Three Digital Transformation Lessons Financial Services Can Learn From Other Industries
This post was authored by Christine Reyes and originally appeared here on Liferay.com
It’s no secret that digital transformation is a necessity for long-term, traditional players in business, if they want to stay relevant to consumers. In a recent study of financial service leaders, 49% of respondents stated they were roughly halfway through digital transformation, and an additional 37% were in early stages. The fact that so many leaders are making inroads in digital innovation is a good sign for financial services. It means that they’re paying attention and preparing for any coming disruption.
However, being “roughly halfway” through digital transformation means that FSI still has a long way to go. The numbers around customer experience improvement efforts hint at some of the remaining obstacles in transformation. Of those surveyed, 55% are currently working on coordinating their customer experience across channels, and 36% are gearing up to begin this work.
This means that, except for a few leaders and laggards, financial services are in the middle of redesigning their customer experience or about to start. In order to sustain this great momentum and not get stuck, FSI should look to examples from other industries that are farther along in the transformation process.
Here are three lessons from the retail and food industries to help financial services carry digital innovation into customer experience.
Lesson One: Pay attention to micro-moments
Google has identified different kinds of micro-moments, which it defines as “moments that decisions are made and preferences are shaped.” One fun example of this from the food industry is Taco Bell’s TacoBot. It integrates with Slack so that you can order food through an instant message. Since Slack is primarily used as a work tool, this is an innovative way to capture the moments when hunger is setting in during the work day.
Or take, for example, what Google calls I-want-to-know and I-want-to-go moments. Consumers are searching for information on their mobile phones the moment a question occurs to them, and searches that include “near me” have doubled in the past year. Banks could take advantage of this through mobile apps that use geo-location to let customers know that they are nearby and available to help with any financial questions they have.
Lesson Two: Find technology that makes brick and mortar stand out
With the rapid rise of IoT gadgets and VR technology, retail companies have to be brutal about which digital trends are worth pursuing and which will fade away. The point of coordinating customer experience across digital and physical environments is to “help the physical, brick and mortar, three-dimensional retail environment distinguish itself from an online experience,” according to a recent article on Forbes. Currently, consumers still depend on in-person interactions for many of their finance needs. Financial services companies need to establish processes for evaluating technology that enable them to both boost their digital channels, as well as redesign their physical locations so that all touchpoints are seamless, easy to use and valuable for their customers.
Lesson Three: Culture is hard to change
People don’t like it when things change. In 2011, JCPenney launched a digital initiative that failed spectacularly, leading some to conclude that its digital strategy was flawed. But when you look at the department store today, they’ve implemented many of the digital initiatives that were attempted five years ago. This suggests that the obstacles they faced were about people and culture, not technology or strategy. See this recent interview with Lance Thornswood, the Senior Director of JCPenney’s omnichannel digital platform. He states that, even when initiatives were successful, trying to create a new work culture “pushed people so outside their comfort zones that the natural tendency was to snap back to the old ways.” He goes on to say that seeking consensus within the company leads to risk-aversion and stops innovation in its tracks. Instead, executives should empower their employees to pursue new ideas that they really believe in. This creates a more optimistic culture that doesn’t condition employees to say “no” to risk. Financial service leaders need to be aware of the resistance to change within their own companies and find ways to guide their employees through the transition.
Final Takeaway
There’s one more thing that financial service leaders can take from the final JCPenney example: it’s not too late to change. Even if your company is stalled on digital transformation and customer experience improvement, it might not be too late to recover. It will take time and coordination across your organization, but hopefully these lessons from those who’ve been there will inspire you to keep pressing forward.
FinTech Trends and the Response from Traditional Financial Services: Part 2
This series takes an in depth look at the report “Blurred Lines: how Fintech is Shaping Financial Services”. For an intro on the topic, check out part 1 of the series before reading on. Part 2 will examine the future of FinTech and what strategies financial service providers should use to counter FinTech.
There’s a definite disruption. So, what are the exact risks?
There was a time when physical video rentals or purchases were the only way for people to watch movies from the comfort of their own home. As technology progressed, these physical video outlets didn’t take the steps needed to counteract the disruption from newer video streaming companies. Slowly but surely, the newer technologies gained market share and won over the mass consumer market to the point that outlets that rely solely on physical videos are just not sustainable.
Similarly, the risks are clear in the financial services industry. 23% of financial services business is at risk of being lost to other FinTech options. That means 1 in 4 services offered by most financial service companies will end up being taken over by standalone, independent FinTech companies. The services at risk of being lost to standalone FinTech companies within the next five years are shown in the graph below.
