The Knock-On Effect of a New Financial Services Model

By most accounts, half of the world’s population will be digital natives by 2020. That means a significant (and rising) proportion of financial services customers around the globe will have grown up with a permanent internet connection. They will never have lived in a non-digital world, and their financial services experiences shouldn’t force them to relive pneumatic tubes and paper checkbook registers. Financial services organizations need to focus on this market, some of whom may only engage with financial services organization via digital channels, and need to provide them with relevant, satisfying, and even enjoyable experiences that also serve the bottom line. The impact of a new financial services model would continue to be felt in adjacent industries such as health, insurance, education and real estate. The emergence of products and services covering different aspects of a consumers need across these industries will accelerate in 2019 and beyond.

To develop an effective digital financial services model, companies should focus on raising awareness of and interest in making mobile payments, making it easier to adopt the payment method, enhancing and promoting chatbots and robot advisory services, extending online capabilities in new directions, utilise gamification to engage customers, leveraging new technology that makes financial service activities more fun, and leverage personalization technology, providing a more relevant, engaging and effective digital experiences. By focusing on these areas, financial services companies can maximise engagement with a digital generation and reach out to more customers than ever before. The benefits of this are not restricted to younger customers either, as the general digitalisation of life means that financial service providers can be connected with older customers who may not have previously used them to the same extent.

What has not been examined is the knock-on effect that a fully digitized financial services model will have on other industries. It can serve both as a template for modernisation and can help other markets develop new ways of connecting with customers by utilizing new digital financial services. Potential disruptive forces for future markets include:

  • Cost commoditisation: Financial institutions are embracing new technologies to accelerate commoditisation of cost drivers.
  • Profit redistribution: The location of profit pools within and between value chains are shifting with new technologies.
  • Platforms rising: Financial institutions are shifting to multiple-provider platforms as a channel to distribute and trade across geographies.
  • Data monetisation: Financial institutions are starting to use a combination of data strategies to follow the lead of tech firms in data monetisation.
  • Bionic workforce: New technologies such as Artificial Intelligence will mean major shifts to financial institutions’ workforces.
  • Systemically important techs: Financial institutions of all sizes rely on large tech firms’ capabilities.
  • Financial regionalisation: Diverging regulatory priorities and customer needs is making way to tailored regional models of financial services.

All of these can apply to other markets too, such as healthcare, insurance, education and property.

An example of the effect a digital financial services model can have is Brightpeak Financial, a division of Thrivent Financial for Lutherans, engages customers in a much broader conversation than a transactional focus on the insurance products that it sells. On a website structured around the categories of “Live,” “Work,” and “Learn,” it offers content that speaks to customers’ direct concerns, from organic produce to marital stress to summer holidays. The site meets customers in the spaces where they already reside and speaks to the value of its products from this orientation. For example, it has Disability Insurance specifically targeted to stay-at-home parents, framing the value of the work that happens outside the traditional workplace.

This was inspired by a programme the World Bank has developed for poor women in Pakistan, a group that is currently largely excluded from formal banking systems but is often quite savvy in managing their money. The World Bank programme reframes basic savings and loans, putting products into terms that the customers could connect with. The products became so unrecognizable that at one point a client team member said, “I don’t get it. This wasn’t about interest rates or loan terms or the language the industry is accustomed to, it was about getting your money this or next Eid.” This, just like Brightpeak Financial, can show how the example of digitialising financial services, and specifically ensuring they are ultra-focused on the customer themselves, can ensure companies following the example of financial services remain competitive and close to their customers in a digital age.

Ultimately, businesses in all sectors need to remain up to speed in the modern age. Financial services have an opportunity to take a lead in digitising its business model, and by doing so open the way for many other industries. This can benefit both the financial service industry itself, by ensuring that customers are retained and services are easily delivered, and in a n age of connectivity, other industries can boost themselves knowing there is a digital infrastructure in place to underpin them.