Despite being geographically far away from the rest of the world, Australia's financial services sector has found its place on the world stage. Australian banks are some of the most innovative in the world. As our 2016 Global Mobile Banking Functionality Benchmark has shown, some Australian banks have overtaken their global counterparts, with Westpac taking the coveted top spot.
The question that I often get asked from Australian digital banking teams is, "so what's next in financial services?"
And I think that's a great question. As uncertain economic conditions, wavering markets, and tight budgets continue to increase the pressure on Australian digital teams to deliver better experiences and increased sales through digital touchpoints, we believe that digital business executives have to drive digital transformation. And this means far more than simply developing a "digital strategy".
Digital banking executives must make mobile the hub of customer interactions, and not treat mobile as if it were just another channel. They should develop mobile banking as a platform to engage customers. To continue to win and retain mindshare and increase wallet share, the next step digital banking teams must focus on are ways to create new sources of value for their customers, not just meeting their basic needs.
I started my corporate career in financial services – working for several large, global high street banks in Asia. During my time “in the trenches” of wholesale and mass affluent consumer banking, I watched a number of ambitious and well-intended new product and service ideas rise through the ranks of budget approvals and stakeholder support only to make it to market and then die a slow death on the vine when customer adoption or planned value failed to meet expectations.
Notwithstanding, the ideas were good – many smart people worked on these projects. However, equipped with the clarity of time, I reflect back on some of those projects today and see a common thread between them. Fundamentally, those shipwrecks all shared one thing in common – they were never properly vetted with the customer before they were commercialized.
Today, while financial institutions are getting smarter at collecting quantitative data around channel experiences; the qualitative validation piece, the ethnographic research piece, the co-creation with customers piece is still missing in most organizations. In some cases, it’s only happening at the bleeding edge. While agile methodologies and minimum viable product-quick-to-market thinking has closed the gap on aligning with customer needs and expectations, the industry as a whole would benefit from an injection of human centered product and service design thinking to move the industry’s CX from good to great.
Join us for our inaugural invitation-only Next-Generation Financial Services summit in Sydney on Thursday, August 4 where I will delve into the topic of design thinking for financial services with my presentation, Fix your Products and Services with a Dose of Design Thinking.
The race to digital is heating up in financial services (FS) organizations; increasingly, the engine making this happen is Agile. Why? Quite simply, it is software that makes any financial business truly digital. Organizations are therefore in a rush to become great at rapidly innovating, developing, and delivering new software products to win new clients and retain and serve existing ones.
Oliwia Berdak and I have just published twin reports — one for eBusiness and channel strategy professionals, and one for AD&D leaders — that share our findings on how FS organizations are trying to ramp up their digital innovation capabilities rapidly by leveraging Agile and other innovative models.
Our key finding comes in response to a question: Are you building a digital lab that contains great developers but is isolated from key business leaders and other technology management teams? If the answer is yes, don’t! If separate digital units pursue disruptive opportunities, they will often end up with just front-end apps or proofs of concept that are impossible to integrate and scale with same speed they were developed.
Two weeks ago, I was lucky enough to spend 10 days in Italy on a vacation with my wife and some friends. As we walked the Path of the Gods, made our own Neapolitan pizze, and enjoyed the gorgeous views of the Amalfi coast, different people in our group would pay for a limoncello here or a glass of aglianico there. As such, our financial activity was a mix of different individuals spending various amounts for a range of stuff. But our group was often too busy having fun to carefully track who paid how much for what and when.
Enter Splitwise* a non-bank mobile app that lets groups of people easily track their spending and settle their short-term debts to each other (see screenshots below). We used it throughout our trip, and it was a breeze.
But why didn’t a bank build this kind of convenient digital offering first? Or why don't more financial providers integrate with Splitwise and other disruptors to build ecosystems of values for their customers? Many bank executives and digital banking teams say their goal is to help customers better manage their finances (and increase retention and engagement by doing so). But too few financial institutions have focused on what Forrester calls the shared finances opportunity. Forrester defines shared finances as:
Any situation in which a person acts as an observer of, partner in, or proxy for another person's finances.
The other day, I stopped by my bank’s ATM to get some cash. After entering my card and PIN and while waiting for my money (during which I was a captive audience), I was presented with an ad for a new service from the bank. Unfortunately, the ad’s call-to-action was a message telling me to call the bank’s 1-800 number to find out more.
I had just encountered one of the broken or inadequate cross-channel experiences that millions of customers face every year.
This is a lose-lose situation: In this case, the bank knew — or should have known — a heck of a lot about me as a customer, yet it failed to use context* to design a better experience and guide me seamlessly across touchpoints. And as a result, the bank also failed to cross-sell me any products or services.
Forrester defines cross-channel behavior as any instance in which a customer or prospect moves from one touchpoint to another when completing an objective. Today, cross-channel goes way beyond online-to-offline transitions; going forward, these interactions will only increase in frequency and importance. Digital executives at banks are left with a tangle of customer journeys across various touchpoints (see image below).
