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The financial services industry is utilizing new technologies and channels, in order to become more efficient, more reliant, more convenient and above all – simpler. Among such new channels are internet websites, social media platforms, smartphone / tablet apps and others. Banks, credit card companies and insurance companies are using those digital channels along the entire service chain, including sales & marketing, communications, consumer service and CRM.
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Digital-Inspired Trends in the Financial Services Industry
Executive Summary
Hamutal Schieber | May 2014
Introduction
• The purpose of this presentation is to present the major industry and consumer trends affecting the Financial Services industry, including;
• We have focused on in the USA and Europe, reviewing industry sources, market research, and the activities of prominent competitors per each sector.
• Main subjects that are covered are:
1. Market trends & Innovations – especially with regards to digital tools, online / mobile solutions and self service innovation
2. Competitor activity on the digital sphere
banks and investment companies
Insurance companies
Cards and processing companies
Consumer Trends | Digital Adoption
• The increase in internet and mobile adoption provides new ways for consumers to access financial services.
• New channels include websites, social media, mobile apps and others. • Banks, credit card companies and insurance companies are using digital
channels for various purposes, including sales & marketing, consumer service and CRM. They are adopting an omni-channel strategy following consumers’ behaviors, as consumers shift between devices and screens.
• At the same time, new competitors emerge as pure-play digital financial services providers, whether mobile or online.
Utilizing Digital for Growth
• Financial Services brands must provide the following advantages in order to attract new clients and cross-sell new services to new clients:– Building Trust through: Personal connection (utilizing social platforms),
content ownership / expertise (utilizing blogs, micro sites etc.) and targeting niches.
– Offering Convenience. On time / on place (utilizing mobile devices). Self service (utilizing mobile, online and tablet).
– Providing Personalization. Online / mobile customizable tools, device-specific presentation (such as tablets).
– Offering Simplicity. The industry is perceived as complicated and confusing. Digital channels are enabling new strategies such as gamification and simple analysis tools.
According to a Timetric Research (Dec. 2013), financial services worldwide digital advertising expenditure rose from US$53.7 billion in 2008 to US$95.7 billion in 2012, at a CAGR of 15.52%. It is expected to nearly double between 2012 and 2017 to reach US$168.4 billion between 2013–2017.
Mobile Trends
• According to an Adobe research (November, 2013), mobile finan cial apps take the top spot for the one con sumers open most fre quently.
• New bank ing and invest ment apps are more secure and make log ging in and use much eas ier than the web site. Con sumers use these apps 30% more fre quently than any other app type.
• The main challenge in mobile financial services is keeping them simple and intuitive, as financial services can be complex.
The Citibank tablet app replaces lists of transactions with interactive financial graphs to make the most of the device’s capabilities.
Mobile Trends
. . , . 2013A T Kearney Dec
• Over a third of customers at major US banks currently use mobile banking, with 43 percent of them in the 18-29 age group.
• According to Javelin Strategy & Research, around half of the top 25 financial institutions in the US are now also offering more advanced features, including p2p transfers and remote deposit services.
Trend Map
Near Future Happening Now Subject
Gamification Niche Targeting, Personalization / Customization, Loyalty, Location-Based offers
Content & Consumer Centricity
Comparisons, Reviews Video & Chat functions for advisory services, Online Account Management
Online Advisory Services
QR Codes, Crowdfunding / Group Payments, hands-free
P2P, immediate transfers, NFC, Mobile Wallets & Couponing
Online & Mobile Payments
Pure-Play Mobile Omni-Channel, Direct Service Multi Channels & Devices
E-Vaults Expedited Payments, Configurable alerts
Self Services
Social Investment for banks, reviews, social media P2P payments, Community Banking model
Benchmarking, social log-in, social investments, marketing
Social Media
Content & Consumer Centricity
Personalization / Customization • location-based offers, e.g. with mobile
wallets• Personalized presentation and tools• Niche targeting
Loyalty• Mobile clubs / couponing• rewards
Consumer Centricity• Content management• gamification
• Geico’s Content collaboration with BuzzFeed
• The Google Wallet mobile app
Consumer Centricity | Content & Gamification• A December 2012 survey by IMN found that 75% of financial services marketers had separate content
strategies in place for each marketing channel, the highest percentage of all industries polled. The key is to deliver true value to an engaged audience.
• In the US, gamification in banking is still nascent, but globally the concept is already gaining ground according to a study on innovation and gamification in banking by Infosys.
TradeHero is a mobile stock market game where you can subscribe to the stock tips of Heroes, or be a Hero and make money from the followers who subscribe to you. A further step in the gamification of “social investing”.
Online Advisory ServicesOnline Video & Chats• Video & Chat functions for advisory services
(in the US, less for Europe)• Online virtual chat
Comparisons & Reviews• Competitors start to feature reviews on their
products & services, especially in insurance.
