While costs and regulation increase in the financial services industry, growth falls behind, as does trust in traditional banking solutions. A bigger focus is now coming into play: customer-centric innovation. Technology is giving customers a different way to find and interact with services, and, as they demand higher levels of value, enabling smaller – less traditional – organisations to reach them.
Innovation of the financial services product through mobile was seen as a disruptive idea – something different from the traditional norm, changing the way things are done – and it has experienced steady growth. The immediacy of the technology has allowed financial institutions to communicate with their customers in a less formal way, becoming more like a peer than a corporation. This is helping to increase trust in the industry and redefining the relationship between financial institutions and consumers.
Nearly £1bn is transferred using the internet every day, and transfers using phones and tablets have risen by 40% in the past year – so says the British Bankers’ Association. It would seem that if there is an option to avoid going into a bank branch, then customers will take it. However, traditional banks are not sharing the same focus, with more investment being placed with branch services than exploring different ways to innovate.
Financial Technology (FinTech) proposes an entirely new future – a future which is brand-less, paperless, customer-centric, centralised and “uberised”. The latest report FinTech and the Disruption of Banking produced by Tomorrow Today looks at traditional banks and future practices, as well as detrimental strategies and opportunities to disrupt, and states that radical innovation will lead to the traditional financial market being steadily eroded. For now – the authors claim – that won’t happen because traditional financial institutions don’t support the culture needed to embrace FinTech’s opportunites. But taking out the middle man without an established dominant disruptor creates opportunities for innovation beyond mobile.
Of course, we’ve already seen some.
One of the first pioneers of digital only banking, Simple, offered a Goals and Safe to Spend tool, and gave people another way to manage money better. BNP Paribas Europe Group’s Hello bank! has an app which includes gamification and social elements, through which friends and family can also see a visual representation of an individual’s financial situation, and if they wish, send contributions through social networks. Children are being targeted by UK start up Osper – parents can top up a pre-paid debit card through an app, and set parameters on how the money is used. Even wearable tech is being embraced by Moven, through the Moto 360 smart watch. The opportunity to make physical visits more accessible has also been introduced by US-based GoBank, whose customers can deposit money at branches of Wal-Mart.
Right now we see a fleeting opportunity for financial institutions to embrace radical innovation and disrupt the market to their advantage. The main thing that seems to be preventing that is the culture of traditional banking and an audience which is unaware of the opportunities that FinTech could bring. Future predictions aside, what’s undeniable is that financial services is in the midst of a revolution which is going to be steered by diverse and strategic exploration of opportunities to innovate. Combined with the impact of Brexit – which we are already seeing in Lloyds’ latest move to axe 3,000 jobs and close 200 branches – and as we wait to see if the Bank of England will cut the Bank rate this month, it’s safe to say that the revolution will not be straightforward.
This post was inspired by Two futures of financial services – an article by Emily Messing in our US team.