Digital technology has allowed many new players to enter the financial services market. These digitally savvy entrants are saying to their traditional competitors, "Hey, I can innovate faster than you can evolve." While some of these startups are celebrating their second or third birthdays in business, some have been around longer and are drastically changing the financial services industry as we know it.
So you might ask, “What makes them so different?” Well, these new players are not former banking executives. Some are former Google or the like, employees with a tremendous financial backing. They understand that consumers want a different experience and different product features. And by successfully intersecting these two demands, they’ve been able to create a better experience and a better go-to-market than the firms holding the largest share.With competition becoming stiffer, the need to innovate and plan more effectively is becoming stronger. To defend market share, remain competitive, and grow, traditional players across financial services must become more customer centric and adapt to the customers’ demands:
Banking Segment: As household acquisition channels evolve, it's difficult to understand the clients' needs and sell or cross-sell the right products. As face-to-face interactions are becoming less frequent, consultative selling skills must be developed in those alternate channels. The way in which today’s consumers are engaging is not only driving the way we market, but the overall way we interact with clients.
Card Segment: The card market is back—consumers are purchasing more credit cards and competition is rising very rapidly for cards and their balances. Also, the introduction of the mobile wallet is impacting the visibility of card. For example, card holders pull out their wallets to see their cards neatly staged. The mobile wallet is sort of disconnecting that engagement with the brand and the actual plastic. This is also changing the way that we market.
In response, traditional card companies have begun to rapidly retool their capability set for marketing and digital. Direct mail is still a workhorse, but will it be the workhorse and differentiator over the next five years? Probably not.
There is one group to watch: millennials aren't acquiring credit cards the way people have historically. This generation is now maturing, but they're not embracing the card the way the rest of us have.
Mortgage and Consumer Credit Segment: The consumer finance sector is seeing more FinTech disrupters than any other sector in Financial Services. Interest rates are changing, people are buying houses again, and they are more comfortable assuming debt. One thing has changed: the way the consumer wants to buy.
Traditional lenders haven’t evolved at the necessary rates to get ahead. These new entrants are saying, "Hey, I've got a lot of money to lend and I can probably disrupt faster than you can evolve." These opposing forces are causing stiff, stiff competition in the consumer finance market.
Wealth Management Segment: Wealth management companies are moving direct-to-consumer, because there is great opportunity to impact individual investments. Therefore, traditional firms are developing online capabilities, while disruptive online firms are building one-to-one advice capabilities.
Insurance Segment: Traditional insurance companies are beginning to invest more in digital capabilities, which makes it increasingly important to determine your audience, what you're willing to invest in that audience, and understand how well you can target that audience. The Internet of Things is having an impact on today’s product and experience. For example, companies like Travelers and Progressive Insurance are using a USB port in a customer’s car to track their driving behaviors and adjust premiums.