Both wholesale and retail users now expect a digital experience from their financial institutions. It’s about differentiated customer experience, providing what they want, when they want it, and how they want it, whether you’re a bank, insurer, or asset manager. This isn’t just a matter of cosmetics. You’ll need to change your back-end operations to support it. And you’ll need to think differently about how to solve problems. Technology isn’t a silver bullet.
Trust in the machines. There’s a behavioral shift underway toward digital channels. Cases in point: our 2017 Digital Banking survey found that 46% of customers skipped bank branches altogether, relying instead on smartphones, tablets, and other online applications; a direct-to-consumer insurer beat out traditional firms in a major 2017 customer satisfaction survey; and asset managers moved aggressively downmarket with automated advice once offered only to affluent clients.
FinTech and InsurTech story shifts to partnerships. Until recently, many firms feared that new entrants would disrupt key parts of their business. But incumbents are now figuring out their own strengths, and startups are seeing how hard it is to scale in a highly regulated industry. Both have come to see the advantages of working together—but which partnerships make sense? Due diligence and finding the “right fit” jumped in importance this year.
More than a money problem. Many financial institutions understand that they need to invest if they are to transform. They know they can’t keep running COBOL on mainframes if they want to compete. For example, retail banks alone spent US$20 billion on digital technology in 2017—but much of that investment hasn’t paid off. And firms began thinking more broadly, focusing on culture, governance, and training.
Business models open up. The need to balance openness and protection in a connected world will likely become a major theme of 2018. By opening platforms to third parties through application programming interfaces (APIs), firms can unlock value from data, create synergies with partners, and develop new cloud-based services more quickly. We expect this to accelerate in 2018, with firms thinking more about how they develop, manage, and secure APIs.
Rise of voice as a channel. Many financial institutions will launch, or build out, virtual assistants in 2018. This goes far beyond technology. In designing bots, firms make branding choices that go to the heart of customer experience. Insurers, for example, might use real-time sentiment-monitoring tools to create “off-ramps,” directing customers to human agents when appropriate.
Digital help. Technology is rapidly reshaping the financial services workforce. Digital tools can do more of the “heavy lifting,” freeing up staff to concentrate on more complex and value-added functions. This transition may not always be smooth, but we expect to see firms paying more attention to how humans and digital labor can work alongside each other more effectively.
Balancing the doers and the dreamers. People who run your business day in and day out are generally quick to shoot down ideas that aren’t fully formed. At the same time, raw creativity can turn into the next big idea if given room to grow. That’s why many firms turn to corporate venture capital, developing in-house innovation labs, or partnering with or acquiring FinTech or InsurTech startups. Bring technologists, strategists, and designers together at the start.
What problem are you trying to solve, anyway? Even the best innovation program is doomed to fail without a clear, measurable objective. Firms often jump straight to measuring ROI without really being clear on what “return” means. For example, if you want customer service reps handling more complex issues, stop measuring call volume. Know what you’re trying to achieve and measure accordingly.
Plug and play. Many firms now find they can replace entire functions with fully digital cores that supply standard offerings such as checking accounts or insurance policies in ways that weren’t possible a few years ago. This can be more efficient than patching legacy infrastructure. Explore the options. You might be surprised at how much “buy” is now edging out “build.”
“It’s not just a technology issue. Financial institutions will need to grapple with big changes to their operating models as they transform their businesses.”
What does “digital” mean in today’s financial industry? PwC’s Scott Evoy says it can vary for each financial institution.
Financial services firms have to the ability to explore, experiment, and embed new technology, says PwC’s Dean Nicolacakis.
Our teams in asset and wealth management, banking and capital markets, and insurance are helping our clients tackle the biggest issues facing the financial services industry. With professionals across tax, assurance, and advisory practices, we can help you find ways to thrive even in a period of uncertainty. Whether you're preparing for regulatory changes, putting FinTech/InsurTech to work, or rethinking your human capital strategy, we work together with you to resolve complex issues, identify opportunities, and deliver value to your business.
Financial Services Advisory Digital Leader, PwC US
Tel: +1 (617) 530 7223
Global FinTech Leader, PwC US
Tel: +1 (415) 498 7460
Partner, Digital Banking and FinTech
Tel: +1 (415) 498 7075
Global Growth Strategy, US Financial Services Practice, PwC US
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Leader, Financial Services Institute, PwC US
Tel: +1 (720) 931 7836