The pressure is being felt within the sector with 2 out of 3 companies believing that FinTech will cause pressure on their own margin in the next 5 years, with 59% believing that they will also lose market share to FinTech firms. Both of these threats can be attributed to FinTech offering high-tech options for basic and convenient financial tasks. The high-tech options are often leaner, carrying fewer overhead costs, which, in turn, allows for the service to be offered at a lower rate. That cost reduction is passed down to the consumer, lowering traditional financial institutions market share and putting pressure on the margins of traditional financial institutions.
However, it isn’t bleak as it seems. There are opportunities related to the rise of FinTech. If a traditional financial service provider is willing to adapt and pivot into the future the risks discussed above can be turned into competitive advantages and lead to improved customer retention through simplification of processes, reducing inefficiencies, and innovation.
What are some strategies?
Integration – if you can’t beat them, join them. 60% of survey respondents in the financial services industry agree that FinTech should be put in the heart of their strategies and 78% of CEOs believe the same. However, there is quite a disconnect between the beliefs expressed and actions taken towards integration.
While 84% of the fund transfer and payment sector believe that FinTech has been put at the heart of their organization’s strategy only 56% of banks, 45% of AM & WM sector, and 44% of insurance sector have put FinTech in the heart of their strategy. All of these figures fall well below what the average respondent believes should be done towards integrating FinTech into the company’s strategy.
The first strategy involves developing a “mobile-first” approach. This strategy has grown in popularity because the majority of the financial service providers believe that up to 60% of their clients will use a mobile application to manage or transfer their finances. Currently, 53% of the industry has a mobile application and 18% of firms in the industry have an app in development. It seems this has become a standard strategy to combat the evolving landscape caused by FinTech.
A second strategy involves collaborating with FinTech companies and integrating the FinTech systems into their own organization. There are many ways this could happen, with acquisition of the whole company, internal R&D, or a joint partnership. All of these have their own pros and cons, which is more of a business problem – but the end goal remains the same.
Since developing a “mobile-first” approach and bringing FinTech thinking into your own organization are the two predominant strategies, many financial service providers have made strides towards modernizing their systems. Other potential strategies to combat the ever-shifting landscape caused by FinTech companies involve altering organizational structure, however, for this strategy to succeed many factors such as talent innovation and luck must be present and the organization must be flexible.
The overall strategies fall in line with the mentality of “if you can’t beat them, join them” because the amount of business FinTech can disrupt is fairly high. Getting ahead of the curve in terms of new and emerging technology is the crucial step in dampening the disruption.
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These strategies will become more mainstream as late adopters to FinTech get out competed and the industry matures. However, for the time being these strategies are the only way financial institutions can retain margins against the competition that is FinTech.
How Will the Industry Respond to Trends In FinTech?
In this series of articles, We’ll be taking an in depth look at the report “Blurred Lines: how Fintech is Shaping Financial Services”. Due to the size of this report, each article will be broken down into sections based on 3 industries – banking, wealth management, and insurance. This article will focus on what exact risks and opportunities arise due to the disruption and how to counteract the disruption that FinTech is causing. .
What is the FinServ industry doing for the disruption?
From the inside of the industry, FinTech appears to be affecting a broad range of financial services. Although, the companies specializing in certain aspects of financial services believe that consumer banking and fund transfer and payments will be disrupted in the next 5 years. The graph below shows the results of the survey.
The recent development of online banking platforms has greatly impacted consumer banking and fund transfers. Purely online banks, or banks with fewer physical branches, have begun to gain popularity due to the added value that is convenience. As an organic development from online banking, the technology to safely transfer funds and pay bills online has been developed.
There is also a high level of disruption in the insurance and asset management sector. 74% of insurers and 51% of asset managers believe that FinTech is going to cause disruption in their sector over the next 5 years. At the same time, outsiders believe that FinTech will disrupt those industries significantly less, signalling that there is industry knowledge of upcoming developments that hasn’t been diffused yet. The graph below shows the divide between industry insiders and outsiders.
What is the main cause? Digital experience. Clients are used to the experience other digital giants give, such as Google, Amazon, or Facebook, and they expect the same level of customer and digital experience from their financial service provider.
75% of respondents said that FinTech has made an impact on meeting changing customer needs and 51% said it has also made an impact on leveraging existing data and analytics. If these items were not on the to-do list for a company in the financial service industry, they sure are now – thanks to FinTech.
What are the members of the financial service industry going to do to counter the disruption?
- Banks are going for a renewed digital customer experience
The most important response from this sector is to implement solutions that banks can easily integrate or incorporate to improve and simplify solutions. Meaning, processes that increase customer experience just by reducing the amount of steps to perform an action or making it easier to do that action. The next biggest response is to move toward non-physical or virtual channels. While a portion of the consumers prefer a physical approach, banks must have virtual channels to compete with the changing industry.
