The Evolving Financial Services Landscape: Delivering Data-Driven Customer Experiences

The finan­cial ser­vices land­scape is increas­ing­ly being defined by banks’ attempts to har­ness new tech­nolo­gies, as well as com­pete with new finan­cial tech­nol­o­gy com­pa­nies. At the same time, it’s being sculpt­ed by chang­ing cus­tomer behav­iour, whilst also filled with uncer­tain­ty about new regulations.

How will these trends play out in 2017? Our research shows that the com­ing year will be defined by cus­tomer expe­ri­ence, to a degree nev­er before seen.

Shifts in the landscape

In my two-part series on the Revised Pay­ment Ser­vices Direc­tive (PSD2), I explored just a few of the ways the finan­cial land­scape has become more com­pet­i­tive. Most of these trans­for­ma­tions point back to the fact that finan­cial prod­ucts have become ubiq­ui­tous. In oth­er words, banks can no longer dif­fer­en­ti­ate them­selves sole­ly through their prod­ucts; rather, they need to stand out through the expe­ri­ences they pro­vide to their customers.

We’ve also seen a lot of changes in con­sumer behav­iour. Your cus­tomers’ time has become more pre­cious, and they’re less inclined to spend it on finan­cial ser­vices – espe­cial­ly when a grow­ing num­ber of apps and web­sites are there to assist. Instead of stop­ping into brick-and-mor­tar branch­es, cus­tomers engage with their banks and insur­ance com­pa­nies on their mobile devices—a lev­el of con­ve­nience that rais­es the bar in terms of con­sumer experiences.

In fact, cus­tomer behav­iour and expec­ta­tions are being “trained” by oth­er indus­tries in which dig­i­tal-first com­pa­nies are already deliv­er­ing stand­out cus­tomer expe­ri­ences – see, for exam­ple, Uber, AirBnB, and Deliv­eroo. With­in FSI specif­i­cal­ly, small, agile fin­techs are also rais­ing and sharp­en­ing con­sumer expectations.

It would hope­ful­ly be fair to say that, since the recent finan­cial cri­sis, con­sumers have lost much of their trust in banks. They still have cog­ni­tive trust in banks to be com­pe­tent in things like trans­fer­ring mon­ey and pay­ing bills, but many cus­tomers have lost social, or affec­tive trust in their banks—that is, they no longer believe that their banks hold their best inter­ests at heart.

As high street banks are focused on re-earn­ing this social trust, they find them­selves start­ing with “neg­a­tive equi­ty,” where­as new start-up fin­techs, which were not around dur­ing the finan­cial cri­sis, are start­ing from zero – a clear advan­tage in many con­sumers’ eyes.

This com­pet­i­tive advan­tage, as well as their abil­i­ty to deliv­er on cus­tomer expe­ri­ence, is allow­ing these new fin­tech com­pa­nies to step into the land­scape, and defin­ing a new com­pet­i­tive age for the finan­cial ser­vices indus­try, in which fin­tech com­pa­nies become seri­ous com­peti­tors for tra­di­tion­al high-street banks.

One trend that has start­ed recent­ly, and I pre­dict will grow quick­ly, is banks no longer try­ing to com­pete with fin­techs but real­is­ing their best bet is to part­ner with them. A good exam­ple of this is the new part­ner­ship between San­tander and Kabbage.

New reg­u­la­tions are also shap­ing the finan­cial land­scape. As PSD2 moves toward imple­men­ta­tion, and the Gen­er­al Data Pri­va­cy Reg­u­la­tion (GDPR), which spans every indus­try, also becomes a real­i­ty, many finan­cial com­pa­nies are look­ing on with uncertainty.

Cru­cial fac­tors in 2017

With­in this land­scape, Adobe’s 2017 Dig­i­tal Trends Report found, “Cus­tomer expe­ri­ence is regard­ed as the pri­ma­ry way for organ­i­sa­tions to dif­fer­en­ti­ate them­selves from com­peti­tors in 2017.” Of course, cus­tomer expe­ri­ence was also a key dif­fer­en­tia­tor in 2016 – but over the com­ing year, it’s going to attract more invest­ment and atten­tion than ever before.

This means the finan­cial ser­vices indus­try needs to adjust its ambi­tions. How do you deliv­er against this cus­tomer expe­ri­ence? How do you under­stand each con­sumer, and lever­age real-time data to ensure that every expe­ri­ence is relevant?

