Financial

Finance, once thought to be the most traditional of industries, is undergoing rapid change. These changes have been spurred by the rampant use of mobile technologies, particularly by Millennials for whom it seems the only meaningful currency the financial industry can mint is change.

Financial institutions look to innovate on how they engage current and prospective customers. Tech and Big Data play a huge role, allowing FIs to offer new services that aim to make banking simpler while increasing loyalty in the process.

How do we innovate in this space?

Consider the following stats from Accenture’s Consumer Digital Banking Survey:

  • More than 1 in 4 customers would likely consider a branchless digital bank
  • More than 50% of customers want their bank to proactively recommend products or services that can help meet their financial needs
  • Almost 50% of customers are interested in forward-looking, real time spending analyses
  • Nearly ¾ of U.S. customers and ⅔ of Canadian customers consider their relationship to their bank “merely transactional”

It’s clear that the financial industry is ripe with opportunities for meaningful innovation, which add value to customers, employees, and culture. But the question is: Who will put their money where their mouth is? Nearly every major FI sports an innovation department, division, or even “lab,” but the truth is that the next big disruption in banking is not going to arrive as a throwaway feature or service. Today’s financial consumer requires a whole new paradigm.

Mobile is obviously a huge piece of this picture. At the end of 2013, there were 590 million consumers using mobile banking apps. This number is expected to increase to 17 billion users by 2017, roughly 15% of the total global market (Juniper Research, 2013). As in many industries, mobile apps have moved from the realm of ancillary benefit to primary selling point. For the financial industry, a robust mobile app is especially important, as consumers need access to their financial information whenever, wherever, with minimal effort. Furthermore, while people love the convenience of being able to check their balances, pay a bill, or send money while on the go, many have begun to ask: is that all there is?

Consumers will choose those financial institutions that can deliver a superior mobile experience rich in functionality with value-added features they can’t get anywhere else. This may mean anything from an innovation on common banking features, such as P2P money transfers and eBills, real time financial advice, or entirely new services yet to be seen.

Yet the challenge of how to conceive and implement innovative services remains. This challenge is far greater than simply driving product, business model, or experience innovation; it also includes measurement, sustenance, and balancing short-term wins with long-term vision.

Mobile payments & mobile wallet

With the smartphone market at maturation and consumers transacting an increasing amount of their banking on mobile, the value of a mobile wallet solution cannot be overstated. Consider that more than 1 in 4 customers would likely consider a branchless digital bank (Accenture, 2014). Constantly on the move, today’s financial consumer requires convenience and speed. As such, they will seek out those institutions that can facilitate the safest, easiest payment and organization options.

The mobile payment/wallet market is already crowded, with established FIs, retailers, and startups jockeying for position and consumers’ dollars. And things are moving quickly. Apple Pay is taking the mobile wallet mainstream, boasting high profile partnerships with American Express, Capital One, and Square. And it looks like Samsung may be soon to follow with a mobile payments platform of their own.

As with a “real” wallet, consumers want one solution, not several. The ability to store payment cards, loyalty cards, and coupons in one place is key. Hence, strategic partnerships will play a pivotal role in gaining market share, such as Ugo (TD Bank and President’s Choice Financial) and PayPal’s PayPal Partners network. With the race to provide a widely adopted mobile wallet solution, alliances have formed — notably the retailer coalition MCX, who hopes its CurrentC app can be a contender against Apple Pay. Unrest is already in the air, with MCX members Rite Aid and CVS disabling mobile payments in order to thwart usage of Apple Pay in their stores. Ultimately, the consumer will crown a winner, and given the Millennial preference for convenience, that winner will have the widest net.

Of course a mobile wallet is useless without the willing retailers with the right POS hardware to process it. By now everyone knows of the immense success of Starbucks’ mobile payment/loyalty app, which was responsible for 11% of its sales volume in 2013.1 But not every business can afford to develop and implement a next-gen POS, so it will be interesting to see what options for small businesses to accept mobile payments will emerge in the upcoming months.

Examples of our work

  • We were engaged by an FI to provide the technical strategy, design,and backend integration to enable P2P payments through a major social network. The app has driven additional traffic and new users to the FI’s mobile application, which was a primary goal, positioning them as an innovation leader in the personal banking space.
  • An FI approached us to help them innovate on P2P payments. Building on their initial thinking, we designed and developed a proximity payments prototype. The prototype aims to make paying friends a simple and delightful interaction.
  • We are helping several FIs use social data to get a richer picture of their current and potential customers. Using this data, they are able to target their services and offers more efficiently.

Personal Financial Management

Personal financial management software has been around for awhile, with software mainstays like TurboTax and Quicken offering people a high level look at their financial health and an extra hand during tax season. Mobile brought with it a “new” wave of PFM apps, which offer portability and look great with their pie charts and graphs, but don’t necessarily add any more value to the desktop tools of the past. Essentially it’s the same model: money in, money out.

Today’s financial consumer has a markedly different attitude toward money. They view it as a means to experience life as it happens, rather than an end with which to buy large life event purchases like a car or a house. While they are much better with credit card debt than their parents were2, the average Millennial is still saddled with nearly $30K in student debt (Project On Student Debt, 2014). This is a generation that is very conscious of their money and wants tools that will help them level up in that awareness. In fact, almost 50% of customers are interested in forward-looking, real time spending analyses (Accenture, 2014). While it’s all well and good to know how much was spent on last month’s lattes, today’s financial consumer wants in the moment and predictive insights that are observational, without being judgmental. And, with increasingly sophisticated machine learning tools at our discretion, there’s no reason why it can’t happen.

