We’re in the middle of a global banking and finance revolution.
Consumer attitudes to banking are changing, and customer expectations are soaring. At the same time, legislative changes and initiatives in the U.K. and across mainland Europe are driving new levels of competition and collaboration for traditional and challenger businesses alike.
These factors have driven high levels of disruption in the financial sector—especially since the global financial crisis of 2008—forged through new partnership of data and technology innovation.
While the implications are greatest for brands in the financial sector, the trends and attitudes driving disruption will be well known to other markets. In telecommunications, new business models are disrupting traditional calls and text messaging, while the health and social care sectors are subject to high levels of regulation and tension. Market complacency is a factor for the education and charity sectors, while insurance firms need to respond to customer frustrations.
It’s a disruptive streak that shows no sign of abating. Let’s take a look at four core areas of disruption across banking and financial services and the lessons they offer all brands.
Adapting To New Attitudes and Behaviours
Several studies over the last 12 months have sought to understand what people want from the financial sector.
Among them, Viacom subsidiary Scratch’s survey of 10,000 millennials found that one third believed they would not need a bank at all in the future. Salesforce’s recent survey of 3,000 U.K. and U.S. millennials uncovered that one in five (21%) don’t use any form of financial institution to address their financial needs—compared to 9% of Gen Xers and 6% of baby boomers.
Both these surveys support Bill Gates’ assertion that: “Banking is necessary; banks are not.”
However, it’s not all doom and gloom for traditional financial. Telstra’s 2016 survey of 30,000 millennials found that 76% trust banks with personal information—no other providers came close.
Like banks, existing players in other markets have spent years building “trust capital” that gives them competitive advantage. However, trust is perishable, and incumbent organisations need to leverage it before it’s stolen by competitors such as U.K. challenger bank Monzo, which is looking to build trust by publishing its product roadmap as a publicly available Trello board.
Micro-payments are another way new players are attracting customers. By breaking savings, investments, and insurance into very small amounts, these services are more manageable for younger people and those on low incomes or with few assets.
Crowdcube has simplified investing by dropping fees and setting minimum amounts to just £10. Acorns automatically rounds up purchases to the nearest dollar and invests the “spare” pennies. Insurance startup Cuvva has begun beta-testing an hourly car insurance service for people who drive fewer than 4,000 miles a year.
These innovative new players offer brands in other markets a key learning. If you can understand how people really want to use your services, that will enable them to be redesigned as on-demand and bite-size where appropriate.
Dealing With Challengers
As rising fintech challengers come of age, existing businesses in this sector have two choices: tackle them head on or form partnerships.
Tackling direct competition
Starling Bank, a digital-only bank, has become the first challenger to gain direct access to the U.K.’s Faster Payments Service (FPS). This major industry milestone could have legacy banks looking over their shoulders at new, hungry, and digital-first rivals. Instead, they should be looking forward and experimenting with innovations that could increase customer satisfaction and reduce operating costs.
Starling has been trialling drone delivery of debit cards, but admits they haven’t managed more than 400 feet to date. This isn’t surprising, given how busy they must be building the beta version of their banking platform, ready for an early-2017 launch. However, bigger banks have the time and money to invest in these kinds of innovations, rather than worrying about Starling’s access to the FPS.
CMOs of more traditional businesses should adopt this approach and leverage their workforce and established relationships to create additional value for their customers.
Partnerships
Finnair has become the first airline to partner with Alipay, enabling in-flight payments between Helsinki and Shanghai. Part of the Alibaba Group, Alipay is used by over 60% of Chinese people travelling abroad and has over 450 million active users in China, making it the top global mobile payment service (PayPal is its closest competitor claiming 192 million actives).
AXA has partnered with Trov to launch a U.K. insurance service “as simple as Tinder” for British millennials. Customers will be able to “swipe” to turn insurance on or off on individual items, tapping into the growing preference for temporary cover and micro-payments.
