What is the future of the financial services industry, amid digital shifts? To answer this question, Schieber Research examined the industry through its Disruption Model. We found that, while the industry had been concentrating on creating more convenient and time saving solutions via mobile apps and self-service tools (see our May 2014 report for elaboration and examples), the upcoming trend will be a focus on personalization of products and services, including “mix and match” solutions, based on digital platforms.
Up till now, banks, insurance, credit cards and payment companies adopted a multi-channel strategy, followed by an omni-channel strategy, mainly by incorporating online and mobile solutions to their offering. In the meantime, new fintech competitors chose to focus on specific segments – targeting niches on the one hand and creating new demand on the other hand. New solutions, such as peer-to-peer lending or insurance comparison websites, have been empowering the consumers, helping them simplify the once-dreaded financial services industry. The penetration of digital banking surpassed 50% in some Western markets, and according to an Accenture report, 39% of 18 – 34 year old's in the US already say that they would consider switching to a bank with no physical branches at all.
With the rise in mobile penetration and social media adaption, and the resulting rise of the collaboration economy, the ability to transfer money fast, pay on the go, and use the mobile phone for any kind of financial transaction is becoming crucial, and fintech start-up are quick to respond to these needs.
In our opinion, financial services companies managed to narrow the technological gap so far, using enabling technologies to catch up (including through M&As and collaborations with fintech's). However, the industry went on to create new needs: to name a few of these changes:
- wearable technology has become more common, creating an opportunity for card-less payment solutions and forcing credit card companies to create virtual solutions, competing with the likes of PayPal, Amazon Payments and others.
- “Internet of things” devices help insurance companies to collect and monitor relevant data on customers, thereby enabling to personalize and update premiums; in addition, digital claim submitting hardly requires an agent, creating more affordable solutions.
- Big Data accumulates stemming from those digital transactions, creating an opportunity to discover new unmet needs.
- new lending and comparison websites shift more power from companies to individuals, and increased transparency is thus required.
Due to data analysis capabilities that will enable companies to list just a few (but a personal and relevant few) solutions to customers, Schieber Research believes that the more complexed an industry is – the more it is going to be disrupted. Financial services companies should therefore aim for a deeper understanding of customer segments, in order to unveil new and unmet needs and develop unique solutions, for a relevant experience that creates a competitive edge.