The financial services sector has been undergoing disruption for quite some time. Changes are, after all, natural in an evolving market.
The move towards digital channels and away from bricks and mortar is the most prominent and probably unsurprising transition taking hold of financial services. We only need to look at services like mobile banking and digital challenger banks to see how technology is transforming the financial services landscape; especially when it comes to customer service.
For example, in wealth management – a service that typically revolved around a customer’s relationship with their human advisor – robo-advisors are becoming more and more common. The insurance sector, too, is similarly bringing mobile to the forefront to allow customers to quickly submit claims from their devices rather than speak on the phone.
At the heart of all digital innovation, the competitive aim is to provide convenience to customers. Technology can make efficient services accessible at any time and through the right channels, which means they better fit to individual lifestyles and life journeys. By being this available and responsive to customer’s needs, financial services businesses can cement their brand as a trusted source.
Digital adoption has at the same time created a fast changing and digitally competitive landscape where traditional routes to profit are steadily being eroded, and new opportunities for revenue & profit can open up and shrink again in weeks & months rather than the previous timeframe of years. This is happening at the same time as interest rates being historically low, creating even more difficulty to generate good returns for financial services organisations.
Financially viable digitally native challenger businesses in all areas of financial services are beginning to show that they can not only survive in this new and challenging environment but also outperform their traditional competitors.
A lot of existing financial services businesses have been alert to all these changes, and many have plans in play for a graceful transition to a digital-first strategy through digital transformation.
The Covid-19 ‘Jolt’
But Covid-19 and the measures it has invoked have banished the slow and steady approach. Instead, the pandemic has jolted businesses and customers into accelerated digital adoption, which has seen some predict a ‘new age’ for the future of financial services.
One thing Covid-19 has done is take away the rejection of a ‘digital first’ consumption model for financial services from those customers holding on to a more traditional model – branches, people, hard-cash and personal relationships. For example using contactless payments in supermarkets has now become the standard way for paying for goods, and ‘dirty’ cash has been rejected. With limited access to branches and telephone support, many people have been turning to online services and mobile apps – some for the very first time.
The question is, now that digital sceptics have been forced to change, will their digital adoption revert to more traditional models once they’re able to do so safely and easily? For many, I think the answer is no. When done properly, digital is just easier and more convenient to use, and having tried it, I suspect many will realise that and not want to go back.
For this reason alone, I would suggest that to safeguard themselves and their employees, financial services businesses must transition to a fully digital-first operation now.
The need to adapt quickly and agilely will feel more alien to some financial services business than others. Some legacy organisations, in particular, will have a culture rooted in being stable and risk averse – an asset that has in the past made them successful.
But the necessity of speed to respond to Covid-19 may have actually helped these organisations temporarily remould to a culture that’s more comfortable with moving quickly and in some cases, failing fast. This is arguably necessary for a digital-first company, as has been demonstrated with some of the digital financial services front-runners. Many traditional, risk-adverse financial services organisations have surprised themselves on what they have achieved in response to Covid-19.
No way back?
It’s a cultural transformation that has been temporarily been imposed on financial services businesses, without choice. And there will no doubt be companies that are keen to return to business as usual. We’ve seen this before with the financial crisis in 2008. Mergers & acquisitions happened, organisations regained stability, and then continued as they had before.
However, I think this time is different. The predicted economic downturn we are now beginning to see won’t allow businesses to turn back to comfortable territory. The Covid-19 driven focus on agility and resilience isn’t going away – the need for organisations to efficiently respond to fast changing situations will become the new normal if they are to survive and prosper in the next challenging years to come.
There’s also a chance that employees won’t allow for this either. Many have enjoyed the newfound flexibility of remote working – something that has stereotypically not been granted to financial services employees. This newfound way of working has placed employee wellbeing front and centre of operations, and in turn, irreversibly adjusted employee expectations. Ultimately, there’s no going back to how things were before, and financial services must re-imagine their approach to flexible working moving forward.
It hints at how flexible working could become a greater competitive advantage in talent acquisition in financial services, which will be even more important as businesses digitise at speed and require new skills.
Of course, there’s no way of knowing the future for certain, especially when navigating such an unpredictable pandemic. There will be trends that we don’t foresee. But digital transformation is not one of them.
Customers are increasingly wanting a seamless digital experience from their banks and insurers, and businesses need to answer this demand by investing in the right innovation and technology.
If we really are sat at the dawn on a new age of financial services, then we all need to embrace this within our workplace cultures, or face being left behind as a part of history. There’s no going back.