In 2018, we looked at the top trends in a financial services profession rocked by threats direct and indirect from Amazon, Google and Apple. In 2020, we have a new sense of how those big players will - and won't - impact traditional finance, from the Apple Card to increasingly refined mobile- and voice-friendly UI across all platforms.
The Funnelback team boasts decades of experience with financial services. So we gathered our best minds to identify what they're hearing from our partners and customers. This is what we'll be watching in 2020.
As is often said, what’s local is now global -- and vice-versa. Across the world, financial institutions large and small are reeling from political, legal, and technological shifts.
In the UK, challenger banks are eating into traditional banking -- while fending off competition from the continent. And fintech is taking an ever bigger cut: Accenture research suggests that there are over 18 million challenger bank accounts in the UK (including CYBG, Metro, Atom and Starling), with 40% of those under 25 now multi-banked.
Meanwhile, Chinese startups have continued to expand aggressively around the world. And rumors abound that the People’s Bank of China might launch a digital central bank currency that would overwhelm similar technologies like Libra.
Australian banking in 2019 was shaken by a number of investigations, culminating in sanctions and massive fines. Aussie banks are likely to face a difficult domestic and global environment despite widely expected “open-ended quantitative easing” in 2020. It’s no surprise, then, that bank branches are closing at a higher rate than ever.
In the US, community banking is facing its toughest year yet as market share for smaller banks continued to decline. But according to FDIC data, return on assets for banks with less than $10 billion in assets reached its highest numbers since 2006 -- though it trailed the larger banks.
In 2019, Apple announced the Apple Card, Amazon rolled out several new financial offerings, Facebook announced Libra, and Google soft-launched its Google Cache checking account. The hostile reaction to Libra from regulators and legislators did seem to give pause to some in tech, but the inevitable growth of these players in the space seemed all but certain.
Mirroring other businesses in the early twentieth century, many financial services firms focused on vertical integration. The vertically-integrated bank, it seemed, could control “everything from the regulated balance sheet to distribution.” Like Standard Oil, the idea did not age well. But bankers held on.
By 2019, however, cracks were evident. “Vertically integrated companies simply weren’t as efficient as their specialized counterparts,” noted an article in International Banker. “Open Banking will allow banks—force banks, in fact—to work with each other and with firms outside the financial sector like they haven’t before.”
With critical differentiators from products and services proving more challenging in a hypercompetitive environment, many firms are looking to customer experience as a key difference. According to Salesforce, 62% of consumers expect companies to adapt based on their actions or behaviors. (The same study found that only 47% of consumers believe they are receiving this level of personalization today. And it’s easy to believe that number is much lower for financial services.)
More than two-thirds of companies in any sector now compete primarily on the basis of customer experience – up from only 36% a decade ago, according to Gartner. Many financial services firms now look to take advantage of artificial intelligence tools. Once focused only on security and auditing, this technology now provides advice and recommendations based on behavioral and transactional data. Mobile banking apps or text messages will prompt consumers with intelligent, contextual recommendations. This increased emotional engagement can lead to increased opportunities and revenues for the service provider.
Though new technologies have opened doors for financial services professionals, some did not sufficiently consider the human at the end of the phone or the keyboard before they were implemented. Good customer experience provides an omnichannel experience, nudging the user with helpful insight without getting in the way.
While omnichannel strategies have been discussed since the early 2000s, technology has finally provided a way for some success in the 2020s. Most consumers look online, offline and on social media before investing in a product or service; financial services are therefore uniquely positioned to exceed expectations at each location -- if they are able to share data between them. Effective digital transformation efforts can therefore be transformative, providing the technical underpinnings to omnichannel interactions. Fill out a form at a branch, then submit it online? No problem.
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