My Key Takeaways from NetFinance 2016

Takeaway 1: Digital is not a function, it’s the new way of doing business

Digital is a board-level conversation in most – if not all – financial institutions.

Digital is not a one-time investment (e.g., “let’s put up a website”, or “let’s install a mobile app”). Rather, it’s a multi-year journey for FIs to evolve its business, people, process, and technology.

The Digital Age is having as significant of a mass disruption in the global society as the Industrial Age did over 100 years ago. Digital is a revolution, affecting every market sector, improving production at every step in supply chains, streamlining business, and providing well-developed information to help businesses make more informed decisions. Its effect on modern-day industry is as significant as was the Industrial Revolution.

Digital Leaders
Uber, AirBnB, Amazon, and social media apps have set the bar for good digital engagement and a frictionless process to buy and sell goods and services to consumers.

How Other Industries Have Digitally Adapted
Some retailers have continued to adapt their businesses to the new way that customers want to interact with them. Home Depot has done an excellent job integrating the multi-channel (brick and mortar, online and mobile) experiences:

  • Buy online via browser, and ‘ship to store’ (to physically pick it up) or ‘ship to home’ (to have it physically delivered to your doorstep).
  • Offering online buyers the option to have a product shipped to their homes, or to pick up the item at their local store. This “ship-to-store” option is often faster or cheaper.
  • Offering customers in stores the option to scan product barcodes or QR codes on their smartphones, to display product prices and information

The New Competitor Landscape (in addition to traditional banks) for FIs are technology companies who truly ‘own’ the digital experience for a large majority of consumers’ digital lifestyle:

Apple Google Samsung Amazon

Question for FIs to consider: How is your firm rethinking how you will market to, sell and service your customers? And who are you looking to for inspiration?

Takeaway 2: Most companies have a long way to go on the digital journey

Adobe quoted a survey that indicated, despite all of the investments many FIs have made in digital to date, only 12% of FIs feel they are done or can ‘see the finish line’ in regards to adapting its organization to the digital age.

Of the remaining 88%:

  • 7% of FIs are not out of the gate
  • 51% of FIs are just getting started
  • 30% of FIs are ‘on their way’

This means that close to 90% of FIs are indicating they have a relatively long way to go to reach their digital goal.

Question for FIs to consider: Where is your FI on its digital journey, and what is the most strategic priority for you now in order to pave the way for your digital foundation in the future?

Takeaway 3: FinTech is here to stay

Citi quoted a staggering stat that the market for FinTech has reached $19B. Therefore, FinTech can no longer be regarded as some a collection of skunkwork startups ‘nipping at the heels of big banks.’ Rather, it is clear that Silicon Valley has embraced the financial services ecosystem as an industry sector where it sees opportunity for both great disruption and great financial gain.

Some FinTech notables: [1]

Virtual Currency: Coinbase
One of the most successful Bitcoin-related startups, this virtual currency exchange is backed by both VCs and banks.

Mobile Payments: Square
The mobile payments company changed the way small businesses accept payments.

Mobile Payments: Venmo
Provides a seamless product allowing users to instantly send payments to their friends for free.

Consumer Payments: WePay
Launched as a consumer payments company, in 2013 WePay turned to processing payments for crowdfunding sites–and it has soared ever since.

Loans & Lending: Lending Club
With its 2014 IPO, the online loan marketplace cemented its role as leader of this FinTech generation.

Wealth Management: Betterment
This “robo-adviser” is jockeying with Wealthfront, among others, to build a cheaper, more tech-reliant type of wealth-management firm.

Also, FIs like Citi are also rethinking its innovation approach, from conducting hack-a-thons to joint ventures with FinTechs to RFP solicitations that present specific digital use cases and extend vendors the opportunity to bid via digital solution prototyping.

Question for FIs to consider: How and where is your FI innovating – from within and through partnerships – to truly redefine its business for the digital age?

Takeaway 4: Consumers attention spans and loyalty are starting to shrink

Behavioral studies have been done indicating that in the digital age, two things are occurring:
1) We are bombarded with thousands of messages per day (one estimate cited 30,000x per day) that disrupt, distract, and/or vie for our focus.
2) The average human attention span has been re-benchmarked through forensic studies to be less 8 seconds (which is apparently less than a goldfish’s attention span!)

Impact: For FIs, this means that they have less and less opportunity to command customer and prospect’s attention in the digital medium, and, when they do, they only have few precious seconds to make that impression.

Secondly, existing customer loyalty is declining. CapGemini cited a recent study that indicated banking customers are more inclined to switch their current banking provider than ever before:
1) Only 55% showed a likelihood to stay with their current bank.
2) Only 38.5% showed a likelihood to refer someone else to their bank.

In today’s digital age, a customer’s inertia to change has been reduced. And customers are more willing to ‘switch’ should they grow impatient with their bank’s inability to adapt to make banking and lending simply easier to do with them. The digital age has provided a way for customers to compare product offerings more easily, making the marketplace more competitive for FIs and businesses in any industry.

Questions for FIs to consider: How well does your FI deliver a personalized and high-satisfying experience for each of your customers? What can you be doing better?