At Finovate Europe in London, the leading event on innovation in financial services, I met a strange banker. He claimed to be from the year 1993 and had been sent in a time machine to London to check out Finovate's 2013 latest innovations; he would then return to 1993 to implement them at his firm. Curious, I asked him about his key findings:
1. Inefficiencies in the value chain will be punished. A good example: Money-wiring services are faster and cheaper via peer-to-peer platforms, like those shown by TransferWise and Azimo, than via Western Union or MoneyGram.
2. The user experience on banking platforms is becoming more engaging. This starts with smooth and speedy onboarding solutions like the one from Five Degrees and moves on to the personalized and engaging dashboards with widgets from Backbase and the award winning Banktron solution form Etronika.
A few weeks ago, the four largest Dutch banks revealed that the number of app users had doubled again in the past year. Dutch mobile phone users are checking their current balance twice as often via their phone as they do via their PC. Unsurprisingly, activity peaks around payday. Given that mobile can be seen as the most important development in financial services in recent years, it is time to get your mobile act together. Digital teams at financial services firms should think seriously about adding relevant mobile touchpoints to their distribution channels. What does this mean for specific sectors of the financial services industry?
Mobile is crucial for retail banking. As my Forrester colleagues Peter Wannemacher and Tiffani Montez show, mobile banking is not just a business opportunity — mobile banking is an imperative. As we can see from our Dutch news story, mobile banking is now growing rapidly in some countries and will displace online banking for everyday tasks like checking account balances, viewing transaction histories, making transfers, and paying bills. Great design is key, however: One nice example is the mobile app from Dutch banking challenger KNAB, in which inter active design and functionality deliver convenience and simplicity:
Tablets are cool! The intuitive design and the standard features of tablets make it possible for digital financial services teams to create compelling customer experiences and support bank advisors and insurance agents in an effective and efficient way. Forrester forecasts that by 2016, 106 million people in the seven major Western European countries will own a tablet, while more than 112 million people will own one in the US. The rapid adoption of tablets means executives should make them an important part of their digital strategy. A tablet is a distinct touchpoint that needs a distinct strategy -- particularly banks that want to promote online banking or agent-based insurers -- and tablets can effectively support your multichannel strategy. Here are a couple of reasons why you should put a tablet strategy in place in the near future.
Tablets are a great device to promote self-service.
I was recently invited to participate in a panel discussion on the future of banking at the Economic Forum in Poland. The head of retail for a major retail bank predicted that within five years, his bank would not have any branches left. This was a remarkable statement, considering that in his country, 29% of banking customers still visit a branch once a month; in Warsaw, there’s a bank branch on every street corner. Across Europe, however, these numbers vary: Forrester’s recent research shows that only 7% of banking customers in the Netherlands visit a bank branch at least once a month, down from 9% in 2011, while in Spain, 49% of banking customers still visit a branch once a month.
Branches Will Not Disappear, But They Will Change.
What is going on here? Will bank branches disappear or will they transform themselves from transaction processing hubs to sales and advice centers? We think the latter because:
Branches are expensive.The elevated cost structure of branches — including their increasing staff expenses (i.e., hiring, training, and retaining them) and the security costs related to cash dispensing — is putting pressure on the cost/income ratio of many retail banks. This is the main reason why SNS Bank moved the cash-dispensing function out of its branches and replaced them with ATMs. But ther are more examples as stated by my colleague Benjamin Ensor in his blog about digital banking innovation in Turkey.
