Financial services is changing, and staying the same.
Post financial crisis, Financial Services Institutions (FSIs) are determined to change. Their motivation lies not just in regaining the trust of a public that has shored up the industry, but also the same goal that they have always had, to find new ways to create products and sell products to generate return for their shareholders.
FSIs have always grasped the nettle of innovation. In my career I’ve seen that they are often the first to deploy cutting edge technologies to gain competitive edge. You could argue that it was the drive for innovation (but without transparency) that provoked the financial crisis in the first place.
As governments and the industry itself introduce guidelines and regulations to guard against the pitfalls of the past we’re seeing a drive that puts digital at the heart of a new transformation in relationships with consumers.
The best example of this is the regulations that outlaw the payment of commission to financial advisors selling mortgage, insurance and investment products. Since the beginning of 2013, UK financial advisors have no longer been allowed to offer their services free of change and make their money through commission from the institutions providing the products sold from their advice. In The Netherlands, the same rules are in place for mortgage and insurance products and both Sweden and Australia are considering similar reforms. In the USA the SEC are considering introducing similar requirements for transparency.
You only have to look as far as the Lloyds miss-selling scandal to see how this regulation can protect consumers. But the consequences of this regulation will be felt far and wide throughout the financial services sector:
- FSIs can no longer rely on a small population of advisors as their route to market
- In order to sell the same volume of products the number of relationships they need to maintain has increased by a factor of 10,000, 100,000 or more overnight
- Those individuals may have no or scant relationship with the FSI
- This market is responsible for around £1.8tn of investments, making it a big problem to solve
This kind of tectonic change requires a dramatic shift in how FSIs execute. The most effective way to meet this challenge is by using digital engagement techniques to market products to individuals. This may feel like a new challenge but in reality it’s a transformation that has taken place in many market sectors before:
- As consumers we’re all aware how music artists now have a much more direct relationship with consumers of their product. Releasing products directly to consumers without the assistance of a record label is not only possible but is becoming a reality.
- In the pharmaceutical industry companies are looking to drive increased profits from non-prescription over-the-counter drugs as patents expire, which requires direct marketing to consumers rather than to health professionals.
- Citizens today expect an engagement with their government that has far more immediate results than in the past. Digital facilities like We The People in the US and the UK’s e-petitions are directly setting legislation agendas and changing the way that election campaigns are run.
Over the past 3 months I’ve talked with three European financial institutions that are urgently implementing strategies to deliver a more intimate and customised digital engagement strategy. For all of them their drivers are the same:
- Velocity - We want to enable the business to deliver this experience at a speed that is not unnecessarily impeded by IT process constraints.
- Personalisation - We want to use what we know about our existing and potential customers engaging with us digitally to drive an experience that feels absolutely relevant and personal to them – regardless of which device they are using.
- Enterprise Scale - We want to do this in a way that is secure, performant and scalable so that it protects and enhances our relationships with the market.
So as the digital imperative takes hold, it’s important to learn the lessons from other industries while focusing on this specific challenge. Great digital experiences begin at Acquia so we have some thoughts to offer:
- Velocity - Warner Music Group and a large global pharmaceutical company have both used Acquia Cloud Site Factory to rapidly create digital experiences for 100s of artists and products in just a few short months.
- Personalisation - Acquia Lift is a solution that automates the 1:1 digital marketing conversation in between your business and customers
- Enterprise Scale - With brands like those already mentioned, along with NBC, New York Stock Exchange and the Whitehouse, using Drupal as their digital platform you can bank (sorry I couldn’t resist the pun) on a compelling experience that scales to enterprise level.
So FSIs are going to be more Digital over time and with a rapidly large, sprawling digital portfolio, governance is the key to avoiding a wild west style, free for all that costs time, money and, sometimes, customers. Organisations need to be free to move at the speed that their market demands. The answer is strong Digital Governance. You can find out more on that topic here.