Part IV: Disruption and new digital customer experience
Fintech, disruption and the digital customer experience
The Ant Group, a Chinese fintech company, was poised to become the largest IPO in world history. In fact, the flotation was pulled after, reportedly, it became embroiled in Chinese politics. Nevertheless, the gargantuan valuation clearly demonstrates that fintech’s moment has arrived.
The genius of the Ant Group is in its bundling of so many financial services in one place. It has Alipay, the world’s biggest payment platform. It has a lending platform. It has an enormous money-market fund and a third-party credit rating system. It offers a wealth management platform and health insurance.
Despite this setback to the Ant Group, its rise will impact Big Tech: you can bet Apple, Google, and Amazon are taking furious notes. And of course, it will impact individual consumers.
But what does all this mean to financial services in the mid-market space?
Before we get into the details, let’s remember that software and other tech has been supporting and enabling financial services for decades. And, similarly, many who call themselves ‘disruptors’ are simply finding innovative ways to present traditional financial institutions’ products and services. So, in part, this is a new name for a revolution long in the making.
When it comes down to it, much of the value in this disruption is simply about making customer’s lives easier.
How it works
A variety of technical and market changes are have come together to enable and accelerate this disruption. Amazingly, the pandemic increased the acceleration, shifting customer expectations dramatically.
And the changes are vast. B2B and B2C users expect to find, select, and buy financial services online. They expect an excellent digital experience, and they expect seamless provision with as much fulfilment, service, and support online as possible.
Use of disruptive tech has gradually crept through the generations, so the gap between the expectations of Gen Z and Gen X has reduced, with Baby Boomers not far behind. For example, most people now opt for chat instead of phone support; for online self-service instead of a request for change; and electronic signatures instead of pen and paper.
Increasingly, online options have become core necessities. Payment by cheque, face-to-face support, and posted documents will soon be rather like the fountain pen you got for your 21st birthday – quaint and irrelevant.
New tech, of course, is having deep effects on businesses as well, enabling companies to transform themselves internally. Many companies in financial services use multiple external systems; but before this new tech, mid-market businesses lacked the resources to integrate them effectively. Now disparate departments and systems can be integrated and streamlined, dramatically reducing waste and delays.
Moreover, new tech allows ambitious business to move into automation. Many manual tasks can be removed using semi-intelligent tools like software robots (Robotic Process Automation, or RPA) which can eliminate the time-stealing repetitive tasks that plague many mid-market companies. Effectively, each member of your staff can be supported by software robots, completing repetitive tasks for them. The tools for the ‘industrial revolution of white-collar work’ are finally coming of age.
Finally, new tech allows for vast but relatively inexpensive improvements to how information is presented and reported. This allows company officers to better delegate, freeing up their own time whilst empowering staff. In addition, once information is available then more sophisticated analysis and intelligent action becomes possible.
Where we’re seeing it
Across mid-market financial services companies, we see digital disruption and transformation in the following areas:
Mobile, mobile, mobile. Smartphone usage is now ubiquitous in almost every market and demographic. Many people no longer see mobile as just an option, they now expect it. Of course, this applies to consumers checking their pension position. But the same person may be the CFO who expects to be able to review KPIs of an outsource provider on the phone whilst in the back of a taxi. Ultimately, many customers will favour a financial service available on their mobile and reject one that isn’t.
Online Communication. Attitudes to communication are changing. Many forms of online communication, like video conferencing, were at first technically unviable. Then they were viable, but nobody liked them. Gradually it has become entirely normal! The new normal for both B2B and B2C now includes:
- Chat support
- Online portals
- Electronic workflows
- Electronic payments
None of these technologies are complicated. But each require careful configuration and integration to ensure they are seamless and secure, and to ensure that the customer experience is simple and positive.
Integration and automation. Much of financial services involves complicated back office functions, multiple external parties, and demanding regulatory requirements. Traditionally, for many companies in financial services, the ‘swivel chair’ users of these systems were key staff tasked with ensuring that the peculiarities of each system were satisfied.
But new tech allows for integration and automation of these manual activities. This can remove huge costs and do away with tasks that wasted time. It reduces errors and frees up experts to become genuinely value-adding. It allows you to set a new, dramatically lower price point, or to increase your margins.