- Fund transfer and payment priorities are security and increased ease of payment
The fund transfer and payments industry’s response to emerging FinTech trends included: creating advanced tools and technology to protect consumers from identity theft, fraud, and account falsification. This response isn’t necessarily one that could combat the emerging FinTech options, but it adds to the current value proposition. Since the existing companies specializing in fund transfer and payments have created a brand and acquired trust with their consumers, they only need to offer better value in comparison to the new FinTech companies. In addition to developing a more secure method of online payment and transfer, increasing speed of transfers in another common step to take in this industry.
- Asset and wealth management shifts from technology-enabled human advice to human-supported technology-driven advice
This industry will respond by improving data analytics to better identify and quantify risk and increased automation of asset allocation. The responses, however, will be leveraged with a human touch that can interpret the data and offer personalized solutions that fully automated solutions can’t.
- Insurers leverage data and analytics to bring personalised value propositions while proactively managing risk
Much like banks, the most important response the insurance industry will have is an emphasis on self-directed services. The increase in convenience increases customer experience as they are able to access all the information through an online portal. It can allow them to make claims, see their coverage, or access important documents. The next biggest thing is to differentiate their services by offering a usage-based insurance. As underwriting changes and technology becomes more advanced, the math behind underwriting can allow for more complex plans that allow for this. Usage-based coverage is another example of established brand to create and underwrite a complex solution.
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Developments in FinTech are causing financial service providers to move forward and innovate towards a better consumer experience. Part 2 will examine the future of FinTech and what strategies financial service providers should use to counter FinTech.
6 Lessons from Inbound Marketing in 2016 & What they Mean for 2017 [Part 2]
This is part 2 in the series “6 Lessons from Inbound Marketing in 2016 & What they mean for 2017”. In part 1, we discussed local SEO becoming more important, inbound marketing and blogging becoming a bigger part of the marketing mix, and social media becoming a lifestyle. In this article, I will focus on advertising, video content, and inbound marketing as a whole:
- Advertisements will have to adapt to the prevalent use of adblockers and a more critical consumer.
- 91% of people say ads are more intrusive today than two years ago. (HubSpot, 2016)
- 73% of people dislike pop-up ads. (HubSpot, 2016)
- 4 out of 5 of people have left a webpage because of a pop-up or autoplaying video ad. (HubSpot, 2016)
- 72% of consumers say they would have a lower opinion of a brand if they subjected the consumer to a pop-up ad. (HubSpot, 2016)
- 34% of consumers say they have mistakenly clicked on an online ad. (HubSpot, 2016)
Consumers are being more and more critical towards ads. If a webpage is hindered with advertisements that effect a positive customer experience, then consumers will respond with an adblocker or even worse, simply exit the page. In my experience, there have been many times where I have instantly exited a page the moment sounds from a video played without me having prompted the video myself. If I have to be on that website, the first thing I will do is stop the automatic video. If this is the type of response consumers have to a website, they will likely leave to go to a competitors How advertising will adapt is up to the creators, but what is true is that they will need to evolve in line with consumer preferences and keep customer experience a priority.
- Video content is now the most popular format.
- 55% of people consume video content thoroughly. (HubSpot, 2016)
- 43% of people want to see more video content from marketers. (HubSpot, 2016)
The ongoing trend and popularity of online videos will take the next year by storm as more companies will invest in creating video content. 48% will create content for YouTube, the king of user-created video content, and 39% will create for Facebook, which has recently become increasingly popular. Below is the complete graph showing what distribution channels businesses will use.
- Marketers will put more emphasis on inbound marketing.
- Inbound organizations are 4 times as likely to rate their marketing strategy as effective. (HubSpot, 2016)
- Just 61% of marketers believe their marketing strategy is effective. (HubSpot, 2016)
- One-third of marketers think outbound marketing tactics are overrated. (HubSpot, 2016)
- 33% of inbound marketers and 31% of outbound marketers rank outbound marketing practices, such as paid advertising, as the top waste of time and resources. (HubSpot, 2016)
This is more of an internal trend. There’s a shift occurring in mainstream marketing to try and pull consumers towards you with engaging content. This could be in reaction to #4. Advertising is slowly being viewed more negatively, so more and more marketers have chosen an inbound strategy to combat it. For more information about the differences between inbound and outbound marketing, click here.
Overall, 2016 has kept a lot of marketing trends stable. There have been numerous improvements to local SEO, advertisements, and inbound marketing that will continue well into 2017. Companies have started investing more in creating content, specifically blogging and video. It is hard to predict the future, but these statistics can give us a good idea where the general direction is going.
