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The future of utilities

Industry utilities are emerging as a welcome innovation in the financial services value chain. Their core proposition of disintermediating non-core functions to allow banks to focus on pure business-generating activities is resonating with an industry coping with siege on multiple fronts. But the path to large-scale adoption is still beset with a few key challenges, like regulatory approval for instance.

Regulatory consensus on the value of utilities is still to emerge, especially when it comes to functions like compliance and risk management, which are still viewed as core responsibilities of banks. Then there is the allied concern of defining liability and accountability in this new disintermediated model. It is clear that the pace of utilities evolution will be a function of the industry's ability to engage and collaborate with the regulatory community.

Concurrently, utilities will have to back up their proposition with strategies and structures that account for the practical concerns that still prevail. The focus will have to be on demonstrating that they can balance risk and value through well-governed organizations built on collaborative partnerships, clearly defined roles and responsibilities, and compliance with contemporary principles of security and privacy.

The primary task will be to develop a detailed implementation and operationalization roadmap. At the level of strategy this must address issues like shared vision, governance, risk management / transfer, to name a few. Then there are the technical and functional considerations of defining a utility's scope of service, its product/service strategies and the structural frameworks that will ensure privacy and security.

The roadmap must also include a coherent technology strategy including the expected evolution, say, from an enterprise platform to full-fledged utility via private cloud and SaaS phases. Continuous innovation must be an ingrained functionality, with the roadmap clearly demonstrating how customer value can be enhanced by adopting robotic process automation, robot advisors, NLP-based tools, self-service portals, self-learning systems, thin-trades, open technology platforms for regulatory reporting, and more.

Finally, utilities should offer a business case to customers that emphasizes the real and extended benefits of adoption over and above immediate cost savings. The long-term view should not only highlight the possibilities for accelerating cost savings but also the opportunities to enable productive financial engineering and strategic enterprise outcomes. But the most critical driver of adoption will be the industry's ability to engage with and accommodate the requirements of all stakeholders - banks, product vendors, infrastructure players, technology partners and regulators.

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