With rapid technological advances profoundly altering consumers’ preferences and priorities, achieving and maintaining a high level of digital agility is no longer optional for mid-size companies striving to be competitive in a global marketplace.
Executives understand this. A recent survey of CFOs found that:
- More than two-thirds planned to increase their investment in digital transformation in 2018 – with 39% boosting investment by at least 10%
- Over half said senior leadership at their organizations viewed digital transformation as critical to long-term business success
- More than 40% were investing in digital to “differentiate themselves from the competition.”
The degree of engagement and urgency is not difficult to understand: Mid-size organizations face competitive pressures from upstart tech companies and large multinationals alike. And when it comes to going digital, such companies rarely have access to the same budgets, talent pools, and insights available to fast-moving startups or well-resourced corporations.
As a result, mid-market executives often want to embrace transformation but don’t know where to begin. If they do have a plan, the challenge is often how to apply limited budgets in ways that will have the strongest digital impact.
The good news? By studying how digital is changing financial services for corporates and consumers, mid-market executives can gain insight into how the top trends are affecting their margins. From there, they can explore how to apply these lessons inside their own organizations – helping their companies keep pace with the rapidly shifting expectations of consumers.
Below, we take a look at five digital forces that are changing financial services.
Access, speed & intuitive usability
The smartphone revolution is empowering consumers and changing their expectations of the companies that meet their financial needs.
Online banking and mobile apps were the first consumer-driven digitization trends to arrive in the financial services space. In the wake of these advances, new paradigms for personal money management emerged: Branchless challenger banks such as Simple and robo-advisors like Wealthfron now offer online-only services—typically aimed at millennial consumers—advertised with low fees and high transparency.
Widespread mobile use has also made a consumer-friendly user experience more valued and significant than ever. Financial services solutions need to be both attractive and intuitive in order to gain widespread adoption: Accustomed to the rich experiences of mobile games and social networks, consumers increasingly demand fast load times and always-on connectivity from all of the applications they use (business or personal). Financial services firms seek to meet those needs with more digital-savvy talent than ever. In fact, the head of Fidelity recently called his brokerage firm “a technology company that happens to be in financial services.”
That’s no idle boast: The company now employs 12,000 technologists.
The impetus for consumer-first experience extends to enterprise technology as well.
Employees increasingly expect the same easy-to-use interfaces and anytime-anywhere access from workplace systems as from their everyday smartphone apps. Cloud technologies are also being deployed for more on-demand, lightweight data storage with many enterprise systems and third-party data solutions now offered in cloud-only options.
And while people across the board have more sophisticated expectations, it isn’t simply about design, infrastructure, and experience. It’s also about learning what customers want, and putting the knowledge to work.
New approaches to data collection empower companies to acquire consumer insights, design roadmaps around that knowledge, and apply it toward new products, solutions, and personalized offerings.
Amazon, for example, is continually building new tools and products designed to add new customers and new merchants to its site while simultaneously reducing payment friction within its platform – essentially “building a bank for itself.”
- Fintech startups are acquiring new users by offering low or no fees. If they maintain new customers’ loyalty and trust, their expansion into new products/services could eat into the revenues of mid-markets that fail to digitize their offerings
- Corporates are deploying massive troves of technology and data to integrate themselves ever deeper into their customers’ financial lives
Building better networks, block by block
Whereas consumerization forges stronger bonds between companies and customers, the ecosystem trend nurtures stronger financial relationships among businesses to create network-effect benefits.
Digital technologies have made business and finance faster and more connected. Yet organizations still tend to operate in silos. From business-to-business payments to goods distribution in the supply chain and beyond, tracking and verification requires massive human effort—and naturally engenders some human error.
The emergence of blockchain technology—the distributed infrastructure supporting cryptocurrencies like bitcoin—has the potential to eliminate many inefficiencies innate to finance and business. But the real power of blockchain isn’t the technology itself. Rather, the transformative potential lies in how curated “ecosystems” of participants will use blockchain as a shared transaction system.
