- The pandemic has accelerated the movement from selling and servicing products to providing integrated, personalized customer experiences.
- COVID-19 has impacted consumers’ financial health, with many reporting lower levels of financial well-being, depleted savings and difficulties repaying loans.
- FinTech firms are rapidly gaining relationship primacy with consumers, posing a competitive challenge to incumbent financial institutions (FIs).
Digitization is changing how FIs serve and value customers in ways that will quickly separate winners from the also-rans. Everywhere we look today, emerging technologies are challenging existing business models: Streaming has altered the way content is developed and delivered. Real estate marketplaces have changed how people experience new travel destinations. Online platforms have transformed how people buy everything from coffee to cars.
In each of these cases, a once-thriving industry was disrupted by the impact of new technologies on customer behaviors and preferences. Incumbents that failed to adapt their business models and practices to the changing market conditions lost consumer trust and ultimately brand relevance.
The financial services industry is at this crossroads today. Consumers, conditioned by their experiences in those other realms, expect financial experiences that address their wants and needs seamlessly no matter the channel or point of interaction. While this transformation was already in progress, the pandemic has accelerated consumer demand for hyper-personalized, connected experiences across the digital landscape.
This is a game that FIs could easily lose to nimbler FinTech and Big Tech firms that are eager to build financial services businesses. To compete, they can invest in targeted digital strategies and leverage data more effectively to improve their understanding of customers and curate value propositions that foster trust.
Ecosystem business models, along with the technologies that enable them, are table stakes for the competition ahead. At the same time, the benefits of a physical presence as a touch point for solving problems and receiving services cannot be overlooked. More than ever, the goal for FIs is to create holistic, personalized and connected experiences that meet customers seamlessly where they live, work and play.
The story told by our research is not so much about the need to embrace data and new technologies. Rather, the story of our latest NextWave Consumer Financial Services research is about the rapid changes in customer needs and expectations brought on by that ongoing wave of digitization and the COVID-19 pandemic, and how FIs can respond to those changes.
Part of an ongoing research series, our census-weighted survey of 5,368 consumers from across age groups, wealth tiers, geographies and genders, highlights how quickly the landscape is changing. It also points to a path forward that involves mixing new strategies and paradigms with existing strengths.
By Nikhil Lele & Rob Mannamkery