Ongoing public distrust towards traditional financial services organizations will continue to shake the ground of previously rock solid institutions.
While old-school banks try to keep up with new tech and market need, savvy innovators are making their mark, exploiting points of friction with customers. Focusing on key issues like accessibility, reduced appetite for risk, user experience and cost have widened access to financial services in underserved niche areas. New age ‘bankers’ have grown rapidly by leveraging easily accessed tools and lean processes.
Unlike the banks of the 1990s that were based on turn-key services, the explosion of new financial service providers are offering niche, innovative solutions that solve a specific issue. These issues address decades of inefficiency, helping consumers overcome specific obstacles and hurdles. In addition, the key benefits on concentrating on niche areas rather than end-to-end business models allow them to be nimble and cost-effective.
For instance, numerous organizations are experimenting with robo-advisors that use algorithms to automatically manage customers’ wealth. This suggests that many functions will become fully automated, from investing to planning. Or, if we consider mobile services, we see innovative offerings like Apple Pay: improving accessibility and point-of-sale simplicity.
Because these tech-savvy enterprises are designed to deliver on research and development, they will continue to test traditional institutions at a rate that’s impossible to compete with.
So what does this mean to you? Well, that depends upon who you are. If you’re a consumer you’ll likely be entranced by the latest and greatest, coming to a smartphone near you. However user-beware, doing away with the traditional bricks and mortar banking model also brings with it an increased risk of cyber-theft. Understand that you’re now on the front line of having to protect what that vault used to do for you.
If you’re a traditional bank or credit union, you likely have a number of people working on the task of staying relevant. It won’t be easy. It may require a look at equity investments in a tech innovator to increased value along with a possible brand extension. You will also likely have to become more innovative in how you reach and communicate with prospective customers. If you’re a tech-savvy financial service, well done. You’ve brought your ingenuity and resourcefulness to the marketplace. However, like the recent Volkswagen crash has reminded us, you may also have to invest in a solid crisis communications strategy.