By allowing entire networks of companies to log activities in a single, decentralized ledger with defined standards and rules, blockchain creates a single, immediate version of the truth for all parties involved —without requiring time-consuming verifications and manual follow-ups.
IBM—among others—is innovating extensively on this front, bringing ecosystems of banks together to streamline processing and reconciliation. And an increasing number of startups and corporates are exploring blockchain to “tokenize” assets ranging from art to securities, or to make supply chains more transparent and network-driven whether tracing the source of diamonds or tracking cherry tomatoes from seed to salad.
These B2B ecosystems are only the beginning of blockchain’s power for transformation.
As companies embrace consumerization in their products and strategies, blockchain technology will eventually provide an infrastructure to deliver more integrated services to consumers in partnership with other participants inside their B2B ecosystems. Imagine being able to select, buy, insure, and track the delivery of an engagement ring, for example, with all involved parties trusting the same shared record of the diamond’s sourcing, manufacturing, sale, and movement history.
- Everybody’s talking about blockchain, but only the network-driven use cases really matter
- Making blockchain matter means figuring out the ecosystems you should participate in to streamline B2B operations (and ultimately create new digital benefits to your consumers)
Bots & AI helping humans work smarter
Repeatable processes are now frequently delegated to software robots. Meanwhile, digital finance solutions are delivering better data collection methods, creating new opportunities for AI-powered outcomes.
Remember the robo-advisors mentioned earlier? They’re not just for consumers.
Startups such as Betterment now offer systems specifically designed for financial advisors, automating robotic tasks associated with trading and portfolio management—rebalancing accounts or locating assets, for example.
In this way, financial advisors and managers are freed up to concentrate on higher-order work, spending precious time and energy on clients rather than calculating deposits and withdrawals.
The same shift is happening inside enterprise finance functions. Software robots—“bots”—are automating accounting and reporting processes in the back office, leading to shorter close cycles and more robust tax compliance. Companies are embracing cloud solutions that collect and collate more standardized data—and unlock more seamless integration to other solutions in the enterprise cloud.
With cleaner information, there’s less manual effort required for data-janitor tasks.
Less human intervention means fewer errors and less fraud. Further, feeding high-quality data into artificial intelligence helps systems grow more robust over time: AI applications now range from cybersecurity and fraud detection to personalization.
AI has also given rise to chatbots that are intelligent enough to offer humanless customer service on websites and interfaces or to serve as office-assisting digital “agents” available to handle scheduling and email replies – much like a trusted assistant would.
Human judgment remains the gold standard for strategic concerns, but machine learning AI systems—which are capable of actually analyzing data, identifying patterns, and using the learnings to make decisions—are handling much of the analytics and modeling.
Though automation in staffing and resourcing remains in its infancy, it’s already providing companies new freedom to redesign workflows and rethink departmental structures.
AI isn’t limited to hybrid human-bot workforces, however. It’s creating a new digital labor market that is already yielding new pricing models for consulting, advisory, and business process outsourcing services.
- Automation extends the value of digital solutions by handling the work humans don’t want to do—allowing companies to focus employees on customers, strategies, or judgment-based tasks
- AI and machine learning put data to work for impactful outcomes, and can help humans work smarter in common-sense ways, potentially lowering costs in the process
Biometrics tech that accelerates action
Soon you won’t need a physical ID card to prove you are who you say you are—your physical person will be enough. Biometric technologies are approaching a level of sophisticated, reliable identity verification and authentication – winning over both consumers and companies.
ID checking has long been a land of bottlenecks and delays, especially when people are trying to access highly protected spaces or resources. Look no further than airport security, where cross-checking IDs against plane tickets involves long waits and massive throngs of personnel.
A growing number of airports and sports stadiums are beginning to embrace new options for faster, smarter clearance. Solutions from companies such as CLEAR enable people to confirm their identities just by tapping their fingers or blinking their eyes, using iris, face, or fingerprint recognition.
