Chasing the Digitally Driven, Part 2

(Mark Dangelo is president of MPD Organizations LLC, featuring books, industry reports and articles. He is a strategic management consultant, outsourcing advisor and analytics specialist with extensive process, technology and financial results and is a frequent contributor to MBA NewsLink. He can be reached at or at 440/725-9402.)  

 Tomorrow’s digitally linked world isn’t your father’s computer science, it’s not even close. Digitization is nothing new (it is representative of computer science cornerstones dating back nearly 40 years ago)–its acceleration and pervasiveness is where adaption, integration, organizational, cultural and implication challenges make winners and losers.

Digitization is fundamentally about what you do with it–explicitly, results!   Furthermore, how information is gathered, processed, merged, extrapolated, retired, transacted, protected, managed, strategized or anything in between cradle-to-grave regarding the sourcing chains of all financial industry’s products and services, is likely inadequate when assessed against transformative performance standards.

For the past four years, chasing the goals of digitization (and realizing measured and consistent returns) has been comparable to chasing an apparition.   In a corporate era defined by aftermaths and results against consumer’s behaviors and sovereign economies, where is digitization heading?  How will it impact our current operations? What are the pathways to embrace for assurance of success when contrasted against where we are today?   

The principle of cradle-to-grave information management is nearly meaningless against the morphing of data, let alone the 20-fold increase expected in the next six years. How can an organization keep up? Inside sovereign borders that restrict electronic access (e.g., China), where does the tipping point of financial safe-and-soundness meet free-market and “moral” restrictions to promote growth–or is it at the edge of a cliff as data become more important than those seeking to strictly control it (or their ability to do so)?  

Regardless of society, individual or blue-sky prejudices, the objectives necessary to guide integration of digital solution sets into corporate infrastructures (including cloud deployments) surround four main categories–efficiency, profitability, consumerism and insight (i.e., intelligence). These markers need to be explicitly defined for every enterprise seeking a digital vision and mission, be it be in mortgages, capital markets, consumer lending or digital media.  

A Golden Age with Copious Green Fields

For technologists and developers of software, the past decade has been thrilling as the science of data and its generation spiked new corporate disciplines, including machine earning, big or vast data, advanced AI, data discovery, business analytics, market repositories (assembled for identification and resale), machine-to-machine interactions, Internet of Things, sensor science and mobility advancements and efficiencies. Holistically, global IT spending has reached a near $4 trillion annual spend (i.e., telecomm, hardware, software, services and data) growing at a normalized rate of 3-4 percent.  

While some professionals label these advancements as (positive or negative) disruptions, risks, outcomes, structural shifts, consumerisms, innovation or as convergence in delivery, whatever it is called the quantitative high-water marks continue to exceed projections. For instance:  

•                     By 2018 global broadband speeds will reach 42 megabits per second, a nearly 250 percent increase from 2013 (source, Accenture).

•                     Global residential mortgage markets will rise from $25.75 trillion in 2013 to $31.1 trillion by 2018 (source, even as loan origination and servicing costs in the U.S. increase (source, MBA).

•                     One billion Internet of Things will be installed in 2015 bringing the total base to 2.8 billion (source, Deloitte) as embedded device sensors reach may reach 10+ billion by 2016 (source, Accenture).

•                     Financial technology research investment in 2013 was measured in billions per year, but in late 2014, investments were measured in billions per month (source, PWC).

•                     Business data volumes continue to increase an average of 60 percent per year (source, British Telecom), while poor or bad data costs an organization 25 percent to 30 percent of topline revenue (source, Fathom).  

But there are many implications for every single digitization product, behavior or service. These associations of digital events are more commonly linked together to influence or disrupt established industries. By linking, layering or extrapolating digital innovations, fast-movers may shed cultural induced thinking and create generation leaping opportunities that were previously unexplored.   

More Than Just Breakthroughs

Somewhat out-of-phase from the initial breakthroughs, (re)birthed out of necessity and innovative emergence, come cyber-security, multi-level (learned) compliance, consumer privacy, data obliteration, digital sources and uses, value measurements (and loss of benchmarking), brand impacts, intellectual rights management, governance and government rules of engagement, rich-media management, storage management, integration and quality assessment software, cyber legality, digital transformation and a hundred others in advanced stages that weren’t even out of the R&D labs (or basements) just two decades ago. Effects of these can be seen in a few statistics:  

•                     Annually, up to one million cybersecurity positions go unfilled (source, Internet Systems Security Association). 

