16 9 THE TIME TO ACT IS NOW BANKS MUST ACT NOW TO AVERT THE THREAT OF DISINTERMEDIATION AND PROMOTE BETTER MARKETS FOR ALL Progress such as this makes it clear that developed market banks must act swiftly to avoid being left behind by competitors from the emerging markets Indeed this is a threat borne out by a 2014 survey from Ernst Young which suggests that Chief Information Officers CIOs in emerging market companies are better prepared for digitalization than those in developed economies The survey found that only 50 of developed market CIOs were highly engaged in using technology to reshape the future of their business compared to 64 in emerging markets The study also suggests there is a risk that banks in developed economies will see digitalization simply as a way of making incremental improvements to the current system rather than a transformation of their business models Of the CIOs surveyed in developed economies 73 saw operational technology as a primary focus although only 55 of emerging market CIOs agreed with this In contrast 60 of emerging market CIOs felt that innovation was where they added most value compared with 46 in developed economies The evidence therefore suggests that emerging markets have a more innovative mind set and one that more conservative developed market CIOs should look to emulate Certainly the transformational potential of digitalization should not be underestimated At the extreme end of the spectrum Kenya is spearheading a drive towards an entirely mobile based system of money the M PESA which removes the role of banks altogether It is unlikely that Kenya would be undertaking such an ambitious scheme if it had serviceable but less efficient infrastructure in place already It is clear at any rate that the pace of change is currently greatest in the emerging markets Indeed in her talk during the 2015 Davos conference German Chancellor Angela Merkel called on European businesses and governments to increase investments in digital infrastructure saying the continent is falling behind the US and parts of Asia The call to arms is therefore clear Banks governments and trade bodies must work together to enact these changes and create more robust and stable markets Get innovating With guidelines in place the imperative is for banks to take up the tools of digital technology and get innovating led by a simple guiding principle follow the client s needs To do this they must remember the three core tenets of convenience trust and expertise providing clients with innovative tailored payments services such as BPO and Virtual Accounts all while offering sound advice and support These moves in turn should be informed by big data which with investment in the right technology and the right talent can offer a clear path to success Certainly banks must succeed in the digital transformation The threat of disintermediation is real Yet the scope for progress is extraordinary Other industries are surging ahead even encroaching upon traditional banking services Given this banks must remember what services make them valuable partners to business and bring those services into the digital age If they can do this not only will the danger of disintermediation be averted banks will instead be making a significant contribution toward the creation of faster more efficient and more prosperous markets

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