Take a close look at the financial services industry as a whole. Then take both the rapidly evolving technology landscape and the increasingly demanding consumer landscape into account. Now, these scenarios don’t seem so impossible. It might take five years. It might take a decade. But at some time in the not-too-distant future, this is exactly what a financial services institution could look like.
So how do you as a financial services organisation leverage the power of technology in order to stay ahead of the curve, while also conforming to increasingly restrictive compliance and regulatory requirements? And all this while ensuring you operate profitably?
The Rise of Fintechs (and Insuretechs)
FinTech initially referred to the back-end systems used by banks and other financial services institutions. In time, it came to include any technology used by the sector. Today, the term is widely used to refer to any company that provides financial services exclusively through the internet, mobile devices, cloud technology or software.
Successful FinTechs and InsureTechs are targeting service niches that have been under-served by traditional financial services firms or use technology to provide services in a new way. According to the KPMG Pulse of Fintech report, over $1.9b was invested in Australian FinTechs during 2019, meaning the investment community – as well as customers – recognise the tremendous value they are unlocking.
In fact, 1 in 4 Australians have switched or are considering switching to a Neobank.
Financial services firms should seek to learn from FinTechs, whose driving principle has always been to provide their users with a simplified and intuitive customer experience through technology.
Increased regulatory compliance requirements
The financial industry has always been highly regulated. But with the constant threat of data breaches affecting privacy concerns and the findings of the Banking Royal Commission, these regulations are evolving and becoming stricter. This has led to financial services institutions racking up costs in order to implement the necessary controls and stay up to date with the latest regulatory changes.
This is where technology is essential. Software designed to collect and mine data, perform in-depth analysis and provide insightful reports is critical to identifying and minimising noncompliance risks. Technology can also help standardise and automate processes and ensure those that can’t be automated are followed rigorously. This eases the process of adapting to new regulations.
A mixed client base
Being a firm in the financial services sector is not easy. On one hand, you have the Baby Boomers who prefer traditional banking with human interactions. On the other, you have Millennials & Gen-Z for who banking via an app/smartphone is the most preferred method – 43% for 18-24 years old and 40% for 25-34 year old. In the middle sit Gen-Xers who want Boomer style personal service and Gen-Y / Millennial style digital services.
So, firms will not only need to seamlessly combine these completely different approaches, but also know which approach will be appropriate on a customer by customer basis.
They’ll need to invest in artificial intelligence platforms to understand customer preferences and provide the preferred style of assistance whenever needed. These same systems should also allow a customer to set appointments with actual advisors if their problem is too complex for the app – or simply if their preference is for human assistance.
Customer retention is more difficult
Because today’s consumers are mobile-enabled and digitally savvy, they’re constantly re-evaluating their options. And, a recent study from Deloitte showed, “switchers” are younger, better educated, more tech savvy and have a higher household income than “stickers”.
A further study found that 89% of overall respondents and a massive 97% of millennials indicated that they use mobile banking. The current generation of customers – and the one to come – have increasing expectations regarding the digital experience they get when interacting with the Financial Services provider. That experience needs to be driven by the insights that AI can generate.
What this adds up to is a need for firms to invest in AI in order to provide customers with assistance when they need it, and to simplify certain tasks. In other words, giving their customers as personal experience as possible – without having to wait for an actual person to provide it!
It might seem like an overwhelming task to deal with these and the many other challenges involved in the financial services sector. Digital transformation for financial services firms is both a driver of change and a means to solve many of the challenges being faced. Technology and I.T. functions need to put themselves in the driver’s seat and steer their organisation’s transformation.
To do this, you are going to need the right technology partner – a team who can understand your challenges, be able to harness technology and develop solutions tailored to specific needs, while remaining compliant.
Nexon is the team that can do that for you. Contact us for a no-obligation consultation – call 1300 800 000 or email firstname.lastname@example.org to discuss how we can help you solve today’s challenges and plan for tomorrow.