The financial sector is going through a radical transformation. Fintech is disrupting the way people bank with innovative value propositions and new business models leveraging emerging technologies to simplify processes and interactions.
These developments are driven to a large extent by the mindset shift in the industry towards customer-centricity. What new fintech players are doing really well is looking at the things people need to do in their lives and providing easy, convenient ways to do them. In contrast, what big established banks have been doing really well is creating banking products and marketing them to people.
But people don’t want a ‘mortgage’, a ‘savings account’ or an ‘‘investment portfolio’. People want to be able to get a home, be better with money, and split the bill with their friends easily after eating out. That’s what makes challenger banks appealing, and if big banks want to stay relevant, they need to move from focusing on products towards putting customers at the heart of what they do. Challenger banks are doing this by developing their services together with customers and listening to their requests to prioritise features. For example, Monzo is co-creating new features with their customers by receiving feedback via community forums and a dedicated Twitter account.
Indeed, there is an increased interest among financial services and insurance companies in serving customers right. The Digital Trends Survey shows that nearly one-third of financial companies find optimising the customer experience and user journey as their most exciting opportunity in 2018.
At Common Good, we took a look at the financial sector through a strategic design perspective and identified 8 key themes for financial service innovation, discussed in the following.
The Empowered Customer
Armed with ubiquitous access to information and increased environmental concern, people are now voting with their wallets for honest, ethical and socially responsible companies that are easy to deal with.
The availability of online customer reviews and comparison sites for financial services creates greater choice and awareness shifting power from businesses to consumers. Hence, as pointed out by PWC, investing in customer intelligence is becoming the most important factor for revenue growth and profitability.
From a technology standpoint, it’s a no-brainer that digital is now mainstream. Moving banking from brick and mortar to smartphone interactions brings convenience, ease, and time-saving for customers.
- Artificial intelligence can not only create more delightful and personalised experiences, catering to people’s diverse needs and contexts, but also automate savings, credit instalments, and provide more relevant financial advice.
- Voice UI queries are quick, convenient and intuitive. Accessing banking-related information through Amazon Alexa, Google Home or Apple Siri is gaining traction with people of all ages. From quickly checking account balance to making seamless payments, voice assistants can be a preferred channel for people struggling with typing or those in a rush situation.
- Blockchain is another new wave that brings a flood of interest among financial players. The adoption of a distributed ledger of transactions that cannot be manipulated will offer an improved infrastructure for financial exchange increasing transparency and trust — something that banking is in great need of. An FCA report shows that financial services is one of the least trusted industries in the UK with only 31% of British adults thinking that they are honest and transparent.
- Cryptocurrencies bring a range of benefits (for customers) such as cost-saving, asset protection and speed. An example reported by Bloomberg of how this works to public advantage is the case of The UN World Food Programme cutting millions of banking fees and delivering food assistance to vulnerable families around the world through a smartphone app based on a digital-currency network.
- Regulation (or the lack of it) has been preventing the widespread adoption of digital currencies until now. However, the hostile regulatory climate seems to be warming up to the idea of issuing e-money. The IMF announced that it’s open to ride the winds of change, embracing the potential of digital currency to improve financial inclusion, security, and consumer protection.
Financial institutions need to innovate their services in accordance with these developments in the economic and political domain.
Seamless digital experience
Examining banking user journeys reveals various unmet needs ranging from personalised interactions, accessible information, easy payments, and transforming tedious paper-based processes into seamless digital experiences, managing all banking needs through a smartphone app.
Design-driven companies such as N26, Nutmeg, Cleo (to name just a few) are leading the way in listening to customers’ expectations of a tailored experience, including customised recommendations with a personal touch. Informed by user insights, they create delightful experiences removing the friction often associated with ‘old school’ banking and money management.
Offering a seamless digital experience isn’t something to be bolted on existing processes. It should be at the heart of the digital transformation strategy and led by a clear understanding of online user behaviours.
