The financial services industry (FSI) is rapidly catching up in terms of customer focus—but execution lags behind intention. Those were the primary takeaways from the 2017 Digital Trends in Financial Services and Insurance report, the latest edition of Adobe’s annual collaboration with Econsultancy. The record-breaking 14,000 respondents included nearly 840 FSI executives, providing a broad cross-section of insider perspectives on the banking, insurance, and investment sectors. While most respondents were based in North America and Europe, they hailed from all regions of the world, offering a truly global perspective on current FSI trends.
In the 2016 report, executives describe a year of increased disruption. Nontraditional banks and third-party services drove a sweeping shift in focus from products to customer journeys; and that shift continues to serve as a major driver of change in 2017. However, as new technologies and data regulations further disrupt FSI, high street banks and investment firms—long defined by their consistency and stability—will be forced to transform to keep pace with their digital-first competitors.
Evolving competition; tightening regulations
In comparison to other industries, FSI started its digital transformation relatively late, and undertook it fairly slowly. This means that, while many banks and insurance firms recognise the importance of digital marketing, they lag far behind other industries in their usage of it. A full 51 percent of executives surveyed said that digital permeates most of their marketing activities, yet only 9 percent of companies claim to be digital-first organisations, and that number sinks to a mere 5 percent for insurance firms. Compare financial services against the retail industry, where 13 percent of organisations claim to be digital first, and it’s clear that FSI lags behind.
Disruptors have been quick to capitalise on this lag—and on the loss of customer trust in many high street banks following the financial crash of 2007. Companies like Atom, Fidor Bank, Mondo, and Starling have moved swiftly into the gap, offering sleek, intuitive digital-first products. Many of these new competitors are also investing heavily in mobile wallets and contactless payment technologies—a perceptive choice, given that 25 percent of all card transactions in the UK are now made via contactless.
Experience opportunities; data challenges
Financial executives clearly recognise all these challenges. More than a third of FSI marketers (34 percent) reported that “optimising the customer experience” will be their most exciting opportunity in 2017; followed closely by “customer journey management” at 31 percent. Furthermore, a full 55 percent of marketers plan to increase investment in personalisation in 2017. Some banks, like Royal Bank of Scotland (RBS), have even appointed specialised teams of “journey managers,” empowered to analyse entire customer journeys from start to finish, and order specific functional changes at any problematic touchpoint.
In fact, 63 percent of executives marked customer experience as their top priority for 2017—a 17 percent increase over 2016. Those marketers are well aware that improved data analytics will be a crucial component of better customer experience, but they also acknowledge that their capabilities lag behind their ambitions. A full 99 percent of respondents consider “improving data analysis capabilities” to be a key element in better understanding customer experience requirements; and more than half of respondents (53 percent) plan to increase their marketing analytics budget over the next year.
Even so, data tactics such as joining online and offline data are a long way down the list of priorities, coming in at only 11 percent. This is due, in large part, to concerns over privacy regulations. At the same time, many FSI companies are held back by legacy data storage systems, along with technology stacks consisting of many incompatible layers. The proportion of organisations claiming to have “access and control over customer and marketing application data” remains unchanged since last year, at 64 percent—significantly lower than the average of 75 percent across other sectors.
AI excitement; technological nervousness
Despite these difficulties in integrating and analysing in-house data, a growing number of FSI marketers see great potential advantages in using advanced artificial intelligence (AI) to leverage that data. While only 4 percent of FSI marketers see “using artificial intelligence/bots to drive campaigns and experiences” as the most exciting opportunity for 2017, a full 33 percent see it as the most exciting opportunity for 2020. In 2016, no fewer than 658 AI venture financing deals were completed, totalling more than $5 billion.
Some banks have already begun rolling out “robo-advisors”—see, for example, Wealthfront’s direct indexing service, Brolly AI-powered “concierge,” and RBS’s “robo-banker” Luvo. AI also shows applicability in mobile wallets and financial planning tools, where robotic assistants can provide notifications and recommendations based on customers’ personal spending habits and goals. However, banks also recognise the risks posed by inadequately secure AI. At a recent CB Insights Innovation Summit, Ramnek Gupta, Managing Director at Citi Ventures, warned, “Slow [adoption of AI] is not a bad thing. It’s absolutely important to be slow, especially in financial services.”
Still, FSI disruptors have also begun to roll out AI services, as part of streamlined digital-first customer experiences driven by superior data analytics. Banks that aim to compete effectively in this new landscape will need to watch these challengers and learn from them, viewing data as an opportunity to deliver consistent messaging, rather than as a barrier.
Read the report today for a more detailed analysis and additional insight, including actionable tips to future proof your FSI business.