01 Aug Fintech Victoria
Alan Tsen, Director, FinTech Victoria
Alan Tsen is the CEO of Fintech Victoria – a not-for-profit organisation that has a mandate to help drive growth of the Victorian FinTech industry. More specifically, it aims to amplify, grow and connect the Victorian FinTech ecosystem.
Alan is an ex-professional services advisor. He worked for a top tier accounting firm on complex international tax structuring and M&A for a number of years. Recently, he led FinTech Australia’s submission to Treasury in relation to the removal of ‘double GST’ on digital currency.
Alan is also the co-organiser of the Blockchain Melbourne, Ethereum Melbourne and Hyperledger Melbourne meet ups and is a founding member of the FinTech Melbourne Meetup group (the largest FinTech meetup in the Asia Pacific region).
Alan holds Bachelors degrees in Law and Economics and a Masters degree in Commerce (Econ). He is also admitted to practice as a Barrister and Solicitor in the state of Victoria. He is a board member of FinTech Australia.
Innovation & disruption
1. Collated data from the Insurance report indicates that innovation is overwhelmingly the top business priority for insurers, with 90 per cent of companies indicating this. What do you think companies should be doing to leverage innovation to drive business growth?
One of the things that we (FinTech Victoria) noticed when we did the FinTech census about a year ago, was that a lot of start-ups want to partner with incumbents, but struggle to actually build these relationships or partnerships with incumbents. We’ve been trying to encourage incumbents to actually partner and connect with start-ups.
The reality is that incumbents can’t do everything themselves. Whether that be because of structural issues within the company, at the end of the day incumbents can be slow and can find it challenging to navigate internally about what to do. So sometimes bringing in some fresh eyes and an agile approach can help that. One thing incumbents in the insurance industry could be doing better is to be partnering with start-ups/externals to really drive innovation internally.
2. With new market players like InsurTechs shaking up the industry, why do established players need to innovate to remain cutting-edge, relevant and competitive?
One thing I’ve noticed, more broadly than with insurance companies, is that quite a few companies could look more closely at their board structure. Incumbents don’t tend to have a lot of innovation experience on their board, which I think inhibits them from being able to take giant leaps forward. Companies should be looking at how to restructure their board; especially those that have been very stagnant for a long period of time. Innovation should be an important boardroom item at the very least, if not the thing that companies are looking at really accelerating.
3. How can companies disrupt internally to drive business growth? I.e. Through customer-led products/services, collaboration, a strong innovation culture, etc?
Being really structurally aware about what customers are looking at and how they’re interacting with products at a broader level is something they really need to think about. For example, think about the experience you have interacting with TV now. It used to be about channel timetables and seasonally adjusted programming – now it’s fully on demand. We can sit down and watch whatever we want, when and where we want instantaneously.
A lot of people want this instantaneous experience with other products, whether that be insurance or other financial services products. And we’re much more used to interacting on our phones, so something as simple as being mobile-friendly if not mobile-first with product designs and customer interactions should be top of mind for incumbents.
Regulation & compliance
4. In an environment of strict regulatory/compliance requirements, our report findings indicate that about half of companies are placing compliance at the forefront of their growth plans. How can companies drive innovation while also adhering to necessary regulatory/compliance standards?
A sort of corporate jujitsu needs to happen around this. There’s a mindset around compliance being a massive burden; and it is a burden for start-ups, it is a burden for incumbents – huge amounts of budget go towards it. But a lot of what is going to drive innovation in industries which are heavily compliant is really thinking about what compliance is – and it can be jujitsu-ed into being a competitive advantage. So being faster and more agile around compliance and using technology to drive it will be a big differentiator for companies in highly regulated spaces.
We’re already seeing it with IBM’s Watson – using AI and machine-learning to drive the cost of compliance down. Companies need to be really focused on taking advantage of technology to enable them to be more agile and innovative with their processes. Companies need to really restructure mentally and internally as to how compliance is viewed. It is a burden, but at the same time, being more agile around regulatory processes and driving down the costs will be a huge competitive advantage.
That’s why RegTech is so hot – everyone is interested because it has this ability to drive down costs, at a much faster speed. RegTech is how you do things faster and more efficiently. So think about how you can make compliance an advantage versus just thinking about it as this ongoing burden.
5. Regulation is considered by many to be a burden and an overhead. What are some positive outcomes of meeting regulation head-on, rather than treating it as a burden?
Talent acquisition & offshoring
6. Collated data from the report indicates an industry-wide push towards offshoring to reduce financial overheads. How do you think moving offshore will impact talent acquisition and retention for established insurers?