•                     Seventy-five percent of firms believe they need emerging data analysis skills, while 42 percent cite time and resource deficiencies as critical impediments (source, SAP).

•                     By 2020, B2B and B2C internet transactions will exceed 450 billion per day (source, IDC).

•                     Along with the meteoric rise of analytically educated data full-time employees, expenditures on IT services will soon break the $1 trillion mark (source, Gartner).  

Beyond digital statistical one-offs, CSC in its 2015 trends discuss a collaboration consequence labeled “cocreation.” In it, companies come together to create digital ecosystems within “insurance, payment systems, healthcare, transportation and more” collectively sharing the product and service benefits These “disruptive” compilations open up new opportunities for markets and profit, while transforming employee skills, time to delivery and customer expectations and usage.   

Finally, operational transformation challenges and a dearth of organic growth opportunities will lead many financial and non-bank institutions to seek out merger and acquisitions to boost consumer relevance as a means to increase profits. With nearly $5 trillion in deals expected in 2015, post-deal integrations will make or break not just operational efficiencies, but also create cocreation digital opportunities that will initiate deal synergies beyond traditional or original guidance.  

Pandora’s Box has Been Opened

With our economies and financial supply chains undergoing a very broad digital awakening, it is interesting to see front-page headlines touting, “Increase capital and shelve Dodd-Frank.” This news is generated from yesteryear leaders who forgot that if we put the Great Recession back 20 years, lack of computing and digitization may have let the likes of Countrywide and Bear Stearns survive.   

Yet, with information discovery and global financial services system integrations embryonically available at the start of the past decade, losses, risk and unwinding could not be hidden (perhaps if they could, buying once leading brands time to recover) as information was readily available. We can only go forward and assuming or making a case for restoration of controls forgets the methods, techniques and depth of information available to today’s modern investor, lender and borrower.  

Fast forward a decade (yes, we are nearly a decade from the start of the last financial crash), how will rolling back regulatory principles at a time of unprecedented access serve a benefit when it will take another decade to do so? It is like fighting for life boats when there are none. Why not recognize the impacts of digital availability and its multifold increases and architect a system (and governance and compliance) that meets a future–rather than assume like the Luddites that the IT world has not already begun to shattered Moore’s law? And, as we all have been educated, past performance is no guarantee of future success, so why try and think we can restore a time when technology was less pervasive?  

While my sarcasm is not even remotely veiled (apologies to the Federal Reserve chairman who didn’t believe there was a housing bubble back in 2005), digitization across financial services will completely mutate existing practices, shift risk and greatly reward leaders who assemble the best possible (and forward moving) knowledge-derived decision making capabilities against costs, predictions and exposures.  

Digitization requires a difference in thinking, different skills and a different attitude. It also requires, in some cases, a destruction (or disruption) of the past. Not everything digital is innovatively relevant to banking, finance and insurance services. However, as we have seen in the first two parts of this series on digitization, events are clearly set to disrupt nearly all aspects of financial procedures, products and services. But unlike the past where destinations were defined at the end of a monolithic solution, tomorrow’s journey has very little to do with either.   

Digitization is a journey filled with vast growth, unstructured solutions and fluidity that will chafe many established financial institutions. For institutions like TD Bank, which is investing in more brick and mortar locations, you can safely bet that these future branches will be digitally provisioned with nearly every high-tech solution designed to embrace customers expecting more than a simple human interface.   

Digitization requires skeptical thinking, but in the end it will create a chasm between those who leverage it embracing its uncertainty and frequent transitions.    And what is more psychology than technology, just because it is Tweeted, posted as a status, pinned on a site or anything else, does not make it real or even valuable. Digitization brings a whole new meaning to “be careful what you accept as fact.”  

Coming up in Part 3, a closer examination of cultures and traits that promote acceptance, adoption and adaptation.   

(The views expressed in this article do not necessarily reflect the views or policies of the Mortgage Bankers Association. MBA NewsLink welcomes your contributions; articles or inquiries should be submitted to Mike Sorohan, editor, at