P2P money transfers

16 years ago, PayPal wowed consumers with its web-based money transfers, no checks required! A huge step not only in payments, but also for eCommerce.

Then came the smartphone. The smartphone has facilitated incredible change in the way people exchange money. Mobile e-transfers have allowed people to send money on the spot, no desktop required, via email. While plenty convenient, new pain points have emerged: What if the sender doesn’t know the receiver’s email address or phone number? What if the secret question is mistyped? Why does the process have to entail more than one step?

These challenges are not going unanswered, with several new options being offered by banks and entrepreneurs playing in the mobile payment space. For example, in Q4 2013, RBC Canada became the first North American bank to offer P2P payments via Facebook, allowing customers to send money to any of their Facebook friends (recipients needn’t be RBC customers). Non FI-startups are simplifying mobile P2P payments even further, allowing consumers to send money for free with minimal information, often just an email and the debit/credit number to draw funds from. The major name in this space, Venmo, has become so popular amongst its Millennial demographic that it’s become a verb. (As in, “I’ll Venmo you the money.”) Venmo has also injected a healthy dose of social into their product, with a live stream of payments.

Messaging apps are also looking for a piece of the mobile payment pie, with SnapChat, Line (Japan), KakaoTalk (Korea), and heavily rumoured Facebook, leading the charge.

Examples of Our Work

  • We were engaged by an FI to provide the technical strategy, design, and backend integration to enable P2P payments through a major social network. The app has driven additional traffic and new users to the FI’s mobile application, which was a primary goal, positioning them as an innovation leader in the personal banking space.
  • An FI was approached us to help them innovate on P2P payments. Building on their initial thinking, we designed and developed a proximity payments prototype. The prototype aims to make paying friends a simple and delightful interaction.

Loyalty

Recognizing the value of acquiring and keeping lifelong customers, banks have long been in the loyalty game. They’ve made key partnerships, primarily with airlines, to create extra value for their customers. Trouble is, not all customers want frequent flyer miles. As a result, savvy FIs are thinking outside the airplane when it comes to developing loyalty initiatives. They are building offerings based on actual data rather than conjecture. These offerings might come in the form of tiered member status, cash-back, flexible points that can be put toward a variety of rewards, or any combo of these.

Additionally, FIs must keep a close eye on the Millennial consumer who is far more likely to shop around for the services that suit them and their lifestyles. In fact, 1 in 3 Millennials are open to switching banks in the next 90 days, with 53% believing their current banks offer no points of differentiation (Scratch Media, 2014). In other words, frequent flyer miles alone won’t cut it for this generation. FIs have an opportunity to step up and be different. What does this mean? It could be augmenting existing services with a layer of personalization, such as how one’s personal expenditures compare to a larger peer group. It might be integrating with any number of the in-market wearables to increase security and convenience. It might be offering a deeper picture of financial health, with steps on how consumers can proactively change behaviours to improve it. In other words, create services that are unique and valuable, and watch the customers come to you. And, because Millennials are far tighter with a buck than their parents, ensure these services are economical.

CRM

Consumers expect personalization across all channels, whether that be digitally, face-to-face, or over the phone. With access to valuable consumer data, financial institutions are uniquely positioned to offer such personalized service. They can use data to create peerless services, attracting new customers and deepening relationships with existing customers in the process. The challenges many face, however, are two-fold: 1) How to parse existing data into meaningful, actionable insights 2) How to acquire social data in order to create richer customer profiles, so that they may offer the right services to the right customers. This means that rather than guessing that Customer 1 is shopping around for a mortgage, financial institutions can know.

Instant access to information is just one part of the new banking paradigm; the other involves  empowering consumers with the knowledge of how they can benefit from instant action. Mobile technologies, including wearables, phones, tablets, and connected cars, give us access to the current state, historical data, and predicted future state of consumers’ physical location, environment (work home, park, mall), context of the environment (metadata and discoverable data such as businesses, other people present, history, etc), and even their behavioural or psychological state.

The digital bank of the future knows there is tremendous opportunity to leverage this access and understanding to help consumers make real time valuable and intelligent decisions regarding their financial life, deepening the consumer-FI relationship in the process.

Examples of Our Work

  • We were engaged by an FI to provide the technical strategy, design, and backend integration to enable P2P payments through a major social network. The app has driven additional traffic and new users to the FI’s mobile application, which was a primary goal, positioning them as an innovation leader in the personal banking space.
  • An FI approached us to help them innovate on P2P payments. Building on their initial thinking, we designed and developed a proximity payments prototype. The prototype aims to make paying friends a simple and delightful interaction.
  • We are helping several FIs use social data to get a richer picture of their current and potential customers. Using this data, they are able to target their services and offers more efficiently.

Sources

  1. “The Digital Disruption in Banking.” Accenture. April 29, 2014.
  2. “Digital Banking – Mobile and Beyond.”Juniper Research. July 8, 2014
  3. Roemelle, Brian. “Why is the Starbucks Mobile Payment App So Successful?” Forbes.com. June 13, 2014
  4. Ashford, Kate. “Why Millennials Are Rejecting Credit Cards.” Forbes.com, 9 Sep, 2014
  5. “Average Debt for 2013 Grads Tops $30k in 6 States; Only 1Below $20k.” Project on Student Debt. November 13, 2014
  6. “The Millennial Disruption Index.” Scratch Media. 2014