The digitisation of the financial sector, and in particular the asset servicing business, has accelerated in recent years, notably as a result of the pandemic, but also of the new technologies that are omnipresent in our daily lives. The subject of generative artificial intelligence (AI) is on everyone's lips, such is its promise of efficiency.
Against this backdrop, the ABBL1 in collaboration with Société Générale published its second survey on the adoption of generative AI in the financial sector in May 2024. 94% of banks in Luxembourg see generative AI as an opportunity.
The race for innovation opens up new opportunities while creating challenges for traditional players. In this context, the dilemma of innovation arises: how to find the right balance between innovation and selectivity, while taking into account the financial constraints faced by companies?
Why change?
Innovation is essential to remain competitive in an environment that is both competitive and constantly changing. Asset managers, who are the main customers of asset servicers, have the same constraints and expect innovation, competitiveness and quality of service from their service provider. New technologies in particular are helping to meet these changing needs. Where artificial intelligence might be considered the best productivity tool, blockchain and tokenisation will enable new business models to be redefined. These two technologies are not in competition, but rather complement each other in the search for its "blue and red ocean zones", as defined by researchers Chan Kim and Renée Mauborgne in 2005 in their book "Stratégie Océan Bleu: comment créer de nouveaux espaces stratégiques". The red ocean represents the existing market, where companies fight for market share by competing with each other. This creates an intense competitive environment, where companies compete mainly on price and functionality. In contrast, the blue ocean represents an unexplored market space, where companies create new markets by offering unique and innovative products or services. In the blue ocean, competition is less intense, as companies create an uncontested market space.
In November 2022, SGSS Luxembourg took part in the issue of a bond by the European Investment Bank as account holder. At the same time, we continued our efforts to automate with AI and improve the customer experience. In 2024, SGSS was rewarded by Celent2 for its digital transformation, in particular for its mySGSS customer portal.
Innovation in a context of selectivity
However, this race to innovate can generate significant investment, and the financial sector faces strict financial constraints. It is therefore crucial to be selective when choosing which innovation initiatives to undertake, focusing on those that add real value, deliver a significant return on investment or generate an unprecedented customer experience. This requires in-depth analysis of projects and the ability to reconcile, on the one hand, customer needs, market trends and organisational strategy with a rigorous assessment of costs and, on the other, the potential benefits of each innovation project with the associated development resources and projects. At SGSS, every project follows a Lean Portfolio Management (LPM) methodology to ensure this selectivity.
What are the risks?
It is therefore important not to consider innovation as an end in itself, but as a means of achieving objectives in the service of an irreproachable customer experience. Failure to master innovation can entail major risks, particularly in terms of data security and regulatory compliance. Striking the right balance between innovation and caution is therefore one of the keys to success for organisations.
Ultimately, innovation is an essential driver of growth and competitiveness, but it must be carried out in a considered and strategic way. Selectivity will be the key to success in reconciling these challenges.
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Laurent Marochini - Head of Innovation at Société Générale Securities Services Luxembourg.
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