Talent is a universal issue everyone has. Offshoring will continue to happen in the short-term – but one of the things I think will happen is a movement back. A good example is in the car industry. For many years in the US, the industry had moved offshore, but that means it’s been cut into smaller slices across the supply chain and reassembly is happening back in the US. Now, with companies bringing in tech-led processes, they’re able to get really competitive in the US because they’ve got more of a tech-focused assembly line.
The reality is that as tech moves in, we are going to see numbers of headcount in some areas fall, but a rise in need and acquisition of talent in other areas. We will see less people in phone rooms and doing assessments and more people leading AI and computer systems internally. So in the short-term, offshoring will happen – but in the long-term, it’s going to be myopic to think only about cost-saving, which is usually what offshoring is driven by. So looking at how to build the pipeline over time will be the more important piece because the market’s not going to be where it is today in 5 years’ time.
7. Many companies are uneasy about offshoring, perceiving the loss of local talent as a loss of internal knowledge and capabilities. Do you feel that offshoring is taking the industry in the right direction, and why?
Broadly speaking, offshoring is driven by cost deduction – and reducing headcount locally and keeping that overhead as low as can be. Given most industries, especially financial services, are reliant on tech, their future will be driven by technology solutions and therefore the roles that we’ll see in 5-10 years’ time are going to be very different. For example, there isn’t currently a Head of AI in most insurance or financial services businesses – but that’s going to be a priority in the next 5 years.
So being able to build those capabilities now should be top of the agenda, rather than having a short-term myopic view about saving dollars and offshoring. It will flip, and offshoring will be less relevant, as a lot of menial tasks that are being offshored are probably going to be handled by machines anyway.
Technology, data & the customer
8. With Telematics and Big Data disrupting traditional ways of doing business, insurers are investing in these platforms to better track customer metrics. How can new technology and Big Data help insurers be more customer-led?
A classic example of what’s being seen in other industries is Amazon’s pre-emptive use of data. Anytime you make a purchase and provide your data, whenever you then go back into the website again, it recommends products to you based on that info. That kind of pre-emptive data is not currently being used across many industries, especially financial services.
Being able to take this data and find customer-led solutions around recommendations – offering discounts at the right time, for instance – is an invaluable tool for incumbents. So if a customer is purchasing travel insurance, why isn’t there a recommendation for a hotel at same time through a partner channel? Or a recommendation for an extension to a credit card limit from the company’s banking partner? Incumbents need to find solutions which really centre on the customer journey and experience. These are processes Big Data can do, and companies in the insurance space need to start leveraging it.
9. There is rising uncertainty across the industry regarding how the IoT will impact the assets insurers are protecting for their customers. What impact do you feel the IoT will have on insurers? What strategies should companies be using to get future-ready?
The IoT will be huge for insurers. We are seeing the impact already, with small-scale things like drones, which are used by a few insurance companies. Drones reduce cost and risk. You can send a drone to see if something is damaged or to assess the structural problems of a building. The cost reduction and safety element is huge.
I think more of what we are going to see is micro-IoT items or systems put in place. It wouldn’t surprise me in the next few years if we start the following: when people renew insurance, a small IoT box plugging into a more central IoT system in the business or house that monitors lighting for instance – whatever it is that is set up and feeds that detail back.
At the same time, it wouldn’t surprise me if we start to see IoT products at a commercial level coming out that monitor whatever insurance item that might be relevant. For example, for damage insurance, there might be a meter measuring if there’s any ongoing water leakage into the building, allowing a company to pre-emptively do something about it or alert the person/company to avoid insurance claims. So we will start to see more IoT devices in the market. It’s how insurance companies take advantage of this opportunity that will be interesting. The IoT has huge potential for cost-saving, but at the same time, it’s a more pre-emptive way to deal with insurance claims in future.
10. The report findings indicate that the majority of insurers believe increasing technology take-up will boost productivity and ROI going forward. How important is technology in progressing companies, as well as the industry as a whole?
There is no industry that will stay stagnant. Industries change based on the technology that’s driving society at the time. The big thing we’re seeing at the moment is that compute costs are coming down, which means the cost of starting a company are reduced dramatically. This is putting a lot of pressure on incumbents to differentiate themselves in the market, across every industry. Insurance is just starting to see this, with start-ups across the world now offering on-demand insurance (InsurTechs). We’re starting to see companies looking at how they might be able to partner with insurers to give them those services (IoT providers).
The market is changing and companies need to be ready for that change or at least progressively thinking about it – otherwise they’re going to be left behind. As a whole, the insurance industry is going to change dramatically. A quote I really like from Marc Andreessen, a partner at Andreessen Horowitz (https://a16z.com/2016/08/20/why-software-is-eating-the-world/) is that “software is eating the world” – and it is, because it’s driving a lot of change that I think many incumbents aren’t prepared for.