The personalized nature of financial services has suffered
For years, the financial services market has become much more transactional. In a race to the bottom on prices, consumers have become more concerned about who does not charge maintenance fees and who has the best interest rate for their cards or the rewards system for their policies than who has the most convenient locations on main streets or which offers the best service. This has put too much emphasis on digital, especially as the generations have grown up, so that now the idea of going to a branch is seen as a foreign concept to younger customers. There is no doubt that the banking landscape has changed dramatically from generation to generation. The relentless march to digital continues to see many branch closures and has resulted in the death of ‘talking to your local bank manager’. According to recent figures from the European Central Bank, the bank branch network is thinning day by day with a decline in 25 of the 27 EU member states. According to a report from last year, at least one bank branch is closing every day in Belgium.
This has created a dichotomy in which large swaths of society are now completely dependent on digital financial services – a figure that will only increase as digital identity verification becomes more widespread. But at the same time, the discourse to consumers is to “protect their data”. As a result, it creates an environment of mistrust, worry and paranoia, rather than enthusiasm for what safe data sharing can provide.
People: the missing link in financial services
Our Digital Frontiers study identified that two-thirds (67%) of European consumers do not know who has access to their personal data and how it is used – only 12% know for sure, while the majority (59%) of public are increasingly concerned about the security of their online digital footprints and how purchase data is used, interpreted and shared. Indeed, 41% now feel paranoid about organizations tracking and logging what they do on devices.
At the same time, the near extinction of humans in the financial services industry is creating a void that consumers are not yet ready to step into. Yes, our research found that technology can play a vital role in managing our finances: 31% of consumers would trust an app to manage all of their finances if it meant it delivered higher returns every month, 39% expect their financial services provider to use technologies such as artificial intelligence and machine learning to help protect their funds and personal data. However, he also pointed out that a fully digital banking network is still a long way off. Only a third (30%) of consumers would choose another bank or financial service provider if their current institution expected them to visit a branch in person. Indeed, only 37% agree that in-person interaction in financial services is almost dead. According to our research, nearly two-thirds (64%) of consumers expect the financial services industry to support traditional and in-person services they don’t rely on, but know other people could do it.
In a race to the bottom on prices, consumers have become more concerned about who does not charge maintenance fees and who has the best interest rate for their cards or the rewards system for their policies than who has the most convenient locations on main streets or which offers the best service.
Whether it’s the desire for trust, the ability to solve our problems – especially in light of high profile scams and cybercrime, or simply providing a personalized experience, it’s clear that for digital in financial services reaches its potential, people still need people; not necessarily on the main street, but at the end of a message, phone or video.
Digital first, not just digital
What consumers are looking for is for financial services institutions to build their offerings with a digital, not just digital mindset, which is good news for traditional institutions – less so for fintechs and neobanks. And who can blame them when it’s something they see on a daily basis in other industries. Retail is beginning to combine in-store expertise and service with digital innovations around delivery choices, but in financial services consumers are being offered problem-solving chatbots and are being turned off as a result. It’s not about a digital versus physical discussion, but rather about creating a mix where the choice of engagement is up to the consumer: from efficient app-based banking services to talking with a real person via chat, phone , video or in person, if necessary. Data is at the very heart of this.
Away from devices and changing customer expectations, there is another driver of change for financial services at the macro level. Government and regulatory expectations have translated into a need for banks to play a greater role in meeting society’s financial needs. Our digital economies depend on the ability of organizations and businesses to unlock the value of data – using it to improve products and services and improve society as a whole. For example, banks are increasingly expected to improve financial inclusion. According to a recent report, seven million adults in the UK are at risk of financial exclusion, meaning they do not have sufficient access to mainstream financial services and products, which is exacerbated by branch closures In progress.
Financial Services Doing It Right
The beauty of this situation is that all the tools and technologies to realize this future are here, today. There are already companies demonstrating how this can be done to great effect. An example is Achmea, which has a leading position in the Dutch insurance market, with 10 million customers. The insurer uses technology and data in a smart way that allows it to quickly add new services or make changes based on customer feedback. Innovations aimed at speeding up its claims processes include an app for policyholders to help them find local tradespeople for repairs to using drones to investigate weather damage to properties.
Totally secure and frictionless financial interaction
Consumers want a completely secure and frictionless financial interaction with absolute confidence in how their data is captured, stored and used. But, for an industry built on numbers, people don’t want to be just another number. And these two goals don’t need to be mutually exclusive these days.
The financial services industry has the opportunity to lead the way globally, demonstrating digital excellence with data to excite consumers, finance the unbanked, connect communities and shape society for the better.