Business GrowthIT StrategyStrategy Planning

Is It Time Financial Services Incumbents Paid Attention To This ‘Product’?

I was once a Product Manager at a financial services firm. Traditionally products in financial services (FinServ) industry have been intangible financial services: loans, savings accounts, mutual funds, wrap products, hedge funds, etc. With FinTech entrants disrupting the industry, it’s probably time incumbents embraced the role of technology ‘Products’ in their business model.

FinTech startups are gaining foothold by providing consumers easier access to services – especially where there’s significant friction in the value chain. For example, consider Lending Club, which is a peer-to-peer lending marketplace. It’s been successful because it reduced the friction borrowers experienced – low approval rates and weeks to get approved funds – when they went through banks or credit unions.

Incumbents can respond by making their current services more convenient, by making them accessible to segments with pent up demand and/ or by removing friction within their value chain. Technology makes such innovation feasible in a cost effective way – hence the need for Technology Product Manager (PdM). Incumbents who figure the right way to incorporate tech products into their business model will survive and thrive during this industry disruption.

Some incumbents have already started this transition. Before long, more will see the benefits and create technology product management teams. This inclusion will have implications for incumbent’s IT organization. It could also influence the product management discipline.

Implications of Product Management teams on FinServ IT organizations

My role as a product manager involved managing a technology product. I was working at large Broker Dealer where the CIO had the foresight of introducing technology product management discipline to a traditional IT organization a few years ago. It suffices to say that such an introduction involves a learning curve before the incumbent can effectively use technology products in its business model. Here are some implications for the FinServ IT organization:

Communication and advocacy beyond the IT group

Product management discipline, like IT security, will need involvement beyond the IT team. The role of a PdM is misunderstood even in the Tech industry where it’s existed for some time. So, when introducing to the broader FinServ industry, the role needs to be explained. It’s important to ensure that a PdM’s role is defined clearly, communicated broadly and consistently, and until advocated until it’s institutionalized. And this communication should start from within the IT group – and extend to all business and staff units of the firm.

Transparency for business into the ‘product development’ process

If technology products by the incumbent involves improving the delivery or value of an existing financial product, PdMs will be partnering closely with business product managers. These business stakeholders may not be familiar with agile or lean methodology concepts. So, to ensure an effective evolution, IT leaders need to explain the technology product development process to business groups and align on its implications to business stakeholders’ day to day routine. Gaining that alignment earlier on will reduce misunderstandings and inefficiencies.

Shift from ‘system’ paradigm to ‘product’/‘solution’ paradigm

Until recently, traditional FinServ IT groups considered individual IT systems as their ‘assets’. Oversight, upgrades, maintenance, resources and budgets were decided at the asset level. As product management discipline gains wider acceptance, FinServ IT will start seeing technology products as their assets, with budget and resource allocation made at the ‘product’ or ‘solution’ level. This will make it easier for FinServ IT teams to communicate enhancements in terms of ‘benefit to the user’ rather than ‘number of system changes’.

Technology as a profit center

Just because it’s responsible for a ‘technology’ product, the product management function/ team need not reside in the IT organization. Finding it a home within relevant business group – based on the pain point it is solving – or creating a separate business unit may be worth considering. The latter will also shift the perception of IT from being a cost center to a profit center. Further, this move may help the organization acknowledge the customer’s perspective (customers don’t – and shouldn’t – care how you are organized or how you deliver the solution; they only care if your solution solves their pain point).

Influence of Financial Services industry on Product Management discipline

I’m hoping that it’s foray into the Financial Services industry will also help product management discipline evolve and mature further, especially with regards to PdM talent that comes from the industry.

Demand for PdMs who bring industry domain knowledge

There are different viewpoints on what makes a great PdM but there’s consensus that PdMs should know their customer and customer pain points very well – i.e., have industry and market knowledge. But job postings for FinServ technology product managers show a strong bias for technical expertise.

When a PdM job posting for a recently disrupted industry asks for “5+ years in a product management role; prior experience developing and implementing products”, it’ll likely attract candidates from tech industry. For highly regulated or nuanced industries like Financial Services or Healthcare, teaming a PdM with significant industry and market knowledge with an Engineering lead, who can bring best practices and cutting edge tech ideas to the table, will lead to a more relevant product.

Technology products inclusion in FinServ incumbents’ business models reflect that the demarcation between business and technology is blurring in today’s world. FinTech startups are currently attacking incumbents by unbundling their services. But if incumbents can develop effective integrated solutions of very convenient individual products, they will thrive. And that journey starts with incumbents exploring the role of technology products in their business model.

(Authored by Sandhya Krishnamurthy, CEO and founder of S2E Consulting, LLC)

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