Perhaps most importantly, for many customers, the distinction between services is often simply the wait time – if you can reduce this from days to hours (or less!) then you’re gaining a real competitive advantage.
Self-service. In both B2B and B2C, customers’ expectations have changed. Whereas a few years ago customers wanted financial service providers to act as trusted experts, they now want to reconfigure services themselves, investigate options and costs, and to make changes without jumping through hoops.
Whether this is amending investments, changing insurance options, or upgrading a service level, the concept is the same. Of course, people want expert advice sometimes. But for both B2B and B2C, they expect to be able to access your products and services and to ‘go shopping.’
The digital experience. In many cases, there is little differentiation between financial services products – often the online experience is the difference. The quality of the UX thus defines the brand in the mind of the customer.
Consider where there are frustrating steps in the cycle for your clients. For example, the need to post paperwork can be the hurdle that results in an abandoned purchase. Or a support service that closed at 6pm, or an error when uploading a document. Personally, if I hear, ‘Press one for existing customers, press two for new customers,’ I’ll likely just hang up.
Outsourcing. A business run on integrated systems can be easily, seamlessly connected to external service providers. This is especially true as many more staff are now working remotely, so it becomes less of a stretch to imagine the work being outsourced to an external organization. This enables a new disruptive era of outsourcing.
Put simply, many CEOs can own the value without operating all the processes. Secure document sharing and collaboration software, integrated workflow systems and simple API integration – it all allows you to lower costs, free up staff, and simplify your business.
Conversely, many mid-market businesses can offer outsourcing services – if they are able to integrate their systems and processes with those of their customers. If you do it right, you open up new ways to monetize your business and create value.
AI and Machine Learning. Mid-market businesses are increasingly able to make use of these technologies, leading to stronger margins, reduced risk, and improved customer service. Frequently AI and machine learning can be employed for one or all of the following:
- Decision support and pricing based on analysis of past data and real-time response to clients and prospects
- Natural language processing, allowing automated, or partially automated, assistance to customers and prospects
- Algorithmic trading to optimise performance and minimise costs
- Compliance monitoring to provide rapid and low-cost identification of fraud, suspicious or unusual activity.
Blockchain. Blockchain is a hugely hyped tech. And it might just revolutionise how we store, share and trust data. It diminishes the power of large organisations who have traditionally owned large databases and mediated our access. Instead it allows individuals and companies to transact with each other in an indisputable and secure way that doesn’t rely on a trusted intermediary. (An ‘indisputable’ record means it’s not possible to argue what happened and when.)
Blockchain often seems like a solution looking for a problem, and there are a number of technical issues that remain unresolved. But the potential importance of this tech still means it can add a zero to your valuation! It’s in your best interest to at least consider where you might reasonably employ the technology.
Redefined or rebundled services. The combination of mobile access, Internet of Things connectivity, seamless integration and self-service offers new opportunities to rebundle or redefine your services. For example, many insurance products are being redefined on the basis of usage; new banking products are based on very short-term deposits; outsourcers are offering click-pricing for services.
Streamlining your internal systems and providing easy web plug-in can allow you to pivot to new disruptive services without completely transforming your business.
Open Banking. Open banking breaks down the barriers put up by traditional banks and creates new opportunities for both existing and new service providers. This is a revolution that reverses many decades of dominance by the big banks and puts the needs of customer back at the centre. (In the EU it is driven by regulations; in the US it is an industry-owned initiative.)
Payments. Every time you pay for an Uber with your phone, you are already using fintech. However, in the B2B space, quite often payment systems are stuck in the 20th century. Is it easy for your clients to pay you, or do you make them jump through unnecessary hoops? Are your payments processing systems digitized?
Our advice to you…
‘Disruption’ is a strong word. It suggests a complete upending, a zero-sum game with only winners and losers. But from a customer’s perspective, there is no disruption – they are simply switching to an easier or less expensive way of doing things.
So don’t let yourself be intimidated (or at least concerned) by talk of disruption. And while you should certainly keep yourself apprised of what the big players are up to in financial services, remember how they got so big in the first place: by focusing on the needs of their customers.
Try and look at your own service from the user’s perspective. See what you can offer them and how you might do it better. In the end, all these technologies, from cryptocurrencies to mobile apps, are just tools; figure out which ones will make a difference to your customers!