Despite the growing range and sophistication of leading (US) insurance companies’ mobile offerings, consumer adoption of mobile insurance services is still low. What makes the mobile solution relevant to the customer? Forrester has identified three elements that determine the convenience of a service or product:immediacy, simplicity, and context.For insurance, the mobile channel offers all three: 1) the immediacy of instant access to your insurance company when it matters, such as when an accident occurs; 2) the simplicity of completing tasks in just a few steps, such as filling out a claims form via your smartphone on location and accompanying it with photos of the incident; and 3) context, as mobile can give customers near-immediate directions and relief when a stressful event occurs. However, a big challenge remains: Do customers feel compelled in the first place to download an app for an event they probably don’t want to happen. We looked at data from Forrester’s North American Technographics® Financial Services Online Benchmark Recontact Survey Q3 2011 (US) and found that:
Last week I visited the Dutch SNS Bank because it has an interesting story to tell. It is one of the few banks that have radically changed their behavior toward digital channels. Instead of reasoning, like the majority of banks are doing, that the Internet is about adding another sales channel in addition to branches, SNS Bank has changed its way of thinking fundamentally: "We are an Internet bank with shops that are an outbound extension of our Internet value proposition." The bank understood two things: 1) The digital revolution is not only limited to the younger, tech-savvy generations, and 2) digital is affecting every aspect of the banking operation regarding product and processes. I haven't seen many retail banks that truly sense the pace of digital change. As always, financial services companies don't necessarily feel the sense of urgency to make radical changes in their distribution methods. A lot of times, we see an attitude like "OK, let's try digital and see what happens, and if it proves itself after one year we have plenty of time and our pockets are deep enough, to respond." This might not be true in the coming years. In a time where digital touch points are growing quickly, this attitude won't work and companies have to make the adjustments earlier and faster. It's good to see that some banks are appointing mobile directors of heads of digital channels; this illustrates that they take digital seriously. In our latest report, Trends 2012: European Retail Banking eBusiness And Channel
Too many insurance companies today think digital channels and eBusiness are about adding yet another distribution channel to existing ones. Moreover, they think of digital channels as being about cutting costs, but this is only part of the story. Their true value lies in the fact that customers love digital touchpoints (including mobile phones and tablets) because they perceive them as the gateway to better priced products and to greater convenience. Insurance companies should be brave enough to face the issues of dual pricing and cannibalization or somebody else will disrupt their business. In the Dutch market, for example, companies like Brand New Day and Inshared are combining Internet-only business models with aggressive marketing to challenge the revenue models of the incumbents. eBusiness and channel strategy executives should drive digitization within their companies and:
Get organized and agile. Agility is the driving factor for next-generation insurance companies. The rapid pace of technology change will make the digital agenda and the corresponding organization the top priority for insurance companies in the coming years
Banks have been the subject of many discussions in the past few months. Their restrictive behavior in giving out mortgages and commercial loans, influenced by the necessity to comply with Basel 3, isn’t making their clients feel enthusiastic about the relationship. Moreover, discussions about bankers’ bonuses have led to a lot of upheaval; restoring bonuses generates negative feelings and mistrust, especially in the many cases where banks were bailed out by their government and still need to repay their debts to the taxpayer. Banks form a crucial part of the economy and are important in overcoming the recession. They are still very powerful, and few companies out there will openly criticize their relationship with their bank right now, as they depend on it. But for how long will the commercial banking relationship remain that way?
Is there still room for insurance brokers in the fast digitalizing world of insurance? Are they the important filter, and closest to your customer, that brings you the right type of business or are they the greedy commission driven sales persons who are more interested in selling products than providing the right solutions for your customers? Independent advice and added value should be their trademark but are they are living up to that expectation?
Moreover, miss-selling practices in countries like the UK and the Netherlands really put the pressure on them. The regulators and insurance companies - driven by the need for transparency- have forced brokers in many cases to go from a commission based model to a fee based model. In the Netherlands, the former market leader Nationale-Nederlanden (part of ING Group) was taken hostage for many decades by the brokers. They were threatened to lose business if they would turn to a multichannel strategy. A few months ago (and many years of back log on this multi channel strategy, later) Nationale –Nederlanden announced its multi channel strategy after all. Is this courage, desperation or the only right thing to do? Of course, the latter and I think it is the only way to go for every financial services company. Too many eBusiness and channel strategy executives out there are still struggling with this important issue and related topics as cannibalism and dual pricing attached to it.
Our research shows that even though internet-savvy Gen Y consumers (ages 24-35) are using multiple touch points in their customer journeys when they research or buy a product, guess what, brokers still remain a valuable part of these journeys but only if they provide added value in the research or sales process.