For several years now, traditional financial services firms have been under siege from a new market of financial disintermediaries—startups focused on using digital channels almost exclusively, to streamline financial services.
Whether you’re a bank, insurer, retirement firm or wealth management firm, you know that digital isn’t just a fad. Digital is a reality that financial services firms must deal with or risk losing even more market share and revenue to emerging FinTech companies. Succeeding in digital is predicated on delivering a superior customer experience. FinTech firms have had the upper hand in this regard, but traditional firms are making strides to catch up.
Earlier this year we discussed the lower-level process of optimizing the digital customer experience in financial services. Now, let’s take a step back and understand the bigger picture of what the financial services industry is facing.
The New Financial Services Reality
Investments in financial technology have grown over 1,000% since 2010 (from $1.8 billion to $20 billion in 2015). These investments are expected to accelerate through 2020 as some FinTechs transcend startup status.
There are many residual effects of digital dominance in the financial services industry, but two important ones include:
- An Uptick in Fraud: According to Financial Fraud Action UK, 2015 saw 26% increase in fraud in the UK financial services ecosystem, totaling €755 million. Specifically, there was a 72% increase in remote banking fraud, pointing to the effects of greater adoption of digital channels—both by consumers and financial services companies.
- In-Person Banking Is Dwindling: Major banks and financial services providers are a long way from going entirely digital. However, consumer behavior is accelerating the shift. Branch banking is still going strong, but 40% of Americans haven’t visited a bank in the last 6 months.
These two opposing trends are indicative of a realization that multiple other industries have come to in recent years—consumers are willing to sacrifice some level of security for the convenience, ease, and better customer experience of digital channels.
Because FinTech disintermediaries can, in some cases, offer simplified account setup processes, more attractive rates and fees, and better overall experiences online, they are successfully eating away at the revenue that well-established firms have owned for years. Traditional financial services companies need an effective way to observe digital behavior and optimize customer experiences accordingly.
The Big Data Opportunity for Financial Services Firms
Capgemini Consulting research recently found that 37% of customers believe banks don’t understand their needs and preferences. At a time when customer experience is a key differentiator for digital financial services businesses, companies must be in tune with what customers need and want.
This is where customer experience data will play a role in digital financial services moving forward.
The same Capgemini survey also found that 60% of financial institutions see customer experience data and analytics (part of big data) as a means to creating competitive advantages while 90% go as far as to say that it may define future winners in the industry. Leveraging big data analytics to optimize the customer experience is an answer to keeping up with innovative FinTech startups while unlocking revenue you never knew you earned.
If you want to learn more about the digital landscape surrounding financial services as well as how customer experience analytics can help incumbent firms adapt to disruption, download our new ebook, How Financial Services Firms Can Uncover Hidden Revenue Opportunities in the Digital Channel.