Our research finds that this boils down into five cru­cial factors:

• Con­text – under­stand­ing what the cus­tomer wants and needs, by analysing the customer’s behaviour
• Expe­ri­ence – deliv­er a rich and immer­sive cus­tomer expe­ri­ence that’s easy and intu­itive to engage with
• Antic­i­pa­tion – pre­dict­ing what the cus­tomer will want today, tomor­row, and the day after
• Orches­tra­tion – pro­vid­ing a seam­less jour­ney across every touchpoint
• Rais­ing the bar – tak­ing the cus­tomer from sat­is­fac­tion to delight and always look­ing to improve

Giv­en the desire to be seen to deliv­er against cus­tomer expe­ri­ence, we will see lead­ing finan­cial insti­tu­tions focus on the fol­low­ing areas to dif­fer­en­ti­ate themselves.

First, they will har­ness their data intel­li­gent­ly and enhance their pre­dic­tive capa­bil­i­ty using arti­fi­cial intel­li­gence and cog­ni­tive com­put­ing sys­tems. The first appli­ca­tion of this will more than like­ly be with “robo-advice” cus­tomer ser­vice sys­tems that will use this new capa­bil­i­ty to enhance the cus­tomer expe­ri­ence. Roy­al Bank of Scot­land (RBS), for exam­ple, has just start­ed using IBM Wat­son tech­nol­o­gy to auto­mat­i­cal­ly answer cus­tomer ques­tions and pass requests to the right agents. And that’s just the begin­ning. The lat­est research from glob­al mar­ket intel­li­gence firm Inter­na­tion­al Data Cor­po­ra­tion (IDC) shows that a full 20 per­cent of banks will inte­grate arti­fi­cial intel­li­gence into their cus­tomer expe­ri­ence in 2017.

Sec­ond, 2017 will see increased adop­tion of cloud ser­vices, as insti­tu­tions over­come their inter­nal secu­ri­ty issues and realise the ben­e­fits out­weigh the risks. At the same time, banks will need to build mod­u­lar cloud archi­tec­tures that sup­port bank-wide shared ser­vices, to ensure that they can deliv­er against cus­tomer require­ments. IDC research says that by 2020, cloud adop­tion will reduce infra­struc­ture spend by 20 per­cent among top-tier Euro­pean banks.

We’re also going to see major devel­op­ment around per­son­al finan­cial man­age­ment tools and data man­age­ment shar­ing through advanced appli­ca­tions and tools that deliv­er added val­ue to customers.

As indus­try-shift­ing as arti­fi­cial intel­li­gence and cloud com­put­ing will be, their sig­nif­i­cance pales in com­par­i­son to the impor­tance of PSD2 (with its con­cerns around APIs and IT infra­struc­ture) and GDPR (with its mul­ti-indus­try changes to data man­age­ment), as well as the increas­ing demands in terms of the cus­tomer experience.

Data man­age­ment is central

All of these new, trendy ini­tia­tives that banks will be talk­ing about rely on one thing; data man­age­ment. And very few organ­i­sa­tions have made any real strides in elic­it­ing insights from their inter­nal data­bas­es of cus­tomer infor­ma­tion, or have linked that infor­ma­tion to desk­top and mobile behav­iour. While tech­nol­o­gy ven­dors offer the nec­es­sary capa­bil­i­ties, most banks and invest­ment com­pa­nies haven’t yet onboard­ed those solu­tions. As more finan­cial insti­tu­tions recog­nise the need for com­pre­hen­sive data man­age­ment tools – and feel the pres­sure from new reg­u­la­tions and trends at the same time – we’re going to see inten­si­fy­ing activ­i­ty in this area.

In short, 2017 is going to be about get­ting the data right. Much more than the longer-term ambi­tions around robo-chats, cloud com­put­ing, per­son­al appli­ca­tions, and mobile wal­lets, finan­cial ser­vices com­pa­nies are going to spend 2017 build­ing a foun­da­tion of data that com­plies with reg­u­la­tions and deliv­ers against cus­tomer expe­ri­ence demands.

This speaks to a sig­nif­i­cant oppor­tu­ni­ty for fin­tech com­pa­nies that begin to focus on data man­age­ment right out of the gate. Once you’ve got a suf­fi­cient data infra­struc­ture in place, you can begin to focus on deliv­er­ing that data-dri­ven cus­tomer expe­ri­ence that will dif­fer­en­ti­ate you from your competitors.

To find out more about gen­er­al dig­i­tal trends over the com­ing year, down­load the 2017 Dig­i­tal Trends Econ­sul­tan­cy Report. We’re also cur­rent­ly com­plet­ing a review of the cus­tomer data spe­cif­ic to the finan­cial ser­vices indus­try, so watch this space for a quan­ti­ta­tive analy­sis of dig­i­tal trends with­in finan­cial ser­vices, com­ing soon.