NTT Data Services

NTT Data Services: Transforming insurance with Digital Business Platform

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A global survey of NTT DATA Services reveals that the financial services and insurance sector (FS&I for Financial Services and Insurance) is about to undergo profound changes. Digital disruption forces 61% of financial services and insurance companies to move away from traditional business models. The solution of the Digital Business Platforms seems like a serious option!

Main results of the study

A few years ago, the great leaders of the FS & I did not feel affected by the changes related to new technologies. In a 2016 NTT DATA survey of bankers, only 7% felt that financial technologies were a real threat. Only 15% thought they would invest in a modernization effort over the next three years.

Three years later, these same leaders are forced to change their way of working. The results of this new survey prove it. For good reason: the growing expectations of customers, the unexpected competition and the evolution of the platform economy. All driven by digital technology. It’s not their direct competitors that drive change, but rather retailers and technology innovators like Amazon, Apple, Google, Netflix or Uber. Their strategic weapon of choice is the Digital Business Platform (DBP).

Le temps est venu de la transformation

The Digital Business Platform offers consumers a wide range of personalized products and services. Most are not created by the platform owner. The goal is to provide a unique experience and quality service 24/7 to consumers. In 2019, 9 out of 10 global FS & I say the time has come to shift to digital. It’s not just about small investments, because change has to be fundamental.

Digital market forces are changing operating models

The study asks FS & I: What trends will have the greatest impact on your business over the next three years? The three main market forces identified are new technologies, increased competition, and changing consumer behavior.

  • New technologies: The survey reveals that 53% of FS&I see new technologies as a lever for their business (artificial intelligence, machine learning, blockchain …).
  • Increased competition: 46% of respondents say they are concerned about the threat of new competitors. These are the fintechs (fusion of “finance” and “technology”), insurtechs (fusion of “insurance” and “technology”), and giants of technology. FS & I are then forced to react to the success of their new competitors. The Insurtech Impact draws up an annual ranking of the best FS & I companies which is very useful for getting to know the new competitors in the field of insurance. Note: on this subject, several other reports are relevant, like the works of Oliver Wyman, or even this blog!
  • Changes in consumer behavior: 44% indicated that changing customer behaviors were of paramount importance. In fact, consumers want to interact with financial service providers in the same way as they do with retailers and other businesses: via the Internet and, increasingly, through smartphones.
Les tendances touchant l'assurance à 1 et 3 ans

Market forces are driving business models changes

These key market forces – new technologies, new competition and new consumer demands – will continue to propel the financial services sector into the digital future. This change is pushing most financial industry executives out of their comfort zone. However, 61% of respondents say their institution is moving away from the traditional service provider business model that only serves their own products.

Les mouvements de marché qui touchent l'assurance

On the other hand, fintech and insurtech companies have all new business models. These avoid the expenses associated with physical buildings and technological infrastructure layers. This allows them to create financial products and services for mobile customers that require self-service offerings at competitive prices. To know the best insurtechs in their field, insurtech impact 2019 unveils the financial companies whose digital transitions are the most successful.

Digital Business Platforms are a holy grail to leverage digital opportunities

How can FS & I compete effectively in this dynamic market and meet growing customer expectations? By working with DBP (Digital Business Platforms) and partner ecosystems.

Digital business platform - Ecosystèmes

A digital enterprise platform (DBP) is a framework enterprise that allows multiple business models to be built and supported by a single technical framework. An ecosystem of digital partners is a set of companies interacting in a shared market of products or services. The DBP infrastructure manages the secure exchange of customer data, oversees authentication and authorization, and ensures regulatory compliance.

Note: You can review on this topic the excellent article about the ecosystems by Bain.


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Early stages of maturity for Digital Business Platforms

Our study shows that many companies are in the early stages of building DBP. For the moment, only 23% of FS & I companies have a DBP that works and provides commercial benefits. The remaining 77% of companies are in the early stages of planning to integrate digital capabilities into their traditional central systems, or have no plans.

Digital business platform - Maturity stages

Insurers are in the lead! Insurers are ahead of any other financial sector, as 32% of carriers have already developped a Digital Business Platform

NTT Data Services Research Paper

FS&I expect meaningful business benefits thanks to Digital Business Platforms

The goal of DBP is to unleash the potential value of digital technology and platform economics, benefiting all participants in digital partner ecosystems: FS & I, fintechs, insurtechs and other partners, as well as customers. The 23% of companies that have already created Digital Business Platforms are reaping the first benefits.

