Banks, Card & Payment Companies, Insurance and Comparison Aggregators
Like most industries today, the financial services industry is utilizing new technologies and channels, in order to become more efficient, more reliant, more convenient and above all – simpler.
Among such new channels are internet websites, social media platforms, smartphone / tablet apps and others. Banks, credit card companies and insurance companies are using those digital channels along the entire service chain, including sales & marketing, communications, consumer service and CRM. In addition, third parties are driving industry transformation as they facilitate peer to peer lending, and provide comparisons between the various products and services.
A research by A.T. Kearney suggests that financial services players are embracing the digital trend with a combined advisory model. For general advisory needs, they proactively create transparency about customer satisfaction and recommendations via portals, professional research tools, social networks, and peer chat functions. Mobile is the most convenient channel for today’s consumers, and over a third of customers at major US banks currently use mobile banking, with 43 percent of them in the 18-29 age group. In addition, according to an Adobe research (November, 2013), mobile financial apps take the top spot for the one con-summers open most frequently.
According to Infosys, video banking is no longer a novelty. Video can be integrated with most banking channels to enable a personalized banking experience for remote and branch banking customers. Branch banking, phone banking, self-service banking, and online banking have already seen video-enabled services such as web conferencing, and online chat.
According to Bain research, insurance companies too must address the digital challenge in order to survive. And, Gartner estimates that by the end of 2015, personal lines property and casualty (P&C) insurers that do not offers online and mobile transactions will lose one-quarter of their current market share.
The digital paradigm shift offer an opportunity to overcome major consumer barriers:
- Building Trust is one of the main goals for any brand, and particularly for a financial brand, as consumers have been sceptic towards financial brands.
- Convenience and Simplicity – consumers are gradually becoming convenience-averse regarding their brand decisions. Financial brands are therefore expected to adhere to a new level of ultra-convenience, in an industry once regarded as complicated. Both traditional services and new services are often perceived as confusing, and financial services brands are tackling this barrier, providing easy to handle, device-compatible analysis tools and wizards. Another emerging trend in this regard is gamification, through which competitors can explain a complicated service (such as the calculation of an insurance premium) to their consumers.
- Personalization / customization capabilities - not only can users customize their apps, account screens and alerts; but they can also receive real-time offers, based on their location and purchasing activity, and even receive advice as per the planned purchase.
Major trends in the digital financial services industry include:
- The rise in self-services – customers can use their smartphone's camera, voice and video options, to deposit checks, converse with a representative, submit an insurance claim, search their accounts etc. Innovative payment methods have emerged, including peer to peer payments via email / text / social media, NFC (near-field communication) and QR code scanning payments, and mobile wallets which also enable the consumers to keep track of their coupons, expenses and receipts. Consumers can also use some ATMs via their mobile phones.
- Omni-Channel vs. Pure-Play. The traditional, physical-world competitors, have already made progress from offering direct-channel access via telephone and websites, to adopting a real omni-channel strategy which follows the consumers’ behaviors, as consumers shift between devices and screens. At the same time, new competitors emerge as pure-play digital financial services providers, whether mobile or online. These mobile pure-play competitors are using digital devices to offer differentiated added-value, instead of a merely offering a mobile version of an online website. Such offers might be especially relevant to younger consumers, who are using their mobile phones as an extension of any other activity.
- Transformation in the payments and credit cards industry. Regulatory pressure to promote competition in the payments industry, and the technological advancements which enable convenient and secure solutions, are shifting the structure of the payments industry. Banks continue to control the segment along with card companies, but they will have to find a way to compete with innovative internet and payment companies, including Google, Apple and PayPal – as well as innovative newcomers such as iZettle and Square. According to a Capgemini and RBS report (2013), global m-payments market continues to grow rapidly, powered by innovation and demand. In line with industry estimates, the global m-payments value reached $256 billion in 2012, and is expected to grow three-fold by 2014 to a total of $796 billion. Forrester Research (Dec. 2013) concludes that digital wallets are poised to transform the way consumers shop and pay retailers, restaurants, and service providers. Early wallets are enabling the convergence of offers, coupons, loyalty, and payments.
- The Sharing Economy and the financial industry - the major models are crowdfunding and peer to peer lending. According to crowdsourcing.org, in 2012, $2.7 billion was raised from the crowd (crowdfunding and peer–to–peer lending), mostly in the US, to finance over a million projects. Online crowdfunding is a relatively new form of financing for projects. The model allows many people to contribute small amounts in the hope of achieving a combined total that meets or surpasses a predetermined funding target. Large platforms include Kickstarter and Indiegogo. The term “peer–to–peer lending” has its origins in the facilitation of unsecured personal lending between individuals (rather than a company) via online sites such as Zopa, Lending Club and Prosper. There has been an explosive growth in peer–to–peer personal lending across the world in the last decade, driven by the many–to–many communication paradigms. A relatively new application of the peer–to–peer lending model allows the crowd (individual lenders) to lend money to companies (instead of individuals) seeking debt finance. in most cases, the loan is an agreement between the borrower and the lender and not with the intermediary.
- Consumer-Targeted Content. Brands customize the content type according to the specific platform, and they are still studying which is the most effective platform per each target market. Today, a brand could set up a substantial presence on social media, to interact with the consumers; it can include authentic reviews in the website as Aviva did; it may put the CEO in the front for consumer interaction as Putnam Investment did; and it can "own" ac content niche to establish its positioning as an advocate who sees beyond the next sale, as did American Express with its "OPEN" forum. The brand is now able to communicate with the consumers on a deeper level, receive insights and ideas, and also achieve differentiation through content.
- Aggregation and Comparison Websites. The financial services industry is witnessing growth in aggregator-selected panels, containing both insurers and brokers. According to analysts, industry aggregators will continue to grow. For example, in 2010 Google added a price comparison tool to its search engine. The Google Compare service currently provides different services: credit cards, mortgages, car loans, savings accounts, and current accounts, car insurance, travel insurance.
In conclusion, the digital tools provide an opportunity to change almost every element of the financial services experience. Clearly, established financial brands have to adopt more of a "start-up" thinking, if they want to be able to respond to the new consumers' needs for convenience, simplicity and 2-way communications, without being left behind.