I spent Tuesday and Wednesday of this week at Finovate Europe. As always, it is a great way to spend two days thinking about digital financial innovation and how firms can deliver better experiences for their customers. Here are a few of my impressions from the two days:
Biometrics is becoming mainstream.We barely raise an eyebrow when shown authentication processes by firms like eBankIT, ID Mission, Jumio, Nice Systems and Wipro that use facial recognition, fingerprints or voice recognition because these technologies now seem almost commonplace. Yet the technologies are hugely impressive and far advanced on what was available or even possible a decade ago.
Future generations will pay differently. The credit card is one of the greatest financial innovations of all time. Yet, despite the various card innovations on show, I cannot rid myself of the belief that plastic cards will one day soon start to seem as quaint and outdated as cheques (and, indeed, business cards). There are many big obstacles on the path to mainstream mobile payment adoption, and payment habits take decades to change, but I don’t think the future is bright for plastic cards.
But many eBusiness executives are more concerned about the potential impact of technology giants like Amazon, Apple or Google with their deep pockets, technological prowess and broad consumer reach.
I originally posted this question on one of Forrester's internal collaboration platforms, but I was so intrigued by the results from my colleagues I thought I would post the same question here to see whether your perspective similarly is thought-provoking.
Please vote in my poll in the column to the right of this post. ->
Have I missed any firms that you think have even greater potential, or plans, to disrupt retail financial services?
Pop Quiz: If your company has conquered North America and Western Europe and is now looking for the next big market, where should you go? The no-thinking, because it’s obvious, answer is of course China. But if you want low cost of entry and a rapid return on investment you might want to aim a bit further South - to Australia.
While it isn’t as big a market as China (or even India) and may have a higher cost of living, which can make establishing a beachhead there expensive, Australia has significant enough similarities to the western world — a well-educated populace, a high income citizenship and desire for new technologies and innovations — to make success here far easier. And if you are doing ROI calculations around this decision, it has a key advantage over its Asian peers: higher acceptance of cloud services.
It is safe to say that online and mobile banking have hit mainstream. Today, more than half of all adults with a bank account in France, Germany, Italy, Netherlands, Spain, Sweden, and the UK use banking services — which we define as information requests, transactions, or alert delivery — on their PCs, tablets, or mobile phones. The uptake of tablets and smartphones gives banks an opportunity to engage their customers deeply across platforms. Our recently published Forrester Research Digital Banking Forecast, 2013 To 2018 (EU-7) explores how each Internet-connected device will drive future online and mobile banking adoption across seven key European markets.
The forecast identifies some key trends in the European digital banking market.
1. Mobile banking adoption continues its sturdy growth. As recently as 2009, mobile banking activity was negligible, representing fewer than 5% of all adults with accounts. Adoption has risen nearly fourfold since and will continue to grow at double-digit compound annual growth rates through 2018. However, consumer concerns about device security will restrain growth: In all the European countries we track other than Italy and Spain, consumers are more than twice as likely to cite security concerns as a reason for not using mobile banking than for not using PC/tablet online banking.
I’ve spent the past two days at Finovate Europe in London, which must be one of the more thought-provoking ways anyone in digital financial services can spend two days.
Here’s my perspective on the lessons from the event for digital financial services executives:
More people are focusing on the small business opportunity. There were far more companies proposing to help small businesses manage their finances this year, in numerous ways from access to capital through to document storage and expense management. I was particularly impressed by the work that Efigence and Idea Bank have done to help Idea Bank’s small business customers manage their finances.
Automated financial advice for mainstream customers is edging closer. For years, Forrester has talked to its clients about the huge opportunity, and pressing need, for financial firms to use software to automate the production of financial advice. A growing number of firms are trying to solve this problem from one angle or another, including Money On Toast, Vaamo, Your Wealth and Yseop. Perhaps the best quotation of the event came from Elizabeth Farabee at Yseop: “A banker doesn’t sell the customer the best product, but the product he knows best.” Automating the manufacture of advice can fix that.
This is a guest post from Rachel Roizen, a researcher serving eBusiness & Channel Strategy professionals.
Gamification, which Forrester defines as the insertion of game dynamics and mechanics into non-game activities to drive a desired behavior, has rightfully been a hot topic of debate in many roles and many industries. We’ve blogged about it here, and written reports on success stories ranging from Club Psych on the USA Network to the use of games in education.
The banking industry has been using some features of gaming for years, such as by offering redeemable points based on credit card purchases, but some remain wary of combining games with finances. Forrester’s view is that game mechanics can be used to draw in new and existing digitally connected customers. Digital teams at financial firms that have begun experimenting with gamification are seeing positive results, including increases to online engagement, online banking use, product sales, and social influence. Here are four leading firms that are betting on gamification and implementing it in innovative ways:
Rising digital customer expectations advances in technology, and continued digital disruption threats from outside the industry will change the game for banks and credit unions. 2013 will be a pivotal year for eBusiness and channel strategy executives to start planning for the next generation of digital banking to both stay relevant to digital customers and thwart disruptors determined to take over those customer relationships.
Customers' digital financial expectations are high. With the proliferation of digital devices, consumers are highly connected to their financial providers. And with adoption of each new device comes higher expectations of those providers, especially among the younger generations. Get it wrong and you risk losing their loyalty.
Our app-driven world will require flexible and extensible digital platforms. Creating a durable competitive advantage, one that can't easily be copied, includes a move to open platforms. An open platform strategy will allow financial firms to use third-party providers to create app solutions that will create differentiation through a personalized user experience and segment-specific capabilities.
I’ve spent the past two days at Finovate Europe in London, which has rapidly established itself as the leading European retail financial technology event of the year. This year’s event was bigger than last year’s, with 64 exhibitors spread over the two days.
Here are my impressions from the two days:
Innovation is hard and usually incremental. Our expectations are so high. It’s easy to sit in the audience and think ‘I’ve seen something like that before’. It’s a lot harder to develop truly new ideas, let alone build them and market them. Innovation is necessarily incremental, moving into the adjacent possible opportunity as my colleague James McQuivey puts it (see him explain it on video here). True invention is extremely rare. As James puts it in his new book, “The most powerful ideas consciously draw from and incorporate elements that were being developed by others along the way, ultimately generating the best outcome in the shortest time at the most efficient cost.” That’s what makes events like Finovate so useful.
Over the past decade, BBVA has worked hard to become more customer centric and match its offerings to its customers’ needs. Given the pace of technology change, customers’ rising expectations and the digital disruption those forces cause, innovation is a critical part of the role of eBusiness and channel strategy executives. I thought I would share a few of Gustavo’s insights here for those of you who couldn’t attend. BBVA has become systematically innovative, launching a continuous succession of innovations many of which were a first in Spain, in Europe or in the world, such as:
Recently, Forrester released a report entitled “What Drives Retention and Sales In US Banking?” that tackles this question from the consumer point of view. Using regression analysis, we uncover how these drivers vary for acquisition, retention, and cross-selling in US retail banking.
What did we find? For one thing, consumers value trustworthiness from a bank above all else for both sales and retention. This comes as no surprise to us; with so many financial institutions to choose from, consumers want to do business with a bank that they trust. This finding also supports the key theme that Harley Manning and Kerry Bodine focus on in their recent book, Outside In: Treating your customers well and providing them with a positive customer experience pays off.
The graphic below shows the drivers of retention for the US retail banking customers: The perception of trustworthiness is off the charts as a driver of retention, and offering good customer service is the second-most influential driver. What our analysis shows to not impact retention — and even shows a negative relationship with retention — is having low APR and many locations.