The disruption of the financial services industry

Technology trends that impact digital marketing for finance businesses…

The financial services industry is going through severe disruption. And that’s before we even start to mention Brexit!

In this article we look at Ten Trends that are revolutionising the financial services industry:

1. Technology

The relentless pace of technological change is causing massive disruption in the financial services industry. Over the past two decades technology has come out of the back office and is now at the forefront of every aspect of financial services. Technology is now a central part of every customer-facing process.

Two decades ago we were experiencing the early tentative days of e-commerce: but now “e” is the new normal. An ever-evolving range of digital transactions are part of our everyday experience. Not just online shopping, but also money transfers, investment and currency exchanges.

Many financial institutions now use cloud-based SAAS (Software As a Service) applications for a range of business processes and as SAAS offerings continue improve and extend into even more areas this can only increase further.

financial services digital marketing

2. Invasion of the FinTechs

Not only is technology affecting the way current financial institutions operate, but a new wave of FinTech disruptors have been entering the market. These standalone companies – often start-ups – are fast-moving and often focus on a specific, highly profitable innovative technology or process. They are therefore in a strong position to compete with existing financial institutions who may have prioritised other service offerings.

Now that they are gaining ground, an emerging FinTech strategy is to start expanding into other areas of the financial sector and offering incentives to a wider range of products and services.

3.Open Banking

The arrival of Open Banking in 2018 has been a quiet revolution. Open Banking enables consumers to authorise financial institutions to share their financial information securely with other organisations. This is made possible by the use of open platform technologies and standards, usually in the form of secure APIs (Application Programming Interfaces).

The implications for customers are that they now have control over their financial information and who can access it. They are empowered to use a range of financial services from different providers without the need to constantly share credentials with third parties.

Open Banking is therefore a powerful catalyst for more competition in the financial services market. Emphasis will increasingly be on financial institutions standing out from the crowd and creating innovative experiences that can help them win customers.

To read more about Open Banking and its implications for digital marketing for finance businesses check out our previous article here.

4.Financial apps

With the increased competition being triggered by Open Banking, established banks are beginning to use technology more to retain their customers. As part of this, a number of major banks are planning to launch apps designed to help customers manage their money.

As part of Open Banking, these new apps will allow customers to manage their money by using data from a number of different bank accounts, including those of rival lenders. These cutting edge apps will be available both on mobile devices and home computers, with the aim of making everything seamless in the eye of the consumer.

5. Customer Centric

The arrival of Open Banking presents a wealth of exciting new opportunities for truly customer centric business strategy. Finance businesses now have operational and digital marketing opportunities across multiple channels including online, mobile and social. The increasing use of chatbots for customer service is streamlining many customer-facing interactions and queries.

financial services digital marketing

6.Security

One key consideration of this new technological era for financial services is cyber-threats. The combination of rapidly evolving technology, customer use of mobile technology, cross-border data exchanges and use of third party vendors is explosive in terms of cybersecurity.

New security measures are constantly being developed. Strong passwords and two-factor authentication are essential. One often-used component of two-factor authentication is biometrics, such as facial or iris recognition, thumbprints, voice recognition. Biometrics can enable quick authentication without the frustration remembering multiple passwords and memorable words.

Banks are also starting to use machine learning and AI as part of their cybersecurity and fraud detection strategy. Currently security software generates alerts on possible fraudulent transactions or virus attacks but these then need to be investigated by humans. But machine learning algorithms are being developed that can provide increasingly sophisticated analysis and potentially predict the possibility of fraud or attacks before they occur, dramatically reducing manual effort and cutting costs.

6. Customer Centric

The arrival of Open Banking presents a wealth of exciting new opportunities for truly customer centric business strategy. Finance businesses now have operational and digital marketing opportunities across multiple channels including online, mobile and social. The increasing use of chatbots for customer service is streamlining many customer-facing interactions and queries.

All these developments are leading to reductions in the numbers and sizes of branches and offices in many financial institutions. But this reduction in face to face customer contact necessitates an increasing emphasis on superb UX in customer interactions across all other channels, so that disgruntled customers are not enticed away by a competitor.

7. Data and Personalisation

In addition to a general emphasis on UX, the abundance of data enables increasing personalisation for each and every customer. Advances in technology advances provide access to more and more data about how customers behave and what they want. Skilful use of analytics can unlock this information, and enable personalised and data-driven marketing to become top priority.

8. Blurring of boundaries

An interesting emerging trend is the blurring of boundaries between different types of financial institution.

One aspect of this is that some of the major banks are now working on new brands to compete with so-called challenger banks. Challenger banks are new banks, usually startups, that are able to do things differently. They include digital only banks such as Monzo, Starling and Tandem. But now RBS is planning to launch a mobile-only bank – aimed at its NatWest customers – and HSBC is rumoured to be working on its own challenger bank project to target SMEs in the UK.

There is also an increasing trend for established banks and fintechs to team up. By doing this they can create sharing-economy type marketplaces in which they cross-fertilise their portfolios to enable customers to discover financial products and services offered by trusted third parties.

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9. The potential of blockchain

During 2018, the price of major cryptocurrencies such as Bitcoin and Ethereum unexpectedly started falling. Many experts are now questioning their long-term viability because of the lack of acceptance of cryptocurrencies by mainstream commerce. Critics of cryptocurrencies cite their extreme volatility and the fact that promises of them being faster and cheaper ways to transact do not always materialise at the present time.

However, the blockchain technology behind cryptocurrencies is still of interest and potential value to the financial industry. It has the potential to transform payments for banks as well as customers. It uses a public ledger system which ensures transparency and minimises risk and human error. These stringent controls could become an integral part of financial institutions’ trading platforms and operational infrastructure in the future.

10. New regulation

We did refer in passing to Brexit earlier, and whatever the outcome there may well be regulatory changes to the financial services industry. As well as those changes, the level of monitoring is growing. Regulators are using an ever-increasing repertoire of data gathering and analytical tools to learn more about the activities of individual institutions.

This closer monitoring of the industry could in time facilitate more accurate predicting and enable regulators to address potential issues before they become full-scale market problems, rather than implementing regulation after the event.

So these are ten of the trends that will continue to disrupt and revolutionise the financial services industry during 2019. Exactly how that will look by the end of the year remains to be seen. But one thing is for certain, for effective digital marketing for finance businesses it is vital to be aware of these trends and monitor their progress as the year continues.