Partnering in this way enables brands to onboard proven platform features quicker than building them. This extra speed gives brands first-mover advantage and enables them to charge more as well as benefitting from positive PR.
Privacy And Data Ownership
The rise in bitcoin—and cryptocurrencies more generally—reflects what many view as consumers pushing back “Big Brother Brands.” The nearly 1,000 ATMs offering Bitcoin withdrawals and pubs that accept them show that more and more people are considering cryptocurrencies, something brands should be ready to accept.
Part of this move to cryptocurrencies stems from a desire for more privacy and security—people are increasingly aware how much their lives are tracked, and how valuable their data is to businesses. The natural value exchange at the heart of this dilemma is being exploited by companies such as people.io that enable customers to take ownership of their data and get rewarded for engaging with brands. More services such as these are likely to appear in the U.K. once the Open Banking Initiative (which is exploring the creation of and access to banking data) is in place for Q1 2018.
Given the increasing amounts of personal data being shared across digital channels, privacy and security are essential customer pillars for all brands. If customer trust allows it, brands can create powerful partnerships and data exchanges. One example is the data-sharing API built by Chase and Intuit that gives customers control over which financial data is shared between their two systems, without having to hand over their passwords.
It’s clear that customers are prepared to share their personal data with financial providers, as long as they are rewarded in a meaningful way. Trusted service providers are expected to deliver added value including pricing benefits, priority access, or more personalised products. For CMOs, this means acknowledging and communicating the value of data in new ways with customers.
Customer Experience Is Everything
As software continues to “eat the world,” traditional players are in danger of being superseded by new ones creating over-the-top services built on top of existing infrastructures. This poses a huge threat to existing businesses as they would lose control of the direct-to-consumer relationship.
Mobile
For many customers, mobile apps are the main touch points for banks—a trend underpinned by the emergence of so many mobile-only banks. A February 2016 study by SNL Kagan reported that 57% of customers would consider changing banks based on the app experience. Critical reviews of the top 10 retail banking apps (those with one or two stars) reveal that the most frequent feature complaint is the reliability of the app, including updates, crashes, and errors.
CMOs need to ensure their mobile apps are secure, reliable, and doing the basics brilliantly. As with the banking and finance sector, all brands should be carefully evaluating features offered versus their competitors.
Voice
Financial services could be a leader in digital assistants as they become omnipresent. Alexa, Siri, Cortana, and Google Assistant offer new ways for brands to engage customers, and could help demystify the often-complex world of finance and banking. As things stand, Capital One is the only bank utilising Alexa and has made it possible to perform a number of actions (including bill payment), while Monzo has an Alexa “skill” in Alpha.
In just two years, voice search volumes have grown from virtually nothing to 10% of all online searches, predominantly because it’s quicker—we type at 40 words a minute, and speak at 150. This demonstrates the growing importance of voice interfaces, an area of “Zero UI” that is being adopted by brands in all sectors.
In similar vein to choosing only the most appropriate social channels, not all brands should be offering a voice interface. However, CMOs that are slow to innovate may face a loss in revenue, or worse still, in customers.
Takeaways For CMOs
The fintech wave has brought a plethora of startup challengers who are innovating with micro-payments, investments, and building new services based on blockchain and bitcoin. At the other end of the spectrum, bigger brands continue to push the boundaries of payment methods through partnerships and acquisition. And for all players, new regulations and technical advancements are enabling over-the-top services to be created, threatening the status quo and sluggish incumbents.
For CMOs, the key learnings from this revolution are:
- understand the changing attitudes of their customers;
- look for partnerships that will supercharge their offering;
- be vigilant about challenges coming from new competitors;
- guarantee privacy and security for customers, and reward them for sharing data;
- focus on the customer experience—doing the basics brilliantly on mobile and investigating new ways to engage.
2017 looks set to be a year in which banks and financial institutions will either embrace the digital revolution or suffer the consequences. For brands who haven’t yet experienced this level of disruption—your time will come.
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This article first appeared in www.cmo.com
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