1 Surviving & Thriving in Financial Services in the 2020 s
2 INTRODUCTION: THE WORLD IS CHANGING We can all sense that something significant is happening around us; not only in the Financial Services Industry, but in all aspects of the world; from the Arab Spring, the conflict in Syria to the reversal in global economies with the Eastern economies leading the G20 out of recession. Not to mention the increasing number of freak weather events; Hurricane Katrina, increasingly high magnitude earthquakes in Asia and in 2013 the UK experiencing its hottest year since Things are changing faster than ever before. Society is changing shape and diverging. The world s population will be over 8 billion by 2025 and the UK population is predicted to grow to over 67million, with the population of people aged 60 and above in the EU rising by more than two million a year. In the UK a third of people will live alone and two-thirds of us will live in cities, with fewer people living in poverty. We will increasingly feel the impact of climate change with more natural disasters and more extreme weather. Energy and materials usage mean our resources become scarce; we ve already passed peak oil, meaning prices will continue to increase. We will have to move to a low carbon, low energy economy. Economic power has shifted to the East - by 2025 China and India together will account for 40% of world trade flows. The cost of living will be higher and a pensions crisis is looming - money will be tight! By 2025 technology will have taken even larger strides; computers that think as fast as humans will be widely available and affordable. All of these have huge implications for the future of Financial Services
3 DIFFERING CUSTOMER NEEDS Baby Boomers are the largest proportion of the population; in 2008 the UK had more over-65s than under-16s. By 2025, one in five will be over- 65, which means one retiree for every three workers. The financial services industry will need to deal with the Baby Boomer s specific needs; for example, they are more conservative and will be more reliant on face-to-face banking. As they retire, they will need access to customised services and personal financial products, especially covering long-term care cost. But it is Generation Y who are driving change. They have huge influence with over 9.7m members in the UK (1.7billion globally). They will become the primary engine of the UK customer economy and will become the most important customers for the financial services industry as they are techsavvy and financially strong. Generation Y want affordable and simple financial products and are projected to move into careful financial management, meaning they will require help managing and saving for retirement. The demographic changes will require financial services to think future-back, to understand how the world might be and how customers might live their lives in the near future. + You must have a clearly defined vision of where you need to be three to five years time + Be clear on your proposition to the customer and the operating model you need to deliver it + For different customer groups, the omnichannel and digital experience need to be tailored to their expectations and needs + Have a road-map to get from where you are now to where you want to be + Prioritise your transformation agenda to deliver stand-alone capability and benefits at key milestones en route to the end-game vision TRANSPARENCY AND SPEED In the increasingly interdependent business and personal world of the digital age, power is unquestionably shifting to the customer. This is exacerbated by the focus on fairness, ethics, suitability and transparency across all products and across the end-to-end marketing, sales and service process. Customers have high expectations expectations which do not respect historical sector boundaries but rather are set by the likes of Waitrose, Apple and Amazon. This is against a back-drop of mistrust and disillusionment with many traditional financial services brands. It s clear to the customer, which companies have customer-centric methodologies. Customers want transparency, for example, clear fees and ease of access to their money. You increasingly need to be able to match your customer s needs with your products and services. In parallel, you must think with a don t let the new entrants eat your lunch mentality and develop an innovation-led, test and learn, fast/fail culture. Keeping an eye on your competition will become ever more important. Being agile and able to react quickly will separate you from your competitors. Similarly, building the capability to respond to the hours not days timescales of social media, should begin now to fall in-line with customer expectation. An understanding that financial services need to be able to change and go on changing fast is vital.
4 AN AGE OF TRUST, RELIABILITY AND INTEGRITY BIG DATA AND NEW PLATFORMS Differentiating your brand and creating emotional engagement with your customers is the new battleground. The focus will be on the level of service provided and trust created. Those organisations renowned for customer service excellence place the development of a customercentric culture and the engagement of their people at the heart of their agenda. Staff at the front-line, interfacing with customers, will still have the ability to make or break a relationship with the customer. Therefore, your people are central in delivering your brand promise and inspiring your customers. + Be joined up around the customer and think outside-in from the customer s perspective to design the organisation around the customer Data is increasingly being utilised in order to understand what customers need and want and how best to target them. Data is a hot commodity. The amount available has increased exponentially; 90% of all data in the world has been generated in the past two years (and this continues to hold true as time passes). There are about 2.7 zettabytes in the digital universe now, during the next 10 years, this will exceed 40 zettabytes (40 trillion gigabytes). To hit that figure, all data is expected to double every two years. We need a way to manage, store and analyse the massive amounts of information as it grows, and cloud computing makes this possible. Cloud computing will overtake desktop within the next 10 years. + Integrate digital and social channels with offline capabilities to deliver an end-to-end customer experience across key customer journeys + Ensure that you do the what s important to the customer basics consistently well + Develop leaders to empower your people to do the right thing by the customer and to foster a culture where the customer is at the heart + You need to define the customer service strategy and proposition which underpin your core products to meet the needs of your customers Some financial service companies assume that all decisions are made rationally, but are coming to understand that this is not always the case. In the past financial institutions have confused the majority of customers with complicated products they don t fully understand and are now paying the price for mis-selling. In order to regain customers trust and be seen as a reliable provider, you will need to offer straightforward, uncomplicated products which require a more rational decision making process in conjunction with great service and practical advice. In addition, the growth of cloud computing will enable more new entrants to play in the financial services arena. It will reduce the upfront capital required to get a business on its feet and offers the promise of significantly lowering operating costs. It also promises to deliver early customer successes much faster than traditional platforms. Legacy businesses cannot therefore simply rest on their heritage. The winners will be those who utilise customer data optimally, using cloud computing as a platform. Preparing infrastructure for the impeding changes and investing in optimal data solutions and storage is key for future success.
5 IS THIS THE END OR THE BEGINNING OF FINANCIAL SERVICES ON THE HIGH STREET? We are living in an increasingly digital world and this is fundamentally changing the way customers select and buy products. In this new digital world, people will live their lives in fundamentally different ways. Digital will become the first point of call for customers and they will use digital to undertake more and more of their interactions with financial services in terms of the way they wish to find information and buy products. Customer interaction through different channels will not only become the norm and will be expected, facilitating access for new entrants, who will be unconstrained by legacy architecture. By 2025, only 10% of financial transactions will be made in cash. It will be replaced with the use of mobile technology and mobile payment systems. The role of traditional financial services institutions like banks will change into sales and advice for more complex products, while remote and mobile banking will be used for more basic transactions. 10% 90% By 2025, only 10% of financial transactions will be made in cash. So, what should happen to branches in an omni-channel world? Looking at retail as an example, we see retailers taking different paths; in the light of sales spread across various channels, Aurora has stated that it will need fewer stores to achieve national coverage, whereas ASDA is focusing on new store openings due to customer demand. There is a shared thinking that the face-to-face channels in financial services will be about showcasing, touchn-feel trials, education and advice. There will also be a challenge in terms of staffing and opening times with new players such as Metro Bank already challenging the traditional bank branch operations, by offering longer opening hours and service seven days a week to fit in with customers busy lifestyles. So there is the big question of how financial services will respond, and how best to change or maintain a physical presence, keeping in mind that the option will need to be worth the cost and effort both for the financial institution and the customer. It s time to be proactive and create the future, rather than letting it happen to you!
6 CONTACT US Sue Grist, Director Egremont Group Natalie McLellan, Associate Director Egremont Group Egremont Group 11 London Mews Paddington London W2 1HY United Kingdom Telephone Website Egremont Group Ltd. All rights reserved Company registered in England
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