Digital transformation in the financial industry

This thesis, my final work of studies in Industrial Engineering and Management, had the objective to present the digital transformation of the financial industry, focusing on the banking sector and the insurance sector. In the first chapter, I exposed the state of the art of the industry: there was an explanation of how the digital era has changed – and it is still changing – the financial market, with a deep penetration of smart devices. This penetration of smart devices allows several digital functionalities to be carried out quite easily. Digital functionalities bring to a redefinition of business models, especially the ones of the banks in the sector: I discussed the Banking as-a-platform (BAAP) model and the establishment of new non-traditional competitors in the industry, fully basing their business model on the digital world (e.g. digital lenders). The initial state of the art explained as well the main challenges that the digital players in the industry are facing and possible ways to overcome them. In the second chapter I exposed the regulations, directives and legislative procedures that control and define the laws that the incumbents have to or should follow and respect. In particular, regulations are mandatory while directives are general indications or advices that financial institutions should follow for having better financial ratios in their balance sheet and income statement. In this chapter I divided these financial “rules” into five categories: financial instruments regulations, accounting regulations, banking regulations, payments regulations and anti-money laundering regulations. Financial instruments regulations refer mainly to the Markets in Financial Instruments Directive (MiFiD). For accounting matters, there are two big standards adopted from financial institutions around the world: the International Financial Reporting Standards (IFRS) and the Generally Accepted Accounting Principles (GAAP). Banking regulations are the four Basel accords, provided by the Basel Committee on Banking Supervision based in Basel (Switzerland). Payments regulations consist in the Payments Service Directive (PSD) and its development PSD II. Finally, anti-money laundering regulations are guaranteed by the Financial Action Task Force (FATF) and the International Monetary Fund (IMF). In the third chapter I presented three case studies deriving from my professional experience in an international major player in the financial industry, from my personal experience of studies abroad in Santiago (Chile) and from the literature on the financial industry. The experience of studying abroad was a great opportunity offered to me by my university, Politecnico di Torino, and I will always be thankful for that. This experience allowed me to grow a lot as a person and to make long-lasting relationships, while perfecting Spanish skills as well. Lastly, the current chapter has the goal to bring forth general considerations about the industry and final overall conclusions.