The financial services sector is changing almost beyond recognition.

Hyper personalisation, digitisation, increased regulation, both disruptive start-ups and major brands entering the market at an increasing pace… these are just some of the challenges facing traditional operators and burgeoning competitors.

Q. What are the big challenges in the financial sector right now?

The financial services world is going through significant transformation driven by a wide variety factors from customer expectations to digital developments. The breadth of these changes is increasing complexity, and all this within a regulatory environment.

Not only are these changes large, but they are also happening rapidly, introducing totally new business models.

This mean that the route to future success may well be based on actions that the organisation has absolutely no previous experience of. So unlike previous change where institutions changed piecemeal now the structure and entire way of working is transforming at the same time.

This is unprecedented.

It’s also in areas we don’t first think of. The impacts of fintech are often seen as being about the tech elements of the organisation but they also have significant impact on people.

Since the financial crisis employment in banking has dropped by over 40% in Europe. Not only that but the type of people you now need is changing as well, so you need not only fewer people you need a different internal demographic as well. That’s not easy to achieve.

Q. In your own experience, what is digital in particular doing to the way the financial services industry is operating?

It is changing the whole way that organisations work top to bottom. That’s challenging enough, but even more challenging is changing the mindset of people who have worked (and developed their way of thinking) in a non-digital environment.

What should be happening and what is happening are perhaps slightly different. Inevitably people and organisations need to recognise the need for change, and that in itself can take time. Some parts of financial institutions have traditionally been slow to change. But change is being forced on them.

I would say digital is enabling:

• New disruptive competitors emerging
• Changing customer expectations
• A deeper look at the cost of legacy systems – is there a cheaper way of doing what we do?

And these are combining with:

• Low interest rates
• A regulatory burden that never decreases

As a combination of circumstances, that’s pretty much a game changer – a new world you need to move into or face a slow decline into failure.

Q. Where does the greatest challenges lay – let’s take the traditional banks first – is it getting the right technology, developing internal people to utilise that technology, or hiring great external people to drive the change?

I think there is a step that precedes all of those – what is our optimum market and customer? There is a real possibility that this may have changed with the digital revolution and arrival of new players.

Customers are not homogenous, their demographics, incomes, expectations, mindsets, and even lifestyles are all different and maybe dynamic. Yesterday’s profitable customer may not be tomorrows.

Customers increasingly want 24/7 availability, real-time capability, personalised offerings and a low friction user experience. Once you know who your customer of the future is then it’s about matching the technology, the people and the strategy to serve that customer.

Q. It must be a real challenge for the regulators too – do you see the development going on there that will need to be done to keep up with the changing marketplace?

Definitely. Albeit with a few surprises. Regulations traditionally have been a step behind what’s happening in the industry, and often regulation is a result of someone doing something they shouldn’t, which then becomes regulated to prevent a repeat.

So, to some degree regulators are always trying to keep up with what’s happening at the leading edge, if not predict where that leading edge is going next and where the systemic risks might be.

There is also an element of a need for differential regulation where regulators are more flexible with new entrants to encourage new players to help them develop. This requires a flexibility within the regulators not traditionally present.

Q. What are the specific things leaders should be looking to do? What’s the right mindset to have in a shifting environment?

It’s all about the fundamental questions of “where do we need to be in the future”, “where are we now” and “how do we get there”. These questions need to be answered to provide a clear and simple strategy to deliver a sustainable and profitable future. The problem is that gaining such clarity in such a complex and dynamic environment is very difficult for most senior leaders.

Their traditional career development has given them an in-depth understanding of their area of expertise but to answer these key questions (and indeed be a credible and effective strategic leader for their organisations) requires an understanding of the big picture both inside and outside their organisations – the evolving ecosystem.

That’s what they need; the critical knowledge of the wider ecosystem, market dynamics, and the leading-edge developments available to them. This combined with the enhancement of their leadership will enable them to guide their teams, colleagues and organisation to have that profitable and sustainable future.

So, it’s not just about being in the market, it’s about being a market leader in all senses.

Chris Roebuck is programme director for the Future of Financial Services Leadership programme, aimed at preparing leaders in the sector for the future economy. The programme is in association with IFS Skillnet and the Banking and Payments Federation Ireland. Chris was Visiting Professor of Transformational Leadership Cass Business School London 2009 -18.