Author: Steve Rackham, Senior Solutions Engineering Manager, EMEA Global Finance at NetApp
Digital disruption in financial services is not a new phenomenon. For some years now, financial technology firms (FinTechs) have been chipping away at the customer base of established players. Banking in particular has seen relentless, tech-enabled change, with new competitors emerging every day – often free from the shackles of regulatory restrictions and legacy systems.
So, what does this mean for the future of financial services? In many ways, the future is already here. Spurred at least in part by COVID-19, digital interactions have surged and traditional banks are now required to meet customers anywhere, anytime, on any device. Playing FinTechs at their own game – with data and innovation at their core – is now a focus for many. But is the world ready?
To shine a light on recent changes within the financial services sector, NetApp gathered insights from 800 consumers across the UK, Germany, France and Spain. Below, I explore findings from the UK specifically, to help gauge the public response to online banking, innovation and what this means for progress in the industry.
Disrupted but dogged: the battle of banks and third-party providers
One of the research’s primary findings is that traditional banks still have a significant role to play in society, with 94% of UK respondents still using traditional banking services. Despite this, however, traditional banks are no longer the only service they use. Online banks, such as Monzo, account for 35% of consumers, while third-party services, such as Apply Pay and PayPal, are used by 56%.
Part and parcel of this rise in digital banks is the fact that FinTechs are starting from a completely different place today compared to where traditional vendors started. Born in the cloud and free from the same regulatory red tape that burdens their financial forebears, FinTechs are naturally agile in comparison and have the benefit of being able to change a business model, almost overnight.
Large organisations simply don’t have that agility in their DNA. But while disrupters continue to do their utmost to steal market share and the traditional banks embrace digital technologies to deter this, both are mindful of the competition faced by third-party providers. Players in this space, such as Apple, have easy access to customers – and access to infinite amounts of data.
In response, they’re able to reach customers by novel, creative means and personalise services in a way that traditional players simply cannot. Owing to the nature of traditional banking models, they are often burdened with complex legacy systems, a compulsion to be risk averse and a need to always be compliant with regulatory legislation. But is the world ready for a digital-first banking environment?
Robots or humans? The future of financial services
The research commissioned by NetApp reveals how digital services have a significant role to play in the future of finance. As confirmed by the 77% of respondents who would like to take care of most of their banking needs without having to visit a physical branch, compared with 82% preferring websites, 65% preferring apps and only 36% preferring phone calls.
But while traditional banks are making digital inroads, it seems consumers aren’t yet ready for services to live solely online. In fact, 52% would still like the option to visit physical branches – and 76% would like human advisors for banking services. Even where there is an appetite for online chat tools, this is only when conversing with a real person (36%) as opposed to chatbots (9%).
Similarly in the UK, just 5% report that they have taken investment advice from robo-advisors. This, combined with the mere 27% of respondents who would like banking services to be automated or involving Artificial Intelligence (AI), tells a similar story of distrust – and one that veers from the narrative that ‘innovation is key to the future of finance.’
To offer a third take on this discordant tale, I wholeheartedly agree that innovation is the key to the future growth of financial services, but believe that a bridge needs to be built between emerging technologies and customers, in order to better educate them on the benefits and reassure them about security. Only then can traditional banks and other institutions use data-driven technology and solutions to propel customer experiences – and the sector as a whole – forward.
Building trust is the key to data-driven innovation and experiences
Ultimately, our world is living through a period of constant flux. Banking and financial services institutions need to move in tandem with this. But in order to do so, they need to understand their data and connect touchpoints across the business, to ensure they’re reaching, listening to, and learning from their customers as preferences continue to evolve.
No matter whether an organisation is considered a traditional vendor, online disruptor or a third-party provider, data-driven decision-making and customer-centricity must be at the core of business decisions. By listening to the customers, trust can be built as services continue to meet expectations which in turn paves the way for future innovation.