Online Account Management• Consumers can apply for banking account,
insurance services etc. online• Mobile signature and data retention
• Aviva partnered with an independent review company, to collect, collate and publish insurance product reviews from Aviva customers.
Advisory Services
• A research by A.T. Kearney suggests that financial services players are embracing the digital trend with a combined advisory model.
• For general advisory needs, they proactively create transparency about customer satisfaction and recommendations via portals, professional research tools, social networks, and peer chat functions.
• According to InfoSys, video banking is no longer a novelty. Video can be integrated with most banking channels to enable a personalized banking experience for remote and branch banking customers. Branch banking, phone banking, self-service banking, and online banking have already seen video-enabled services such as web conferencing, and online chat.
Online & Mobile PaymentsPeer 2 Peer / Group payments• Immediate transfers• Crowdfunding• Mobile & Social Media p2p payments: Social media
enables instant money transfer among members of the family and friends. This is especially beneficial to Gen Y consumers.
Technology• NFC• Hands Free• QR Codes
Convenience Solutions• Mobile Wallets & Couponing• Check deposits & mailing
• Citi’s Popmoney payment service - "Pay Other People" directly from your Citibank account.
• Tap & Go - MasterCard contactless technology
Mobile Payments
• Regulatory pressure to promote competition in the payments industry, and the technological advancements which enable convenient and secure solutions, are shifting the structure of the payments industry. Banks continue to control the segment along with card companies, but they will have to find a way to compete with innovative internet and payment companies, including Google, Apple and Paypal – as well as innovative newcomers such as iZettle and Square.
• According to a Capgemini and RBS report (2013), global m-payments market continues to grow rapidly, powered by innovation and demand. In line with industry estimates, the global m-payments value reached $256 billion in 2012, and is expected to grow three-fold by 2014 to a total of $796 billion. P2P m-payments in developing markets, and C2B m-payments in developed markets are the main drivers of growth.
World Payments Report (WPR) from Capgemini and The Royal Bank of Scotland (RBS), 2013
Mobile Payments | Online & Offline
Traditional payment players focus on digital
Payment networks, acquirers, issuer processors and card issuers are
expanding their offerings into mobile payments .
Visa and MasterCard are building on their payments expertise, issuer relationships,
ubiquitous merchant acceptance and brand recognition, and leveraging
strategic acquisitions to build mobile payment capabilities (Visa’s V.me,
Mastercard’s Paypass-enabled wallet network) .
Internet & Mobile Players focus on expanding into the physical world
PayPal and Google are aggressively working on mobile payments and
expanding their online presence into the physical world .
PayPal’s partnership with Discover to enable wallet acceptance at retail
locations, leverage cheaper funding alternatives (e.g., ACH, Automated
Clearing House) and pursue a credit option (Bill Me Later) positions it well for
the next wave of mobile payments. Google continues to partner with existing
payment players .
Source: Deutsche Bank (Dec. 2012)
Mobile Payments | Digital Wallets• Forrester Research (Dec. 2013) concludes that digital wallets are poised to
transform the way consumers shop and pay retailers, restaurants, and service providers. Early wallets are enabling the convergence of offers, coupons, loyalty, and payments.
• The company says that successful wallets will enhance the consumer's commerce experience by delivering more value, greater convenience, and a contextually relevant, compelling experience.
• A report by Deutsche Bank (Dec. 2012) states that companies are increasingly moving the wallet to the cloud to support retailers’ omni-channel strategies, streamline the payment process to add cards and support offers and loyalty programs, and most importantly overcome adoption hurdles for NFC (nearfield communication) based payments.
• According to the Deutsche Bank report, software-based technologies such as QR codes, geo-fencing, and line-skipping apps are driven by cloud-based wallets and the ability to deliver better value propositions such as hands-free payment (no physical interaction with point-of-sale devices to complete transactions). Also, line-skipping apps eliminate checkout lines and improve response times and customer experiences.
Garanti Turkish bank’s iGaranti app aims to provide a convenient mobile experience, with real-time offers from partners.
Mobile | Insurance
• According to Bain research, addressing the digital challenge is a matter of survival for insurance companies, as insurance companies that act too late or stumble through the transition will lose customers and remain saddled with a relatively high cost base.
• Gartner estimates that by the end of 2015, personal lines property and casualty (P&C) insurers that do not offer online and mobile transactions will lose one-quarter of their current market share.
• Oscar is a new insurance firm that launched in late 2013. Oscar offers a web- and mobile-friendly aesthetic designed to make the insurance experience smoother for plan members.
Multi Channels & Devices
Omni-Channels• Services are available seamlessly on any
platform• Online / offline convergence
Direct Service• Online channel for offline competitors
Pure Play• Online / Mobile only
• Mint brings all your financial accounts together online or on your mobile device, automatically categorizes your transactions, lets you set budgets, etc.
Omni-Channel vs. Pure-Play
• The traditional branch-based model is being replaced by an integrated channel approach that allows customers to conduct banking seamlessly across various channels, such as initiating a transaction in a branch and finalizing it in a mobile app.
