In the last five years, we’ve seen finserv companies invest increasing amounts of time and money to create strong and marketable digital identities. Many established finserv ‘brands’, despite their efforts, continue to run digital strategies that are lightyears behind other industries.
A new drive towards digitising the financial industry has led to an explosion of new companies on the scene, many of which are managing a digital marketing operation that’s miles ahead of traditional finservs. Younger, shinier finserv startup companies have seized their moment to take on the giants, and they’re finding a niche in the market that never existed before.
These companies are challenging the monopoly of customers that well-established brands have held on to for years, with little disruption along the way. With new, more agile organisations challenging the concrete top-down approach that traditional companies tend to run on, the face of the industry could be about to transform.
Power shift – The era of the customer
According to Econsultancy, established organisations across many industries are facing a huge challenge: customers are becoming more tech-savvy every day and their expectations are growing. With new platforms helping to transfer power from companies towards customers, brands are under pressure to adapt fast.
Most customers are now unwilling to buy any product or service that does not provide the same levels of convenience, simplicity and speed to which they have become accustomed from other services that they use daily. When it comes to investing or online banking, consumers have shifted their priorities and are now choosing the smartest digital companies to work with, not just the most trustworthy.
Finservs are well aware of the need to bring customers closer to the centre of their digital approaches. In fact, a report by Deloitte recently found, that of the FSI firms with a digital strategy, 93 percent agreed that their main objective is to improve customer experience and engagement. Econsultancy also found that clear customer journeys across all channels was seen as ‘very important’ for the vast majority of respondents in their survey.
Are traditional brands ready for disruption?
Worryingly for most companies, whilst a huge 90% of the financial institution employees surveyed recognised that digital is disrupting finance, many do not believe their firms are ready for this disruption. In fact, only 46 percent of FSI respondents agree or strongly agree that their firms are adequately preparing for digital disruption.
Daniel Newman of Entrepreneur explains the problem:
“Large companies often make decisions that don’t reflect the customers’ best interest. After making such choices, they’ll attempt to “work in” the customer later down the road. This doesn’t bode well in the face of digital transformation.”
Startups steaming ahead
According to Econsultancy, it is newer companies that tend to do better in terms of digital transformation. The constant mode of innovation in start up industries tends to result in new models of how work gets done. Job descriptions, tasks, skills, and requirements also tend to be highly fluid. According to the survey, lack of organisational agility is one of the biggest barriers blocking firms from taking advantage of digital trends.
Collaborative companies that democratise information and have a morphing of team structure generally find it easier to form an effective and responsive digital strategy. FSI firms traditionally work form a position-based structure in which the most important decisions are made by senior management. In this hierarchy, we tend to see less contemporary ideas being shared and utilised.
Rich Watts, Nurture CEO and influential figure in digital strategy talks about why start-up culture works so well with digital:
“Start-ups are bringing so many innovative ideas into digital. Start-up mentalities tend to drive agility, scale, and rich engagement, which are the models that CIOs should be looking to replicate. CIOs with a start-up mentality also become magnets for the most talented employees.”
A new global study by Dell Technologies found that 78% of businesses believe digital start-ups will pose a threat to their organisation, either now or in the future, while almost half fear that they may become obsolete because of competition from these start-ups.
The Privacy Problem
The issue for many finservs is that their risk taking ability is strictly limited by regulations, especially since the crisis of 2008. And as such, it can be tricky for firms to build their digital businesses as speedily as other industries are managing to do.
Along with this, as firms move further digital and more traditional industries aim to embrace the start-up culture, an on-going shift in decision rights often occurs. Valuable information is increasingly shared with a broader set of stakeholders and new processes and work flows emerge. In the face of this, customers can be placed more at risk as more people are given access to sensitive information.
Companies must embrace this start-up culture with caution: safety and privacy needs to come first, so employment of a strong cyber security strategy is essential.
Author Sean Williams