A building block approach to develop capabilities

NTT DATA estimates that 10 key capabilities are needed to build DBPs in several steps:

  • Step 1: Maintain customer relationships and manage customer privacy, preferences and permissions.
  • Step 2: Incorporate emerging technologies (artificial intelligence, blockchain …) and collaborate with new partners.
  • Step 3: Access customer data and ensure the security of this data.
  • Step 4: Integration with internal systems (core, distribution, etc.) and adding new distribution channels.
  • Step 5: Launch new products, analyze and target the best customers, and finally, integrate third-party products.

Current state of investments in Digital Business Platforms

The study shows that despite the limitations of existing systems – and the expected benefits of a DBP – most FS&I companies continue to play the role of advocate by investing heavily in solving current system problems rather than initiatives of transformation.

Digital business platform - State of investments

FS & I companies are taking the first steps towards digital transition by investing to launch new products, building better customer relationships and improving the consumer experience.

Partnering with fintechs and insurtechs is a dominant strategy

How do FS & I companies, with limited resources, develop offerings that align with those of banks, insurers and other retailers? Quite simply, allying with fintechs and insurtechs.

83% of companies confirm that they will have to work in the future with fintechs and insurtechs. 78% report using external partners to quickly integrate a full set of features and digital capabilities (80% or more) into their DBP to meet the digital expectations of consumers.

Partnership is a major strategy, not only to develop and sell products and services, but also to fill gaps in FS & I that offer only services from their industry.

Digital business platform - partnerships with insurtechs

Top strategic priorities

Open banking refers to the use of application programming interfaces. This makes it possible to create applications and services around financial institutions. The mastery of this digital marketing and engagement was selected as the number one strategic priority by 54% of respondents. In addition, 39% of respondents give priority to improving the agility of their services. These two strategic priorities complement each other with respect to the desire of bankers and insurers to hyper personalize products and market them.

FS & I companies face new challenges to satisfy their customers: transforming a traditional industry, inspiring new business models, participating in the platform economy and even improving society.

Digital business platform - Major obstacles

Open API to compete globally

To achieve their digital transition, FS & I are turning to Open APIs. APIs set standards to support this interconnectivity faster and more efficiently. They are flexible, dynamic, and allow banks to add new services, products, and features over time without making major changes to their integration architecture.

Open banking forces banks to no longer be a vertically integrated business, as the new business world operates with horizontal layers that connect to each other and exchange data easily. Now, leaders need to see APIs as potential products that can generate cost savings and additional revenue. For example, 74% of businesses with mature DBP (at Step 5) plan to create value-added APIs to monetize or launch an application store.

Jinnbee can help you in the definitoin of your strategy on systems opening and APIs.


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Major obstacles

The survey identifies eight obstacles to the creation of digital business platforms:

  • technological architecture,
  • the integration,
  • an overall business strategy,
  • the organization of cross-functional teams,
  • objectives and cost sharing,
  • the attractive business case,
  • organization and
  • sponsorship of the leaders.

A vast majority of FS & I continue to work with older versions of central systems. Existing technology therefore remains an important anchor that slows progress.

Recommendations to seize opportunities of platform economy

Finally, some recommendations are given by NTT Data Services:

  • Creating a digital culture: Much more than a business model, it’s a state of mind, a new way of working by being open, connected, and transparent. By immersing themselves in digital culture, customers, partners and business leaders will notice the benefits.
  • Adopt the cloud and new technologies: Turning to technologies such as artificial intelligence, and working exclusively with digital tools such as the cloud, will allow the company to evolve and improve its skills very quickly.
  • Think beyond the four walls – look for partnerships: This is the end of vertically integrated business models. Partnerships are now at the center of business strategies. With its international landscape of insurtechs, Jinnbee accompanies you in this strategy of partnerships
  • Commit to the digital customer experience: Digital can not be considered a mere channel, otherwise you risk making the same mistakes as so many organizations that viewed the Internet as such.
  • Create an organization of transformation and innovation: This is the biggest challenge facing the company. We recommend creating an agile business model and rethinking your business model to be more responsive.

The industry recognizes that it is in the midst of a transition to a fundamental digital change. The results of the NTT Data Services survey suggest that FS & I companies have an excellent opportunity to improve their business strategy in the face of increased competition and ever-increasing customer expectations. Leaders who refuse change will be in decline. New leaders will be on the rise. Finally, the strongest brands of all will be those that will win the best partnerships.

NTT Data Services: Transforming insurance with Digital Business Platform
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