• According to research by A.T. Kearney, Omni-channel integration poses a significant IT challenge for banks. Thus, some banks are setting up new digital banking entities with quick processes, integrated systems, and agile organizations.
• These digital banks promise a new customer experience with quicker processing, greater convenience, and anytime, anywhere availability, and they embrace social networks, mobile banking, and customer insights to better meet customers' needs.
Image source: The Financial Brand
They rethink the way mobile banking is done by designing a bank for the smartphone as opposed to simply providing access to banking products through a mobile device.
Self ServicesDigital ATMs• Smartphone-enabled ATMs• Video Tellers
Online / Mobile Services• Configurable alerts now span a variety of needs,
such as bill payment reminder, incoming payment alert, etc.
• Expedited payments
E-Vaults• E-vaults enable clients to store important and
critical documents in the secure folders that are provided along with their online accounts.
• Bank of America Health - take a picture of your receipt and upload it to a claim, submit a claim while you’re still at the doctor’s office
Self Service
• Capgemini report maps insurance industry tools enabled by mobile devices
Infosys maps mobile / online banking services
Social Media & SharingSocial Investments• Social investments enable consumers to track
specific investors. Banks are expected to offer similar services in the future.
• Community Banking
Social Identity• Logging-in with the client’s social identity
provides a personalized experience• Facebook pages provide direct & after-hour
channel to the bank
Group Payments & Peer 2 Peer Lending• Group payment applications allow entities to
collect money from a group of people. This helps in sharing expenses among groups like family, friends, clubs, and teams.
• Peer 2 Peer Lending is slowly replacing existing lending mechanisms.
• Barclays’ “Yourbank” platform encourages consumers to share ideas about how it can improve its everyday banking services.
• Amex by American Express allows users to make purchases through social networks.
Financial Services Sharing Models• Online crowdfunding is a relatively new
form of financing for projects. The model allows many people to contribute small amounts in the hope of achieving a combined total that meets or surpasses a predetermined funding target. From its beginning funding music, the model expanded into the creative industries more broadly and into product design and development helped by the growth of large platforms such as Kickstarter and indiegogo.
• In recent years, the model has been adapted further to fund projects with a specifically social aim and also into the financing of businesses.
Y. Pierrakis and L. Collins, BANKING ON EACH OTHER Peer–to–Peer lending to business: evidence from funding circle, Nesta, 2013
There are few distinct models under the umbrella term of crowdfunding such as: donation crowdfunding, crowdfunded equity investing and crowdfunded lending. one important distinction between these models is the motivations of the people that provide the funding. This varies from the donation model where the aim is purely philanthropic to some who fund through the lending model who do so solely to attain a financial return.
Peer to Peer Lending
• The term “peer–to–peer lending” has its origins in the facilitation of unsecured personal lending between individuals (rather than a company) via online sites such as Zopa, Lending Club and Prosper.
• There has been an explosive growth in peer–to–peer personal lending across the world in the last decade, driven by the many–to–many communication paradigm.
• The proliferation of internet use and growth in social media has enabled those seeking finance to reach more people with greater ease and at far less cost. the ability to securely transfer money online allows those seeking to back a project or business to safely contribute funds. And the increase in the quality and volume of data available on individuals and businesses finances allow for the creation of accurate credit scores, which allow lenders to set suitable interest rates on the finance they offer.
• A relatively new application of the peer–to–peer lending model allows the crowd (individual lenders) to lend money to companies (instead of individuals) seeking debt finance. in most cases, the loan is an agreement between the borrower and the lender and not with the intermediary.
Peer to Peer Lending
According to crowdsourcing.org, in 2012, $2.7 billion was raised from the crowd (crowdfunding and peer–to–peer lending), mostly in the US, to finance over a million projects. The two biggest players today, Lending Club and Prosper saw 195% growth over the year ending in June 30, 2013, generating more than $1.5 billion in loansLending platform operators have faced significant regulatory challenges, and analysts anticipate continued uncertainty through 2018.
Online Advisory ServicesOnline Video & Chats• Video & Chat functions for advisory services (in the US,
less for Europe)• Online virtual chat
Comparisons & Reviews• Competitors start to feature reviews on their products &
services, especially in insurance.
Online Account Management• Consumers can apply for banking account, insurance
services etc. online• Mobile signature and data retention
Comparisons Sites
• The financial services industry is witnessing growth in aggregator-selected panels, containing both insurers and brokers. According to analysts, industry aggregators will continue to grow.
Ernst & Young, Bringing profitability back from the brink of extinction: a report on the UK retail motor insurance market
• In 2010 Google added a price comparison tool to its search engine.
• The Google Compare service currently provides different services: credit cards, mortgages, car loans, savings accounts, and current accounts, car insurance, travel insurance.
The research was conducted by: Hamutal SchieberSchieber Research | Market Research & Competitive Intelligence www.researchci.com | [email protected]
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