What does Joseph Sieczkowski, senior managing director and CTO of TIAA-CREF, say when people ask him to describe digital innovation? "It's like what Netflix did to Blockbuster," he said at the InformationWeek Financial Services/Dell Think Tank roundtable event today in New York.
Three key factors on which Netflix innovated helped it surpass the entrenched model for renting videos, Sieczkowski said: customer experience, operational excellence, and changing the business model. "All of a sudden, you don't have to drive to the store. And it's not like you got to the store and there was someone in the back room who knew what you wanted to watch. And you can acquire content differently without worrying about cost associated with physical space. You can put your customers first."
He was joined on the panel by David O'Connell, senior analyst for Aite Group, who cautioned that the digital world means that, like Blockbuster, financial institutions are subject to outside pressures from startups attacking the weak points of their business models.
"Banks are facing competition because there's so many ways to pay your bills now, and while there are cheap ways that banks can give their customers to pay their bills easily, that's not being provided by internal IT departments, but by third parties," O'Connell said. That means more firms have access to the technology that consumers seek, and firms must decide whether they want to take on software development themselves.
Sieczkowski supports internal development. TIAA-CREF recently appointed a chief digital officer to help unite the digital strategy across business units. "There are specific things that will give you a competitive advantage, and some of our technologists are second to none," he said. "We have to be good stewards of our constituents' money and do it the right way."
That was the tactic taken by MetLife, according to Aite Group's Todd Eyler, who is working on a case study with the insurance firm. Facing declining sales in certain customer segments, MetLife set up a new division for direct sales, products, pricing mechanisms, and an outsourced technology infrastructure.
"Crisis can sometimes be the mother of invention," Eyler said.
When it comes to existing in an omnichannel world, O'Connell said financial institutions are doing a good job of setting up channels for outgoing information, but they need to do a better job of leveraging that data for a two-way conversation. But Stacy Swanstrom, senior vice president for Nasdaq, said that it can be difficult for financial companies to work with intermediaries to the customer, because of fears over information security.
"There's a lot of opportunities in terms of taking and displaying data to tell customers what they can do better," she said. "But our customers are sometimes reluctant to give up their mid and back office. It's worth a lot to them."
Nathan Golia is senior editor of Insurance & Technology. He joined the publication in 2010 as associate editor and covers all aspects of the nexus between insurance and information technology, including mobility, distribution, core systems, customer interaction, and risk ... View Full Bio