With the rise of digitally native brands like Apple, Facebook, GooglePay, Acorns, and Robinhood, we see a systemic change in the way brands are disrupting the financial ecosystem. The companies that are going to survive this disruption already have, or are quickly building, a more modern architecture. We anticipate the marketplace to look a lot different in three-to-five years than it does right now. Banks and asset managers will either consolidate or, in some cases, they’ll enter zombie status. We’re also starting to see an uprising in non-financial players in this market.
Pay Attention To Embedded Finance
Embedded finance will become integral to nearly all e-commerce and within interactions between customers and businesses. Consumers expect these financial elements to be immersive, clean, easy to understand interactions between them and their brands. Embedded finance is something that all brands should be paying attention to if they want to survive. Even companies outside of traditional financial services, such as Starbucks or T-Mobile, have adapted their experiences and are now behaving in many ways like financial services entities.
There are a few critical things that banks need to consider and act upon to stay relevant, keep their current customers, and attract new customers.
Banks must change the way they are perceived because of the rapid pace at which the world is evolving, and the theme of embedded finance is in everything. Non-financial institutions that are well funded and have modern infrastructure are seeing a real opportunity for penetration.
Banks must have a solid, modern infrastructure in place to cultivate the right insight into their consumers. This will allow consumers to have a richer experience that satisfies all their wants and needs. They also need to leverage APIs and microservices for a more robust front-end strategy, allowing consumer interaction to take place simply, with no delays in onboarding a consumer, and interacting with brands that are continuously improving and innovating.
21st Century Banking
Banks will have to compete against entities that have already solved these issues, already have modern data architecture, and comprise modern APIs and microservices. Many banks are behind in creating what 21st Century banking is going to look like moving forward. Their relevance exists because of their past banking licenses and the regulatory and security aspects of their brand. This won’t be enough – they have to offer more to stay in the game and ahead of the competition. If they don’t get out of the mindset that they can be disintermediated, they’ll become obsolete.
Have a consumer-first mindset.
For both the bank and the customer to be happy, there needs to be transparency and trust. In this new age of assistance, customers expect their favorite brands to collaborate to provide extended and connected digital experiences. Banks need to shift their orientation and should aspire to be sticky -capturing mobility, simplicity, and giving their customers the ability to use their banks in micro-moments every day – being the connection point between all of those moments. They must think of it more like a proactive coach or advisory relationship than sitting back waiting for the client to come to them to help solve a need. They can do this by bringing forward propositions that a consumer feels in a more personal way.
Excitement About Buying A House
Customers don’t get excited about a mortgage, they get excited about buying a house – the mortgage is simply a necessity. Banks need to flip the mindset to what a consumer wants so they can better serve. The brand has to show the consumer that they not only care about them but the surrounding community that they impact. People seek interactions with purpose-driven brands that they can relate socially to.
Platforms allow large companies to be more serviceable to their consumer base across many aspects of their life.
Emerging and modern technology has opened the door for many opportunities. Banks now can be relevant to their customers across many different facets of their life, and they need to figure out ways to be part of this connected experience with brands.
With all e-commerce – houses, cars, appliances, jewelry, no matter what a consumer needs to buy, they will need to facilitate a payment transaction, which is where the platform comes in. Companies that aren’t traditional financial services companies create solutions to enhance the business they are in. Big tech wants to get into payments for two main reasons: first, so there won’t be friction from a bank disrupting the service they are producing on their end, and second, they are looking at it as an opportunity to disrupt the marketplace because there hasn’t been attentiveness to a consumer as it relates to their financial life.
Embedded finance is in everything. That’s the motivation for creating the platform and the ability to provide high-tech, high-touch interactions with more customers and clients. As the platform expands, banks need to look at products and services that better serve people’s lives.
The Example Of WeChat
WeChat is an example of a platform that is integrated into all aspects of a person’s life. Banks need to have that same strategy, they need to think beyond financial services from a transactional perspective and integrate into customers’ lives in a meaningful way. Finance gives people the means to live their lives, whether that be securing a mortgage to buy a home, saving for children’s college, putting money aside for a vacation, or purchasing a car. Customers want to have a solid understanding of their financial position at all times, in a clean and transparent format, all while knowing the bank has their back from a safety and security standpoint.
Emerging tech allows us to break down the barriers of entry to other traditional businesses. Within the marketplace, there is a desire and absolute need to turn a client’s financial interest into something more personal rather than transactional. Historically, these relationships have primarily been transactional, and that orientation has to change. While it may be painful, it is necessary to allow customers to come away with a great experience. The key focus should be on creating personal products that are simple, valuable, and transparent for customers to decide what best fits their needs.
About the Author
David Donovan, Executive Vice President, oversees Publicis Sapient’s entire financial services portfolio for the Americas. He is responsible for setting operational and marketing strategies for the firm and managing relationships with top global investment banks. Donovan brings 25 years of expertise working on Wall Street as an institutional equity trader, including 14 years as the sector leader of technology trading for Fidelity Management and Research, when working with investment banks and asset managers.
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