The financial services (FS) industry is in the midst of a digital transformation, where customers are becoming accustomed to great experiences and raising their expectations when interacting with their FS providers. We believe the industry has reached an inflection point, where we will begin to see separation between the providers that are the eventual winners and everyone else.

The next 12 – 18 months will be critical for FS leaders on this journey, as they will be called on to make important decisions that will shape their company’s future viability. Emerging and maturing technologies such as enhanced analytics, intelligent automation, cloud computing, AI, IoT and augmented reality will reshape the near-term future of financial services, the products offered and the experiences delivered to both consumers and commercial clients.

According to KPMG’s 2018 global CEO survey, the majority of CEOs polled are ready for the challenge, with 95 percent of U.S. CEOs polled seeing disruption as more of an opportunity than a threat, and 88 percent feeling prepared to lead their organization through a radical transformation.

The CEOs see new technology skills as critical to supporting their organization’s growth plans, with emerging technology and scenario- and risk-modeling specialists their top priority. And they are working with fintechs to augment the creation of best-in-class customer experiences.

As evidence, investment in U.S.- based fintech companies surged to $14.2 billion across 427 deals during the first half of 2018, as investors poured money into startups in fintech segments such as regtech and blockchain, as well as late stage companies, according to the KPMG Pulse of Fintech report. Investments in blockchain-related firms already doubled in the first half of 2018 compared to 2017.

A few of our observations about the impact of digital transformation include:

• The significant fintech activity noted above is evidence that digital savvy organizations have been picking off bits and pieces of the traditional FS value chain by creating best-in-class experiences

• The new reality is that a consumer’s best experience anywhere becomes their expectation everywhere

• This level of disruption is now accepted as the new normal and most FS companies have made the full pivot from trying to validate the level of disruption to developing their own tactical plans to create best-in-class experiences

• Many companies are still focused on bringing down the cost to serve, but mostly in the context of providing incremental funding to leverage digital broadly as a growth driver

To date, consumers have shown a willingness to unbundle their lives by going to many apps to get bits and pieces of capability delivered through great experiences. However, KPMG believes this has created “digital fragmentation” as our lives and finances have been distributed across a myriad of apps, many with disparate login routines, passwords and loyalty programs.

We believe this level of “digital fragmentation” has reached a tipping point, causing a movement to simplify and re-bundle across 4 key themes:

1 Make it Easy – Help me clear the clutter and un-fragment my life.

2 Know Me – I don’t want to repeat myself. Use the data you have to serve me better.

3 Value Me – Since you know me, then help me reach my financial goals and aspirations.

4 Protect Me – Above all else, I need you to protect my money, identity, and data.

The digital FS provider of the future will help customers achieve their goals by connecting their finances to specific journeys (buying a home, saving for vacation, planning for a family) and providing an ecosystem of providers through open-APIs delivered under one seamless and simplified brand experience.

This requires an ability to leverage both internal and external data and apply advanced analytics to personalize experiences at a more granular level, eventually down to the individual consumer. It also requires a realization that legacy technology, data warehouses and processes don’t prevent an organization from providing best-in-class experiences.

Those financial services companies that make the commitment and dedicate themselves to digital transformation and leveraging technology to their customers’ benefit, will be the winners in this ever changing world of finance.