I came across a linguistic definition this week which I believe is pivotal to the way all of us, in financial technology services, think about developing products which deliver real value to users.
It’s the difference between the words 'digitisation' and 'digitalisation'. Digitisation is the conversion of text, pictures or sound into a digital form that can be processed by a computer. Or if we put the word into a sentence, like we used to do at school - 'Ross scans his last three months of bank statements, saves them onto a pdf on his PC and emails them to his IFA.'
Digitalisation is something very different indeed. Digitalisation is more the process of leveraging digitisation to improve business processes, turning digitised data into intelligence and creating opportunities to action knowledge - a much broader concept which produces real business benefit. Or if we’re back in the classroom again, it’s much more of a 'Ross gives permission to his IFA to use open banking to access his transactional data, so that he doesn’t need to digitise his bank statements himself, and his data can be used to make real changes to his financial life.'
A recent report from Deloitte, Innovation in Private Banking & Wealth Management, applies this linguistic distinction to wealth managers in particular and suggests that 'Wealth managers are mainly digitising their traditional business model to reduce their cost base: and fintechs are either offering digital solutions to support wealth managers or are providing digital offerings to compete for digitally-aware private clients. The innovation efforts of wealth managers are therefore concerned mainly with industrialisation efforts, and those of fintechs with disruption: neither are focusing on innovation to embrace a change of the Wealth Management business model.'
Ouch! We could do better.
But to be fair to our industry, we are definitely putting the work in, and progressive IFAs and creative fintechs are making huge leaps to transition from digitisation processes to digitalisation transformation.
Open Banking technology, for example, has swung wide the doors of opportunity for digitalisation and the accruement of real business benefit to both IFAs and their clients. For example, Visible Capital’s platform for wealth managers allows their customers to provide secure access to not only their transactional data but investments, pensions, insurances and wills, ensuring that IFAs are able to work with the data to provide finely tuned advice and pinpointed product offers.
This is where the real transformational work happens! This is where data is turned into real, tangible benefits.
For a customer, there is a danger that digitisation simply means transferring the time consuming process of populating forms from the IFAs to the customers themselves. Instead of sitting in the IFA’s office going through the paperwork with a cup of tea and a complimentary hobnob, they are sitting at home sorting out the paperwork and inputting the data on their own PCs.
However, with full blown digitalisation processes, Visible Capital’s IFA clients are able to save days of data processing for both parties and ensure that valuable data sets and knowledge banks can be actioned, transforming the relationship between IFAs and their customers and creating new insights and business benefit opportunities.
Whilst the Deloitte authors might be right that there are some wealth managers and fintechs stuck in the digitisation phase who could do better, we believe there are many others out there who are definitely deserving of a sticky gold star.
by Ross Laurie CEO, Visible Capital
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