In Vistra’s research, almost eight in 10 (78%) respondents indicated that disruption would be a largely positive development for their business, while one in three thought it would only have a minimal impact on the industry. When we asked which technologies they were experimenting with, one of the top responses was “none of the above”.
Some might argue that Polaroid, Blockbuster and Kodak were also taking a “none of the above” approach to emerging technology, shortly before they began haemorrhaging their core business to more innovative competitors. But the situation isn’t quite as simple as that. Merely investing in new digital tools and using them to make small-scale efficiencies isn’t enough to avoid disruption; becoming the next Uber, Monzo or Netflix means developing solutions that challenge redundancies in the marketplace and provide a compelling alternative.
So, while it may be true that businesses in the Corporate Services sector are exploring new technologies to some extent, we find that many are doing so primarily to enable operational efficiencies and streamline manual processes. They are much less likely to be rethinking their business on a fundamental level – and that hesitancy could be leaving them ripe for disruption.
A good question to ask, therefore, is where that hesitancy among service providers is coming from, and how it can be overcome. In our view, the answer comes down to a mix of sector-specific issues and a more general fear of the unknown. And yet, by looking at the progress that has been made, we can get a sense of what may be possible in the future.
Blockers in the industry
Much of today’s industry is fragmented, a situation which is not conducive to innovation. Niche and localised providers do not have the scale to invest in untried technologies that take time and specialist skills to deliver a return on investment.
Moreover, service providers face an additional challenge in the form of regulation. On one hand, the evolving regulatory landscape is establishing the right conditions for technology-led disruption. As the root cause of many sector-wide inefficiencies, in the form of anti-money-laundering and other compliance requirements, regulation has already inspired digital innovation in the industry.
Through mobile applications that enable the scanning and validation of customer ID documentation by mapping an individual’s face – captured via the ‘selfie’ function on a personal smartphone – digital technology is, for example, simplifying the customer due diligence process. A great deal more is possible, to use innovation to drive positive change while ensuring compliance, but regulators themselves can be an obstacle to progress. In many jurisdictions, they require certified, notarised passport copies and are therefore not keeping pace with the advances made by service providers.
This is a situation that is worthy of concern, especially as regulation continues to evolve, often as a consequence of technology itself. The Common Reporting Standard (CRS), for example, would not exist were it not for the technology that enables the automatic exchange of information, and we can expect further requirements to come into force to reflect further shifts in technology. For the time being, however, it’s up to service providers to understand how they can use technology to operate more efficiently within the confines of regulation.
Thinking beyond “faster horses”
One of the most promising outcomes of technology adoption in recent years has been increased speed, which represents a significant advantage in Corporate Services. For those looking to buy shelf companies and incorporate in offshore jurisdictions, for example, an opportunity has been created by way of online, automated tools that review company lists, search for multi-jurisdictional shelf companies, carry out renewals, and set up companies in IFCs around the world.
The challenge now is to imagine the next – and more innovative – stage beyond what is already possible. Where the burden of transactional processes has been reduced through robotic process automation, artificial intelligence has the potential to simplify a great deal more, freeing up time for executives to carry out more specialised and value-adding tasks. As has already been demonstrated in other sectors, smart technologies are already going beyond the digitisation of manual processes and are performing complex roles that were once thought the preserve of humans, including creative industries and journalism . With the World Economic Forum estimating that approximately 42% of all workplace tasks will be automated by 2022, up from 29% today , executives in the Corporate Services industry should not assume that their organisations – and their own skill-sets – will be immune from this trend.
Similarly, there is a potential for blockchain to build on the progress that has already been made around the use of technology during the incorporation process. Due diligence provides a good example of this. At present, companies need to work with multiple service providers – including banks, lawyers and accountants – which leads to a great deal of replication. Blockchain, meanwhile, could provide the verification required to circumvent this repetition and prove identity much more quickly.
As mentioned above, regulators provide one potential stumbling block here. Lack of scale, through fragmentation, is also an issue. And yet, the numbers of sector businesses exploring artificial intelligence and blockchain – at 23% and 22% respectively – remains disappointing. If service providers want to succeed, there is more they can do upfront to experiment with the new tools available.
Conclusion: Keeping up with the customer
There is no doubt that the Corporate Services industry has yet to experience the full force of disruption, and a disappointingly small number are taking action to take ownership of that disruption themselves. While regulation and lack of scale explain service providers’ reluctance to some extent, there is a point at which responsibility has to lie with those unwilling to explore the latest technology.
We can also expect the situation to become more acute over time. Younger generations are already doing everything online, from online banking to personal insurance, and they also have a keener sense of data privacy than their older peers. If established businesses are serious about satisfying an increasingly tech-savvy customer base, now is the time for them to raise their game.
Compliments of Vistra – a member of the EACCNY