• February 25, 2016

Only the Strongest Survive: The Evolved Future of Financial Services

In the next three to five years, the financial services ecosystem will dramatically evolve in terms of players, products, and customer engagement strategies. The winners will be the institutions that understand the critical relationship between customer-centric banking and modern technology. From portfolio-wide services to changes in brick-and-mortar environments, the transformed future state of banking means more personalized offerings, streamlined IT, and greater security measures.

Transformation at a Glance

Hewlett Packard Enterprise’s Daniel Biondi, Fellow & Chief Technologist, Financial Services, Asia Pacific & Japan, and Tom Hetterscheidt, Chief Technologist, Financial Services, Americas, have expert insight into the direction the industry is heading. They point to these key areas that will transform the financial services industry:

  • Digital Banking: Because many customers will prefer to utilize online tools to manage their finances electronically, banks will realize the necessity of setting up online entities in the way that Bancorp Bank did with Simple. Customers will also expect banks to anticipate their needs based on behaviors and actionable insights, and present relevant product and service offers. For example, with predictive analytics and actionable insights, a bank can determine customers’ key life moments, such as when a customer with a college-aged child would benefit from a school loan. The same can be done for mortgages, investment properties, or personal loans.
  • Customer Engagement: Product-centric customer engagement will be replaced by a customer-centric approach. Banks will look at the entire customer portfolio to proactively anticipate needs and cross-sell new personalized products and services. Further, customers will expect to receive communications and offers on their preferred interaction mechanism—e.g., platform, channel. At the retail branch, the physical space will change to be more of a “coffee shop and lounge” experience for the customer. In addition, banks will be challenged to leverage all channels of technology to increase the speed and agility of each customer’s transactions.
  • Convergence of Industries: As Biondi explains in a previous Enterprise Forward article, banking, retail, and telecommunications are merging to create a new ecosystem in which the banks are being pushed to the back of the value chain moving into a strictly custodial account role.
  • Blockchain Payments: Keeping a digital ledger of transactions can make payments and verifications happen in minutes rather than days. More financial institutions will leverage the underlying blockchain technology to streamline business-to-business (B2B) payments in particular and solve the increasingly troubling issues in the area of cross-border friction and large payment volumes that are often exclusive to B2B. Other examples include foreign exchange and currency exchange.
  • Mergers and Acquisitions: Greater consolidation of regional banks will change the playing field. In addition, the top 10 banks in the world will also see sizable change due to cost pressures and increased competition for customer loyalty.
  • Sensing and Internet of Things (IoT): Insurance companies use sensor technology in cars to track driving behaviors, predict future actions, and then formulate premiums accordingly. In the banking world, sensing and the Internet of Things can buoy sales and customer service. For example, with facial recognition technology, branch associates have instant customer information to better assist or suggest products and services that are relevant to the customer.

Customers Remain at the Center

Financial services entities are nonexistent without customers, which is why many banks are evolving from the wait-for-your-appointment approach to an amenity-rich concierge approach. However, nothing zaps bank loyalty faster than security issues. “This is why banks are looking at personalized digital vaults, which are essentially personal data clouds that store all of a customer’s critical information, from bank accounts to birth certificates,” Biondi says. Hetterscheidt adds that as customers and banks become more connected, the attack surface for fraud and identity theft widens. “Banks need to look at new and evolving tools and technologies to address—or at least stay up to date with—criminals,” he says. These tools include biometrics, location-based identification, and tokenization. The latter substitutes a sensitive data value (e.g., account number, card number, social security number) with a non-sensitive value (i.e., a token value). This protects the privacy of the sensitive data and ensures that it can’t be used elsewhere.

Across the globe, banks of all sizes are feeling increased regulatory demands. More pervasive technology, greater transparency, and value-driven customer experiences spearhead the changes that will dramatically transform financial services by 2020.

Learn more about moving the enterprise from the current state to one that fosters innovation in “The Path to Self-Disruption: Nine Steps of a Digital Transformation Journey” by The Economist Intelligence Unit.

For more on real-world transformation with Hewlett Packard Enterprise, click here.