“W hy can’t I do that on my phone?”
For financial services companies looking to woo—and keep—Millennial customers, ensuring that question is never asked could be the only difference between success and failure.
“Digital natives have a higher degree of expectation in terms of what they are able to do on their devices, including signing up for products and services and having a certain level of personalisation,” explained Christopher Young, Adobe’s director of industry strategy and marketing for financial services (Adobe is CMO.com’s parent company). “That said, there is a spectrum of adoption across generations. It’s not exclusive to just Millennials, but also for anyone who has embraced the digital world.”
The digital revolution is permeating every aspect of financial services, from banking to wealth management to insurance, all of which face competition from a host of new online-only challengers. This is concerning to traditional financial services companies, with more than 50% who said they worry they won’t be able to appeal to younger generations, according to the “Digital Trends in Financial Services” report, by Adobe and Econsultancy. Without the brand loyalty and personal relationships that helped these companies retain their parents’ and grandparents’ business, winning a generation of digital natives often comes down to the experience they have interacting with a company on their devices. And, so far, the industry isn’t doing so hot.
A recent look into Millennials and mobile banking—carried out by digital verification specialist Jumio—found that 85.5% were dissatisfied with their ability to access financial services from traditional providers on their mobile devices. (The good news for brick-and-mortar banks is that their online-only competitors aren’t knocking it out of the park either. While only 7% of the survey’s respondents expressed dissatisfaction with accessing services from challenger banks on their devices, a mere 8.5% were satisfied—leaving 84.5% lukewarm.)
Jumio surveyed more than 700 Millennials globally and found that while they prefer to bank via mobile, their attempts often are not completed; 93% had abandoned a transaction they started on their phones. Unsurprisingly, the most common cause (in 91% of the cases) is that people cannot remember their password.
Balancing convenience with security is a perennial issue for banking and the trend toward mobile has made it even tougher to achieve. But a nascent move away from passwords—which are more easily hacked than other more technologically advanced forms of online security—could make mobile banking easier and safer.
Some banks see the answer in their customers’ eyes—literally. Biometrics, user identification through fingerprints, eye scans, voice and the like took off last year with some of the nation’s largest players and is gaining steam. Millions of customers at Bank of America, JPMorgan Chase and Wells Fargo, for example, can now use fingerprints to log into their bank accounts through their mobile phones and millions more are expected to follow. Wells Fargo lets some corporate customers scan their eyes with their mobile phones to log into corporate accounts. Citigroup can help to verify 800,000 of its credit card customers through their voices.
Delivering these sorts of solutions is important for traditional financial services providers, which are losing market share to tech-savvy online competitors. According to research done by financial services consultant McKinsey & Company, the number of fintech startups in existence jumped to more than 2,000 in early 2016, up from 800 in April 2015.
In the banking world, these competitors are beginning to command respect and make traditional banks take notice. In the UK, for example, challenger and specialist banks saw a 56% growth in gross lending in 2016, increasing their market share by 2.9%, according to the Council of Mortgage Lenders in the United Kingdom. Virgin Money, an online-only bank, is now the eighth-largest lender in the country, above the Yorkshire Building Society and Clydesdale Bank, both long-established institutions. And in the United States, “neobanks,” such as Moven and Simple, are nipping at the heels of America’s banking giants.
But banks aren’t the only entities facing change. Wealth management and insurance companies are also grappling with the need to engage the digital generation. And one of their biggest issues—as it is for banks—is the paperwork, another task that often gets abandoned when starting an online presence.
Adobe’s Young pointed to online investment firm Wealthfront and virtual insurance agency Insurify as companies that have minimised friction in the onboarding process. Wealthfront allows clients to open an account after filling in a relatively simple online risk-tolerance questionnaire. Insurify last year introduced a feature that lets potential car insurance customers snap a picture of their licence plate with their phone and text it to get rate quotes. To help traditional financial services clients compete in this new reality, Adobe employs proprietary software to help boost completion rates of digital paperwork. For example, Adobe worked with RBS Group to help the company increase its loan application completion via mobile by 20%.
“Here’s the thing with financial services,” Young said. “There’s nothing you can purchase that doesn’t come with a form or application to fill in. ... Making it easier for customers to apply for a product or service, especially over a mobile device, is key. Companies spend tonnes of money on advertising, web sites and mobile apps advertising, but ultimately when someone goes to open the account they don’t necessarily have a good experience. All of that branding and investment is undone. And don’t get me started on companies that are still making you print, sign and fax paperwork.”
Some companies may not even be taking their marketing as far as possible. The Adobe survey found an overwhelming majority (87%) of financial services companies believe that mobile will remain as important or become even more important to gaining new business in the next three years. However, most are not extending key digital marketing capabilities to their mobile apps. For example, while 50% said they are extending “targeting segments” to their mobile sites, only 34% are doing the same with their apps.
No matter how much customers can accomplish independently, sometimes they do want to talk to or, in the case of Millennials, chat with a human. Somewhat ironically, the growth of the online chat option has created the need for artificial intelligence.
As the financial services industry interacts more often with customers online and expectations for speedy service rise, these companies are becoming increasingly dependant on AI. That means the person you’re chatting with often isn’t a person at all but a robot. Research is currently being done to improve how these robots read human emotions. If you are angry, for example, the robot will pick up on that and change the tone of the conversation.
“Financial services is a relationship business, so how do companies now shift and develop relationships with individuals through mobile devices at scale and in real time?” Young asked. “That’s where you’re going to have to get into things like algorithms, machine learning and automation, because it almost can’t be done any other way.”
Another piece of good news for traditional financial institutions, especially the larger ones, is that they have the deep pockets necessary to address shortcomings in the mobile experience. They can also simply gobble up the smaller competitors. Indeed, while fintech startups are on the rise, they also have their work cut out for them. According to the McKinsey report, in the eight-year period between the Netscape IPO and the acquisition of PayPal by eBay, more than 450 new technologies—such as digital currencies and wallets, attempted to challenge established banking companies. Fewer than five of these challengers survive as stand-alone entities today.
In short, as McKinsey concluded, “It’s tough to disrupt banks.” But that clearly hasn’t stopped upstarts from trying.