In Part One of this two-part series, guest blogger Dennis Herhalakis talks about the future of financial services and the key factors impacting technology and the customer experience.
The Future of Financial Services
Under assault from regulators since 2008 and distrusted by sceptical consumers, the Financial Services (FS) industry is still trying to fix past misdeeds. But in the interim, technological advances have changed the landscape forever. While FS firms were focused on IT, regulations and upgrading core banking systems, technology firms were busy changing the relationships between consumers and suppliers. FS firms now have to close both technology and customer experience gaps.
So what does the future of financial services looks like? To a large extent, it’s already here – it’s just distributed across the broader services, media and communications landscapes. To understand this, let’s look at some of the major developments of the last 15 years:
Customer experience – the impact of Amazon, Apple and Google extends far beyond their respective industries. Consumers benchmark all experiences against those provided by the top companies – and established FS firms, both culturally and otherwise, fall well short.
Big data – data-driven marketing first emerged in the mid 1990’s, but it was the confluence of digital only firms and the ability to capture all channel interactions that really moved the dial. Supported by massive increases in processing power and collapsing storage costs, data-driven has become big data-driven.
Personalisation – personalisation is part of customer experience but it’s important to distinguish it from the other more standard factors such as website reliability and ease of use. Customers now expect to be reached via the right channel, with the right content, at the right time.
User Generated Content (UGC) – consumers under the age of 40 spend a great deal of time with media and 30% of that time is with UGC (between 5 to 6 hours per day)*. They trust UGC more than any other media source and it drives their purchase decisions.
Peer validation – as trust in institutions has declined, peer validation has emerged as the new way to build reputational capital. Whether through customer reviews, internet forums, user ratings or canvassing friends and family, consumers are using distributed trust sources to get opinions on products, services and individuals. Digital marketplaces such as Airbnb and Ebay now have Trust and Safety teams building and monitoring the trust infrastructure.
Democratisation of investing – online trading, peer-to-peer lending and Robo-advice are all examples of a broader trend where consumers now have access to markets and products that were previously unavailable. In particular, the rise of ETFs and online technology to generate low cost diversified portfolios with very low entry points has created investment avenues for millions of new investors keen to try financial self-management.
Financial self-management – with the emergence of strong digital capabilities and investing tools, distrust of traditional banks and, in particular, their ability to offer unbiased advice has driven the rise of financial self-management. This trend has also been supported by an increasing trust in non-traditional financial institutions and the almost limitless amount of research and advice available on media platforms.
Stay tuned for Part Two where Dennis will outline how financial institutions can incorporate the above factors into their own business models.