The personal touch | FinTech
Personalisation is rapidly becoming the driver of brand value and competitiveness in financial services, as Kris Hansen of Portag3 Ventures explains
Go big or go home. That was the message to incumbents set out in a recent report published by Accenture. In 5 Big Bets in Retail Payments in North America, the global professional services company explained, rather starkly, that incumbents in the sector find themselves on increasingly unstable ground, with “most retail leaders in the top US and Canadian banks” of the view that they will lose between 11% and 15% of their revenue pool to emerging competition from fintechs, Big Tech, non-banks and challenger banks.
The reason behind this shift? In technical terms, Accenture suggests the “increasing commoditisation of the transactional aspects of payment”. To you and I, customer experience is fast becoming the new driver of brand value and competitiveness. And, quite simply, fintechs – with their innovative mindset and ability to be flexible and scale rapidly – are taking the lead in the development and implementation of new, customer-centric finance solutions.
Of course, the concepts of customer-centricity, user experience (UX) and personalisation are nothing new. Banks and financial institutions have targeted various customer sectors with tailored services and packages for many years. However, as Accenture’s research makes apparent, there’s every likelihood that for incumbents this will no longer be enough.
“Personalisation is the difference between an experience that is ‘pretty good’ and one that is amazing – and, increasingly, consumers are expecting the amazing,” says Kris Hansen, Chief Technology Officer at Portag3 Ventures. Hansen has considerable experience in the sector. Alongside his role at Portag3 – a fintech and insuretech-focused VC firm that aims to empower and invest in “visionary financial entrepreneurs” – he also holds the same role at challenger bank KOHO Financial. The common thread, says Hansen, that runs through these positions “is a love of finding ways to do things differently and to build teams that can solve problems.”
The sector, according to Hansen, has seen considerable change in recent years, particularly with regards to fintechs evolving their propositions in line with consumers. He says that the prevailing trend is towards the “less obvious”, with a shift away from features and capabilities that customers could easily ‘see’ towards more specific and niche areas of the financial services value chain that can bring “tremendous value and opportunity”. Alongside that is the influence of blockchain. “Love it or hate it,” he says, “it’s driven a new generation toward some of the very hard problems in financial services; blockchain also challenges some of the most fundamental assumptions in the industry, which is very healthy.”
Specifically, on personalisation, Hansen highlights data as a key enabler of greater customer centricity. “Wholesale data at cloud cost and scale has made the previously impossible – or, at least, impractical – easily attainable,” he explains. “I have solutions, for example, that were scrapped five years ago based on their sheer cost alone, that are now possible with a few clicks and a credit card. We’re still in the early stages of innovation in the area, with many firms still focused on getting the fundamentals right when it comes to customer centricity. The next level will be all about the evolution of expectations.”
And while those expectations continue to evolve, Hansen reiterates the importance of one key factor in any relationship between a financial services provider and customer: trust. To this end, the digitalisation of these relationships – banking via decentralised services such as apps, the use of AI and chatbots to manage customers relationships, and machine learning to understand customer requirements requires a shift in focus. “Historically, trust has been about the reputation of the bank and the size, security and track record of the vault,” says Hansen. “That’s changed. Trust is now digital. Knowing people digitally is about personalisation and relevance. Tech-focused organisations are making great progress here, especially with the contextual awareness of digital assistants. In the financial services sector, we still have a long way to go, as many experiences are very generic and irrelevant. This will be a key frontier going forward.”
Spearheading that new frontier are several startup and unicorn fintechs – those flexible, innovative organisations at the forefront of the latest technology and financial services. According to Hansen, the personalisation of financial services through the application of new technology is a key differentiator between incumbents and startups. “A fundamental principle in any business is, naturally, knowing your customer; fintech is no exception to that rule. Once you reach that point, everything you do with that knowledge needs to be personalised, and now, new technologies that have commoditised machine learning, clustering and prediction are making that possible.”
Hansen explains that those businesses that are new to the market have an advantage over incumbents, their nimbleness and small scale allowing them to implement new technologies more rapidly than those legacy organisations that “have the history and robustness of data, but just haven’t organised it to be useable”. Some firms, he believes, can move quickly to define new solutions and capture markets, but “some of the realities of the industry and which fintechs have to integrate with are a half century old and move at a glacial pace. One of the challenges of being part of a fintech firm is to be able to move with alacrity yet remain pinned down waiting for industry incumbents or regulations to evolve. Managing this and still getting new features into customers’ hands quickly is increasingly becoming a fine art.”
The implementation of that “fine art”, will very likely change the face of the industry for incumbents, certainly if Accenture’s latest work is to be believed. For Hansen, the focus on personalised financial services isn’t going to abate. “As consumers continue to expect a more personalised experience the concepts themselves will need to be challenged. As an industry, we tend to like to structure products into decades-old categories like checking, savings, investments and so on, but with personalisation these lines will blur and people will simply get the features they need.
“I expect that simpler and more transparent products will evolve, which demonstrate new ways of thinking in financial services. Apple didn’t just create the first digital music player, it revolutionised music with the iPod – it was the simplicity and form of the device that captured the imagination of consumers. We have yet to really see this in financial services, but I’m very confident that we will.”
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