere on the continent, are not using the latest software, as they are under the impression that it is too costly and complicated,” he explains. He adds that when these organisations effectively make use of the Cloud, the pressure is taken off with regard to such issues as security and encryption and they are freed up to focus on their businesses as the latest levels of compliance are provided by the Cloud provider.
Another benefit of the Cloud for the financial services sector is that it permits enormous speed-to-market advantages for organisations, which, in turn, allow for huge benefits over time. “The advantage lies in agility, as once you have the Cloud on your side, your ability to change things and bring new solutions increases exponentially. This is because you have full knowledge of whatever technology platform you are using, without having to develop skills in-house. For organisations that do not have vast resources, the Cloud is extremely compelling, as it means they can move quickly without having to make huge investments. It removes capital costs to operating costs, so they are funded off the income statement against their usage and not against building an asset,” elaborates Orsmond. For the very big companies, the business case is similarly compelling, he indicates, because they can get substantial cost and time savings in going to market.
Moving to Digital Insurance
Orsmond urges African bank and insurance companies alike to be digital insurers. The concept of digital insurance is one that is applicable to both and is largely determined by the notion that origination processes that are people-driven are increasingly becoming unaffordable, he explains. Add to this the fact that physical face-to-face customer engagement is becoming a lot harder, with companies (banks and insurance companies) facing an uphill task. “The whole point, therefore, is that if you can leverage your knowledge of the customer in these sectors to make compelling offers via their devices (smartphones, etc.), then you dramatically increase your ability to convert them. In the old model, you had to persuade a person to come to you. But, in the virtual world, if a customer is online and you can immediately assess something about them and engage with relevance, then you enter into a meaningful conversation that might lead to a sale or the modification of an existing one. Innovative banks and insurance companies are starting to work out how to get offers to their customers virtually, whether solicited or not,” he observes.
Orsmond believes that strides are being made across Africa with respect to companies becoming digital insurers. He points out: “All the data says that the number of smartphones in use is accelerating at such a pace that every bankable person is in possession of a quasi-smartphone. So, suddenly you are in the space of intelligent engagement with your customers, and this environment is probably far more fast-moving in Africa than elsewhere. These smart gadgets are an economy on their own and insurers and banks need to get onto the bandwagon or they will be shut out forever. This will not only be on a cost basis, but also based on the fact that they are not going to get the kind of penetration rates they need in order to survive. In this respect, I am convinced that Africa has huge room for growth. Even the local institutions have realised this, which is evident from their activities in buying stakes in institutions up north.”
The financial services industry, the banks and insurance companies in particular are in for exciting times ahead. With the advent of the Cloud and the vast opportunities it provides, many institutions are likely to succeed in turbulent economic times. According to Orsmond, they can ill afford to ignore the Cloud, as it is the very cog that is needed as they make the transition from being mere financial service providers towards being digital insurers.
CASE IN POINT | SAP
by Andrew Ngozo