How ‘Fit’ is the Consumer Finance Sector as it Faces the Future?
Speaking on the developing relationship between consumers and the financial sector, here Tracey Follows, Chief Strategy & Innovation Officer of The Future Laboratory, offers her take on the future of the consumer finance sector.
Money. It is something that is in the back of most normal people’s minds most of the time.
But the brands involved in money are not generally amongst the public’s favourite or most salient brands. Stop anyone in the street and ask them to name their favourite brand, and it is not likely to be a bank, an insurer, or an aggregator. And if people are happy with their bank or insurance, they don’t talk about it.
What does peak consumer interest though, is the prospect of making something onerous or boring a little bit simpler, quicker, more convenient or better value. And it’s around these benefits that we see the consumer finance sector pivoting and changing.
The arrival of so called FinTechs, companies offering new technology and ways to manage money – Apple Pay, PayPal and Circle, or Bot based automated savings services like Digit – is changing our relationship with money and finance. And with 40% of Brits believing that the image of big name banks has deteriorated in the past year, it’s no surprise that money clubs and a new generation of digital alternatives are beginning to be used in place of the traditional banks.
As the march towards a cashless society continues, and as new entrants and non-financial brands begin to offer real replacements to traditional financial services, the traditional finance brands are going to have to adapt.
So how fit are the category players and their brands to face the future?
The Future Laboratory has identified six key behaviours that make a business ‘fit for the future’. These include: Long Term Planning, Brand Stretch, Innovation, Conscious Business, Thriving Employees, and Agility.
Within the sector of consumer finance there are some very different types of business. Traditional banks, Insurers, and payment firms such as PayPal, Visa and Mastercard are all there. But there are some common themes and challenges despite their obvious differences.
For the purposes of comparison, we’ve looked at the brands in this sector in two broad groups: Banks and building societies and ‘Others’ – a more eclectic group made up of insurers, aggregators and payment gateways.
All the brands in this sector score above average on Agility, a measure of the brand and businesses ability – in financial terms, to actually make its ideas come to fruition. Only eight of the 45 brands making up these two groups fall outside the top 50% of all 547 brands in this study. To be expected, given the nature of these businesses.
Where these groups start to pull apart is when you look at Brand Stretch and Conscious Business. The last couple of years has seen consumer trust and the reputations of banks fall away as tales of scandal, collapse, failure and huge salaries have been paraded through the media. While some individual brands fare better than others, as a group every single brand falls well outside the top 50% of all brands in the study on Brand Stretch with banks being pulled down by poor reputation scores.
Presumably, in an attempt to correct their failing reputations and to answer to ever greater calls for transparency and honesty in the sector, these same banking brands score very well on our Conscious Business behaviour. This is a measure which assesses if a company or brand is behaving in an ethical way that doesn’t have adverse effects on people, wherever they are in the world. Consumers understand that they are part of a “whole system” and they increasingly don’t want to buy from companies that are having a bad impact on the environment or on people. They increasingly expect brands to publicly own their impact on both.
On this measure, the overwhelming majority of banking brands are fully compliant with the GRI – the global reporting initiative that provides a method for companies to assess and report their impacts on the environment and society.
The other, non-banking business and brands simply haven’t faced the same pressures and it shows when you look at their Brand Stretch scores, making allowances for the general apathy to finance brands, they score much better. They are much less concerned with ethical behavior (and so far, haven’t had to be)
The comparison between PayPal and Halifax – the two best brands in each sub group within consumer finance – shows that each group needs to learn from the other if they are to be fit for the future.
The traditional retail banks need to look towards servicing their consumer and future consumer in ever more innovative ways while continuing to rebuild trust, reputation and therefore their brand.
The others can’t afford to ignore the lessons of the last few years and that includes the drivers of Conscious Business. They could bolster their brands by doing so and help to insulate themselves against any future scandal in the eyes of the ultimate judge – the consumer.