The challenges behind the “Amazonisation” of financial …
What is “Amazonisation”? Luxherald takes a closer look at the underlying revolutions happening in the financial services industry, as firms seek frictionless customer experiences and to extract value from huge volumes of data.
“I don’t believe that data is the new gold.”
So said Sherry Madera, chief industry and government affairs officer at the London Stock Exchange Group, during the Luxembourg for Finance “Focus on Amazonisation” event on 9 June. The neologism in the event’s title derives from a 2019 LFF report and refers to the client-centric platformisation of the industry in the mode, widely seen as exemplary, of Jeff Bezos’s online retail giant.
“The one building block of Amazonisation for financial services […] has got to be data,” said Madera. “I don’t believe that data is the new gold. But perhaps data is something more fundamental. Perhaps it is the sand.”
The amount of data being produced worldwide, Madera explained, is projected to go from 33 zettabytes in 2018 to 175 zettabytes in 2025. One zettabyte is as many bytes, roughly, as there are grains of sand on every beach on the planet.
Creating value out of raw data
Incredible amounts of effort and money are being put into turning that data into value. Madera reported that nine in ten financial services firms already use machine learning in some form or another, while three in four are making “significant” investments in new data technologies.
According to Innovate Finance, worldwide investment in fintech reached $44bn in 2020.
Demand for smooth user interfaces with financial services platforms has only grown since the covid-19 pandemic. Edward Glyn, managing director and head of global markets for funds network Calastone, pointed out at the LFF event that more than a quarter of Amazon Prime users complete an entire transaction–from seeking a product to paying for it–in under three minutes.
Amazonising financial services is, he explained, “about making the industry more interesting, more compelling, more user-friendly, but then encompassing all of that [in the] experience, that whole end-to-end transaction lifecycle, in a way which is as frictionless as possible–so you rip out any unnecessary costs, you make it easy, it’s cheap, it’s more viable, and everyone wins.”
As the financial sector seeks to Amazonise itself, so must regulatory bodies evolve in the resulting landscape.
A May 2021 report from Luxembourg for Finance stated that, in a recent survey, 57% of financial services professionals thought that regulation was not keeping up with sector-wide digitalisation trends.
When asked by LFF moderator Chris Hollifield if regulation is becoming a problem, given that financial service offerings frequently include outsourced services and thus multiple companies, a CSSF spokesperson said: “No.”
Karen O’Sullivan, head of innovation, payments, market infrastructures, and governance at the CSSF, went on to comment that there are indeed more layers of complexity. “The fact that there is more and more use of digital platforms–it doesn’t change [the CSSF’s] role,” she said. “What it does change is how we need to act or work to meet that objective.”
“There is–in my view–no new risk as such, no real problem or challenge to the supervision. It’s more [about] seeing how all these techniques or platforms or solutions can accentuate certain of the risks that are there already today.”