Digital disruption has hit retail financial services in Asia Pacific (AP). In 2014, fintech investments in AP totaled US$880 million and skyrocketed to a staggering US$4.5 billion last year. Just as payments innovation has been a darling of venture capital investors in the US, the picture is not so different in AP as payments took the largest share of fintech investment deals at 40%. This is followed by lending at 25%. However, the next frontier of disruption doesn't lie in payments and lending. FF16, AP's first fintech competition, featured an array of fintech finalists offering a wide array of capabilities that signal what is to come in digital disruption in financial services.
We observe that the next frontier of digital disruption for the financial services sector will take place in investment, security and authentication as:
Data access, predictive analytics, and machine learning drive investment innovation. Exploding volumes of data are driving new, disruptive products and services in retail financial services. While predictive analytics isn't new, it has now entered the mass market, becoming more ubiquitous to retial investors. Smaller, nimbler players such as 8 Securities are now using algorithms to help customers derive insights from data, making predictive analytics more affordable and accessible. There are also B2B fintech companies such as BondIT and ShereIT that help financial advisors and brokers maximize their clients' portfolios.
Digital wallets appear to be so compelling – simplifying life for the customer (check), always present (check), location marketing (check), loyalty and rewards (check), multiple payment types (check), digital delivery (check) adoption…hmmm, not so good.
So why are consumers not flocking to the promised land of Apple Pay, Android Pay and other digital wallets?
Well they are...sort of. You have to look to China to see the promise of a wallet fulfilled, where Alipay has left its humble payment origins behind and now moved into smart cities. It lines up alongside the lifestyle platform WeChat; as well as shopping, paying bills and taxes with WeChat Pay, you can also schedule hospital appointments, order a taxi, apply for a visa or file your taxes. The numbers are staggering: according to this article by The Drum, 420 million people used WeChat to send 8.08 billion “red envelope” digital payments over Chinese New Year alone, almost double the transactions that PayPal had during the whole of 2015. But China is a special case – born straight in to a digital world, wallets arrived without legacy, without competition. Head back to the West and you start to understand some of the challenges – highly competitive markets, fragmented providers, disintermediation fears from banks and card issuers, trust issues from consumers – it’s just not China.
Faced with increasingly empowered customers, together with mounting pressure from existing and potential digital disruptors in the financial services sector (such as Alipay in China and Codapay in Southeast Asia), many banks across Asia Pacific have launched mobile banking apps to enable customers to make mobile transactions. Initally, these mobile banking apps suffered from abysmally low customer adoption and delivered poor customer experience. However, mobile banking apps have come a long way over the past five years, going from little more than an extension of online banking to what one digital banking executive calls “the most important part of my job.”
Through conversations with our FSI clients, we have observed a positive transformation in how eBusiness executives think about and execute on their mobile strategy, which contributed to rising adoption levels and better customer experience. The most notable shift that eBusiness executives have made is to perceive mobile as a crucial part of their organization’s broader business transformation imperative linked to specific business objectives and outcomes — this is fundamentally different from the early days when some eBusiness executives equated a mobile app to a mobile strategy.
Our exclusive FSI summit in Singapore on Friday, April 15 will bring together an intimate group of senior executives from banks, insurance companies, and selected fintech firms. At the event, my colleagues and I will share Forrester’s FSI digital business research, and facilitate discussions with industry leaders.
My presentation, “Who Does Mobile Banking Well In Asia Pacific?”, will explore:
A recent Forrester survey found that business leaders in the financial services industry (FSI) saw 34% of revenues in 2015 generated through digital products and services or products sold online. Their expectation is that this digital quotient will surge to more than half of their business by 2020, leading to a digital arms (and capabilities) race against a new breed of competitor. JP Morgan CEO Jamie Dimon accurately sums up the new competitive dynamic when he notes that “there are hundreds of startups with a lot of brains and money working on various alternatives to traditional banking.”
Our inaugural invitation-only summit in Singapore on Friday, April 15 will bring together an intimate group of senior executives from banks, insurance companies, and fintech firms to share Forrester’s latest FSI digital business research and facilitate a discussion with industry leaders. Our team of esteemed analysts will lead the discussion; here is a snapshot of the topics that will be presented on the morning of the summit:
Frederic Giron (Vice President and Research Director serving CIOs – Singapore): Accelerating Digital Business In Financial Services
Oliwia Berdak (Senior Analyst serving eBusiness and channel strategy professionals – London): How To Organize For Digital Financial Innovation
Randy Heffner (Vice President and Principal Analyst serving application development and delivery professionals – Dallas): APIs Take Center Stage In Financial Services
As a preview of the report, here are two of our predictions for 2016:
APIs and open platforms will take center stage. APIs are becoming the most powerful technology in digital business design. Done right, APIs open new angles for business strategy. Financial services providers have been relatively slow to recognize and act on APIs as an opportunity to transform their businesses and, ultimately, better win, serve, and retain customers.* This will change in 2016, as digital executives collaborate with CIOs to champion big investments in internal, B2B, and product APIs. APIs won’t only help firms increase agility and provide services to clients and partners: They will enable financial firms to build dynamic ecosystems of value, reconnecting a fragmented value chain. They will be part of a wider, and longer-term, shift to open platforms as the foundation of digital financial services strategy.