Managing money effortlessly
Money is a difficult topic to talk about and a very complex matter to make effective decisions about. That’s why a lot of people don’t engage with it or rely solely on pricy expert advice.
UK is currently facing a crisis in people’s financial literacy with widespread economic consequences, shown in a study by UCL and Cambridge University, and paradoxically the UK is a leader in financial services worldwide. There is an obvious gap between the financial institutions’ expertise and what real people really need. So, how can we serve people’s financial needs better?
Financial organisations need to start with understanding the way humans think about money and how they go about making decisions about savings, bills, retirement, budgeting, insurance, investments, credits, etc.
Behavioural economics can help explain the blockers, biases, and fears people have in relation to money and inform effective ways to support and ease decision making. This field of study provides a range of psychological principles that are hardwired in human brains and give predictable indicators of how people tend to choose and act.
Behavioural insights can be a useful method to inform new financial product innovation. For example, Lemonade, the refreshingly different rental insurer, demonstrates how understanding the cognitive challenges people face when thinking about insurance can lead to innovative value propositions — turning insurance from a dreadful chore into an easy, fun, and comforting experience.
Designing for vulnerability
Another way financial institutions can create value for people is by addressing the issue of financial vulnerability. According to FCA, half of the UK adult population show characteristics of potential vulnerability. This includes people affected by life events such as:
- bereavement or divorce
- health-related problems that affect their daily activities
Designing around those needs sparks ideas for context-aware and proactive advice for customers on their spending and saving behaviour, clear insight into current financial assets, and forecasting of cash flow events in the future.
Just a quick look into any big financial institution will reveal a scary story of rigid business processes operated by silo departments, hampered by inflexible legacy IT systems. To be able to reap the opportunities of improved agility and customer-centricity, established financial institutions need to adapt existing processes and organisational culture to enable it to thrive in a digital environment, migrating infrastructure to the public cloud and to re-imagine ways of working by instilling cross-silo collaboration.
The biggest enabler of customer value in financial services will be the introduction of open banking. People need to manage their money within a system of different organisations i.e. make quick transactions between friends, transfer money to relatives abroad, or move money to their ISA with another bank. Accessing financial details is currently too burdensome across a variety of different accounts, websites, and passwords.
Open banking will change this by facilitating a far more convenient, and transparent connection between providers. By sharing customer information with permission, third-party providers can integrate data from different banks, present it in an easy to comprehend way and provide single-point access to a range of services. Financial institutions will need to become more flexible and co-operative, balancing security and compliance.
Having insights into customers’ data — revenue, spending behaviours, and repayment track record, banks will be in a better competitive position to offer personalised, better-targeted products and services. In this new landscape, financial organisations can share the risks of trying to sell everything to the customer in a fierce rivalry with other incumbents. Instead, they will be part of a new financial ecosystem of reliable strategic partners, leveraging open data to create value for people with much less friction.
Customers as well are becoming increasingly aware of the value of their data and the importance that they remain in control of it. However, there are studies to show that more than two-thirds of customers are willing to give access to personal information in exchange for a more personalised experience. This alludes to another power shift — from ‘personal data as an exploitative commercial device’ towards ‘personal data as a value exchange’ with permission being the currency. Thus, customers will increasingly expect superior services, transparency and security in return for allowing access to their data.
The future of banking remains uncertain but one thing is for sure — retail banking and financial services are on the verge of a radical transformation and Customer Experience emerges as the determining competitive advantage.
Fintechs will not necessarily replace big banks — quite the opposite — some will rest on the established infrastructure of traditional banks but provide new service to customers with a fresh approach. To enable superior service and user experience, it is important to understand which touch-points are most impactful and the cue to this lies in truly understanding people’s needs.
Throughout our work with helping healthcare and insurance organisations become customer-centric, Common Good has established a robust human-centred methodology of uncovering customers’ unmet needs. Our strategic design approach balances human needs with business objectives to develop desirable and commercially viable value propositions to enable clients to innovate their services effectively.