The financial services space has so far been slow to embrace biometrics technology. The imprint of these solutions is nevertheless advancing as consumers warm to the frictionless convenience.
Banks and businesses see value in the high levels of fidelity achieved with biometrics verification as well as the security benefits of using biometrics at the point-of-access: In digital uses, biometrics technologies create a way to unlock protected documents or access role-based systems without the slowdowns of passwords and two-factor authentication.
We’re not signing mortgages via eye scans currently, it’s true. Yet odds are good that US firms may soon follow the lead of South Korean peers—many of whom have already embraced palm-vein recognition for pay-with-your-hand transactions and iris scanning for account access and mobile payments.
As voice assistants such as Alexa and Siri grow in popularity, there is ample opportunity for biometrics and real-time payments to converge with vocal commands into a driver of immediate, screen-free purchases.
In fact, voice biometrics are already helping US capital markets move faster than ever.
Startup Cloud9 Technologies offers an “Alexa for the trading floor” that turns trader conversations into digital commands. (Because biometrics verification leaves a digital record of who ordered which trades when, the solution delivers highly valuable data for understanding compliance and financial returns.)
And as blockchain and cryptocurrencies advance in development and adoption, biometrics tech will grow even more significant—allowing for a way to virtually authenticate human “aliveness” and securely link an individual’s identity in the physical world to their anonymous, encrypted private-keys.
- Know-your-customer guidelines will evolve as biometric technologies deliver automated, efficient ways to validate, authenticate, or verify identities without physical documentation
- Enhanced security, fidelity, and speed create benefits for both consumers and companies
Intelligence for smarter business strategy
Digital transformation provides stakeholders unprecedented visibility into financial and operational performance. Synergy between cloud technologies, automation, and AI-augmented deliver greater power for converting data into insights.
Now that AI systems can mimic human thought processes, corporate stakeholders have far more powerful toolsets for understanding and mitigating risk factors related to both external and internal forces—ranging from predicting stock-price movements to detecting activity patterns of fraud or hacking:
- Growth and retention strategies are being designed around customer behavior, based on AI-powered insights into when customers “churn”—or drop off from enrollment processes.
- Machine learning drives better forecasting and predictive modeling for organizations, using sophisticated data analysis to making budgeting and projections more accurate.
- Rather than hire consultants and advisory firms to review numbers and create reports, decision makers increasingly rely on the data visualizations and forward-looking analytics delivered by their software solutions.
- With service interactions migrating to more and more chatbots and other voice- and text-based interfaces, the insights are extending to customer sentiment and experience as well.
- Voice engagement—that is, speaking to technology as if conversing with a person—delivers more contextual information than point-and-click transactions do. Applying natural language processing solutions for contextual analysis can help companies gain unprecedented understanding into how customers truly feel about interacting with their brand or business.
This kind of information can be put to immediate use in context-driven marketing and personalized communications—and the story will not end there: As new digital solutions emerge, companies will gain ever-more information for targeted intelligence per customer.
Blockchain, for example, creates the potential for mass personalization: The technology will provide an immutable “memory” of customers’ interactions inside an ecosystem creating data graphs that deliver ever-fuller portraits of activity over time, with context from all parties across the network.
- Digital technologies are serving stakeholders with consumable, actionable business insights powered by AI and human-mimicking judgment
- Faster, more intelligent decision making helps mid-size companies compete—and doesn’t necessarily require putting consultants on the balance sheet
Partnering for the pace of change
Understanding which digital trends to incorporate into a company’s operations—and when—requires a holistic look at both growth challenges and revenue goals. But with startups and corporates squeezing their margins on both sides, few stakeholders have time to spare.
Working with a trusted commercial bank can help mid-market decision-makers create the sort of smart, lithe strategies that will allow them to impress and compete in the digital realm without busting the budget.