The digital evolution of the financial services sector

Posted by Tom Denbigh
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An evolving sector

Whether it’s banking or wealth and asset management, financial management is evolving. Competition is coming from all directions. New entrants and challenger brands are disrupting traditional models and moving into the space.

Changing regulations and advancements in technology have meant that the sector has changed rapidly over the last five years, and more challenges are around the corner with the UK’s open banking reforms, the Payments Services Directive (PSD2) and EU-wide mandates.

The new open banking regulations mean that now banks and building societies must allow regulated businesses access to the financial data of their customers, provided the customer gives their permission.

This means that banks and financial services firms will see more customers using apps to analyse their spending patterns and shop for better deals on everything from broadband packages, to mortgages and loans.

But while open banking offers the potential for a streamlined service for customers, financial services firms must be wary of the possible pitfalls these changes will bring. This new, digital focused business model could lead to a service that’s cold and impersonal, with banks losing the face-to-face connection with customers. There’ll also be the temptation to bombard the customer with messaging and notifications, pushing them further away.

Data driven

With the advent of open banking the value of data is set to skyrocket, but the sizeable stores of data held by banks may become less of an advantage in the face of new challengers. The threat of GAFA (Google, Apple, Facebook & Amazon) is well documented, all having moved into the payments space, and all widely expected to leverage their own vast data stockpiles to capture a larger market share.

Asset management - traditionally a low-capital and high-margin business - is an attractive target to these new entrants due to the sector’s high value data.

Open Application Programming Interfaces (API) will allow new entrants in the market to plug into incumbents’ systems and access their customer’s account data, thereby levelling the playing field, powering innovation and effectively cutting out intermediaries.

MoneyLive92% of MoneyLIVE survey respondents believed that in order to survive the next decade, it was critical for banks to embrace open APIs and the associated opportunities to improve their customer offerings through partnerships.

There’s also the issue of analytics; established banks and financial institutions generally lag behind new entrants in terms of their analytical capabilities, but with new FinTech companies on the scene and tech giants like Amazon and Google eyeing the sector, firms need to be confident of their ability to glean actionable insights from their data.

Customer focused

Alongside these changes, customers themselves are becoming more digitally-savvy. There’s a move towards DIY finances with smart budgeting and money management tools, while FinTech is empowering users to completely rethink their financial wellbeing and encouraging them to be active participants in their financial lives. New entrants to the wealth and asset management space have jumped on the opportunity, provided by smart devices, by lowering the barriers to entry and offering more attractive pricing models.

The concept of what the customer wants is in transition, as are the services that financial services firms will need to provide in the future. One of the key priorities that emerged from Econsultancy’s 2017 report was the need to support customers along every step of their journey.

The focus has moved from product-centric, to customer-centric strategies. Everything starts and finishes with the customer; it’s no longer about selling a current account, investment bond or insurance plan; it’s about supporting the customer to manage their money better.

In a changing landscape, financial organisations must prove their relevance in a new world while showing a keen understanding of their customers’ financial needs. Established organisations must capitalise on their trusted reputations, while new entrants will need to place the focus on their freedom to innovate and disrupt. As more and more of our finances move online, firms need to figure out how to display the all-important human touch, whatever the touchpoint.

Financial services’ organisations need to join up online and offline data to create meaningful insights that add real value for customers.

Firms have an opportunity to help their customers, not just in how they manage their finances, but also in how they manage their lives.

Digital solutions for an industry in flux

Wealth and asset management firms have been much slower to embrace digital transformation than their banking counterparts. But regardless of business type, and whether an established player or a new entrant, one of the things that unites all financial services organisations is the crucial role of digital technology on their growth and survival; how technology can help them stay ahead, engage with existing audiences and attract new ones.

Customers expect their financial advisers to operate with the sophistication and speed of tech giants, but MoneyLIVE’s Future of Retail Banking survey found that only 20% of banks personalise and adapt their online interfaces to reflect individual customer habits.

Increasingly, people want the same level of service online as offline, with the ability to move seamlessly between the two.

An investment in digital technologies can help financial services organisations more effectively engage customers, deepen relationships and improve service and experience across every touchpoint. But to truly transform the capabilities of financial services firms, digital needs to be at the heart of their business model.

Better for everyone

Web and mobile sites are a key element in a firm’s digital transformation, and as such, they’re becoming more sophisticated and responsive. In the coming years, we’ll see an increase in personalisation to drive new business; pushing relevant content and guidance at the right time to make the experience as intuitive and relevant as possible.

Online tools are being introduced to enable financial advisors to develop closer relationships with customers, as well as giving them the means to understand the health of their customer relationships at a glance.

These solutions offer more scope for interactivity from the user, with customers gaining access to advisors, product experts, tools and research without leaving their home or office. A digital focus also makes it easier to spot pain points in the customer journey. Traditional hurdles like onboarding and credit assessments can be streamlined and completed in minutes rather than days.

Mobile is making spending, managing, and investing money easier than ever before, and is forcing the entire industry to rethink its concept of brick-and-mortar branches, as well as the role of face-to-face. However, the human touch is still essential. Digital must add value and be part of a seamless end-to-end omni-channel experience, allowing customers to use the channel of their choice. With digital improving the service online allows for a better offline experience.

Advanced digital experiences don’t just aid the customer. For the staff who are hands on with a firm’s website - the content managers and marketing teams who have day-to-day involvement with the site - a smarter, more responsive website offers a raft of benefits; from flexibility with uploading content, to improved performance and load times.

Transforming Metro Bank’s digital customer experience

Metro Bank

Our client Metro Bank understood the important role of digital and the impact it would have on their business.

Their core message is around customers having the very best experience however, whenever and wherever they choose; whether that’s physically in a store, or digitally through an app or online.

That’s why they invest in their prominent high street stores, as well as their digital and telephony channels. They also knew that the website is the first interaction many customers will have with the brand so they needed an online experience, which would engage and deepen relationships.

But to successfully achieve something like this, a website can’t be developed in a silo; that’s why Netcel’s work was part of Metro Bank’s wider digital transformation strategy, one that aimed to streamline Metro Bank’s systems, processes and people.

Metro Bank’s redesigned device agnostic site - a seamless experience, with new tools, calculators and personalised content.

For new users, the site needed to explain the bank’s USP, which is all about customer service. By revamping the website and getting the site experience and content right, Metro Bank knew they could exceed expectations online and make customers’ banking experience even better, which in turn would increase operational efficiencies across the business.

Read more about the digital success of Metro Bank

Regardless of the size or age of the firms in question, those who seek to get ahead - and to stay ahead - of the pace of change within the financial services sector need to be committed to digital innovation in order to achieve their business ambitions. But digital transformation isn’t a single project; it’s an ongoing process that evolves with the needs of customers and organisations. Firms need to prepare their digital experiences for the future to ensure they’re ready for anything that the future may bring.

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