Threat from fintech and challengers helps drive up use of consultants in banking and insurance…
Banking, the largest consulting market within the global financial services industry, grew 8.4% to US$13.6billion in 2016.
The global financial services industry also continued to be a very good market for consultants, growing 8.3% in 2016. While the US, DACH and UK remained the industry’s three largest markets, the markets in China and India grew even more strongly.
These findings are in a new report (The Financial Services Consulting Market 2017) from Source Global Research, the leading research and strategy firm for the global management consulting industry. The report says that even the uncertainty associated with Brexit and the US elections couldn’t deter clients from investing in consulting support to help deliver a range of projects from compliance and cost-reduction to higher value, digital transformation.
Using the biggest and most sophisticated model of the global consulting industry, Source also identified that investment in widescale digital transformation was greatest in insurance and banking, with even greater emergence of fintech prompting immediate action. Source says that this the main reason consulting revenues grew fastest in the insurance and banking sectors in 2016.
Zoë Stumpf, Head Analyst at Source Global Research, said:
“One of the key drivers of demand for banks globally in 2016 was the continued emergence of non-traditional competitors, ranging from fintech’s to challenger banks to niche lenders. With these challengers working in a more agile manner, and with customer propositions much more suited to the digital age, they represent both a threat and an opportunity for banks.”
Colin Preston, Consulting Partner—Financial Services, Baringa Partners, added:
“Larger banks know they need to replicate some of the cultural aspects of challenger banks, so they are trying to speed up the way they work.”
Regulation remains a strong driver of consulting demand
The Source report also highlights that regulation remains a strong driver of consulting demand in financial services, particularly in Europe where implementation deadlines loom for regulations such as MiFID II, Basel III, and GDPR. The US is an exception in this regard, with a fear that consulting revenue growth around regulation is starting to plateau as the regulatory focus shifts from the largest players to mid-tiered organisations. But the report adds that there remains growing interest from clients across the world regarding innovative regtech solutions, as well as reporting-as-a-service—a potentially lucrative and long-term play for consultants.
Brexit office relocation could drive a flurry of activity for consultants in 2018
Despite the invoking of Article 50, and the added pressures of a clock that has started to tick very loudly, the financial services industry is no clearer about what Brexit will mean. Where there has been Brexit-related demand for consultants, many of the projects have focused on scenario planning. However, this could be set to change with the possibility of a “hard” Brexit, or no Brexit at all, becoming increasingly real, and driving clients to act, with scenario planning and location strategy turned into a key focus for clients in the past few months. Source believes this is likely to indicate the onrush of a flurry of activity for clients and consultants in 2018.
Steven Culp, Senior Managing Director at Accenture added:“The impetus for significant change because of Brexit isn’t there yet because none of the detail is clear. It’ll be really interesting as we hit 2018, as banks and entities are likely to have made some decisions to move things in one direction or the other.”
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