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Digital-First and Not Digital Only in the Financial Services Sector

It’s not often financial institutions are heralded as digitally pioneering, yet this is exactly what has been happening over the past few years. Payments and money transfers to any country in the world can now be completed in the blink of a ‘biometric identification’ nanosecond. But for all the advances made in this sector, there remains much work still to be done when it comes to improving customer sentiment and experience. In an era of rampant cybercrime where pervasive messaging is making customers more aware and more protective of their data every passing day, do consumers want a fully digital service without the human touch? And what do they expect from their financial provider?

Posted: 30th June 2022 by
Matthew O’Neill
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Personalised nature of financial services has suffered

For years, the financial services market has become much more transactional. In a race to the bottom on price, consumers have been more concerned with who doesn’t charge maintenance fees and who has the best interest rate for their cards or rewards system for their policies than who has the most convenient high-street locations or who provides the best service. This has placed an over-emphasis on digital, particularly as generations have grown up so that now, the thought of going to a branch office is seen as an alien concept to younger customers. There is no question that the banking landscape has dramatically changed from one generation to the next. The relentless march to digital continues to see swathes of branch closures and has ushered in the death of ‘speaking to your local bank manager’. According to recent figures from the European Central Bank, the bank branch network is getting thinner by the day with a decline in 25 out of 27 EU Member States. According to a report from last year, at least one bank branch closes every day in Belgium.

It has created a dichotomy whereby large swathes of society are now totally reliant on digital financial services - a figure that is only going to increase as digital identity verification becomes more widespread. But at the same time, the narrative to consumers is to ‘protect their data’. As a result, it is creating an environment of mistrust, concern and paranoia, rather than an excitement for what safely sharing data can enable.

Humans: The missing link in financial services

Our Digital Frontiers research identified that two-thirds (67%) of European consumers don’t know who has access to their personal data and how it’s used – just 12% do with any certainty, while the majority (59%) of the public are increasingly concerned about the security of their online digital footprints and how purchasing data is used, interpreted and shared. Indeed, 41% now feel paranoid that organisations are tracking and recording what they do on devices.

At the same time, the near extinction of humans in the financial services sector is creating a void that consumers are not yet prepared to take the leap of faith to cross. Yes, our research uncovered an acceptance 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 generated greater returns each month, 39% expect their financial services provider to use technology like artificial intelligence and machine learning to help protect their funds and personal details.  However, it also highlighted that a fully-digital banking network is a long way away. Only a third (30%) of consumers would choose a different bank or financial service provider if their existing one 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, almost two-thirds (64%) of consumers expect the financial services industry to support traditional and in-person services that they do not rely on but know other people may.

In a race to the bottom on price, consumers have been more concerned with who doesn’t charge maintenance fees and who has the best interest rate for their cards or rewards system for their policies than who has the most convenient high-street locations or who provides the best service.

Whether it is the desire for trust, the ability to solve our problems - especially in light of high-profile scams and cybercrime, or to simply deliver a personalised experience, it’s clear that for digital in financial services to reach its potential, people still need people; not necessarily in the high street, but at the end of a message, phone or video.

Digital-first, not digital-only

What consumers are looking for is for financial services institutions to build their offerings with a digital-first mindset and not digital-only, which is good news for traditional establishments - less so for fintechs and NeoBanks. And who can blame them when it’s something they see daily in other sectors. Retail is starting to blend in-store expertise and service with digital innovations around delivery choices yet in financial services, consumers are being offered chatbots to fix problems and are being turned off as a result. This isn’t a digital versus physical discussion but more about creating a blend where the choice of engagement is down to the consumer: from efficient app-based banking to speaking with a real-life person via chat, phone, video or in-person, when required. Data lies at the very heart of this.

Away from devices and evolving customer expectations, there is another driver of change for financial services at a macro level. Governmental and regulatory expectations have translated into a need for banks to play a fuller role in meeting society’s financial needs. Our digital economies depend on organisations and companies being able 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 that they do not have sufficient access to mainstream financial services and products - something exacerbated by the ongoing branch closures.

Financial Services getting it right

The beauty of this situation is that all the tools and technologies to realise this future are here, today. There are already businesses demonstrating how it can be done to great effect. One example is Achmea, which has a leading position in the Dutch insurance market, with 10 million customers. The insurer makes use of technology and data in a clever way that allows it to quickly add new services or make changes based on customer feedback. Innovations to speed up its claim processes include an app for policyholders to help them find local tradesmen for repairs through to the use of drones to survey weather damage to properties.

Totally secure, friction-free financial interaction

Consumers want totally secure, friction-free financial interaction with absolute trust in how their data is captured, stored and used. But, for a sector that’s designed on digits, people don’t want to be just another number. And in this day and age, these two objectives don't need to be mutually exclusive.

The financial services sector has an opportunity to lead the way globally, demonstrating digital excellence with data to excite consumers, bank the unbanked, connect communities and shape society for the better.

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