Modern Finance — A Tale of Challenges and Opportunities

Anusia Grennell
Jul 23, 2017 · 4 min read

The financial industry has had a tumultuous decade but polls show an increase in confidence in financial institutions in the past few years. All well and good but is it enough? Considering the accusations levelled at the industry and the many upper-echelon misconducts unearthed in recent years, banks are rightly re-thinking how they purport their business in relation to their clients. Financial regulators and institutions alike have an arduous task as the industry seeks to prove its commitment to ethical practice.

In PwC’s report Top Financial Services Issues of 2017: Thriving in Uncertain Times, ten topics for consideration are put forward including artificial intelligence and robotic automation; the rise of neobanks; cybersecurity; the regulatory environment and industry ethics. All reasonable concerns but if this report is reflective of the industry-at-large, the emphasis on tech seems to come at the expense of more diverse customer-focused considerations, for in this report the customer / service provider relationship gets hardly a mention outside of the frame of new technologies and how they can be used to enhance the customer experience.

However, this focus on tech is understandable considering traditional banks are experiencing significant churn as customers jump ship to neo- or challenger banks. These contenders come to the market free from a legacy infrastructure and with financial products and services facilitated by up-to-date, functional mobile app technology. Their service is completely online and so they forego the overheads of the branch-distribution model. They are finding new ways to fund and promote their service, bringing on board celebrities and raising huge capital from investors in an attempt to boost scale and appeal to millennial customers.

In their report, PwC claim FinTech and InsurTech companies succeed because they solve problems at the heart of customers’ needs. Certainly these previously mentioned non-banks are in a position to offer discounts, they have no history of misconduct and the variety and convenience of their service is very convincing. However, considering this is the financial industry, it may be a little premature to be using the word success. Bearing in mind that one of the key factors in finance is time, FinTech is surely too young to be considered a success just yet. It might be more appropriate to say that in offering an alternative to the long-established traditional banking system, these companies have garnered significant interest and popularity amongst a younger generation of banking customers. The rest of the neobank story really has yet to play out.

I questioned some of my peers — you guessed it, a bunch of milennials — about their experiences with neobank N26. I wondered what drove them from their original banks / attracted them to N26; had they any security or trust concerns, and what were their opinions on human- vs technology-led service.

It seems poor customer service from the likes of BOI and AIB was a deciding factor when making the switch. N26’s availability in Ireland was a draw. Half of the respondents expressed a preference for a physical rep and local branch. Others claimed not to mind the lack of human contact. Resoundingly in terms of cybersecurity, the answer was a big tick for artificial intelligence and automated processes, but a massive “I don’t trust anyone with my money” in terms of overall confidence in financial institutions-at-large, citing corruption and error as real concerns.

These new forms of banking are coming to the market claiming to be industry disruptors but perhaps — in a world where young people don’t trust anyone with their money — the biggest and most effective disruption to the current state-of-play would be a company that comes to the market providing a service that uncompromisingly foregrounds the interests of its clients acting with transparency and integrity as a matter of principle. We are constantly told that’s “not how things work” and “it’s naïve to think that way” but if ‘idealist’ Jeremy Corbyn’s rise to near-prime ministerhood; the Irish marriage equality vote and the backlash against Trump’s presidency have taught us anything it’s that there exists an appetite for this type of thing within the very target audience that is providing these neobanks with their aforementioned ‘success’. And if that appetite is strong enough to be making a difference in world politics, why then should it not be considered as ‘change-making’ on the world’s financial stage? Yes to tech but yes, too, to doubling-down on revolutionising the industry to provide a service that those oft-mentioned millennials can truly get behind, and in turn will benefit everyone else, including the entire industry in the long run.

With clarity and transparency, there follows faith and confidence. Certainly this approach requires investment of both time and money. In an industry plagued by ethical failures, with catastrophic effects on a global scale, to invest in measures that legitimately set an organisation out as transparent and trustworthy, putting their clients’ interest ahead of their own, is to be truly disruptive.

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