Disrupting the Market
12 October 2017
Disruption used to be a bad thing. Now it’s the buzzword for describing the innovative, agile and creative approaches to adapting existing methods of working that are transforming the way in which we all do business.
The Fintech sector is at the heart of the digital revolution and almost every day there is a report about a ground breaking new technology promising to transform the way in which we run our finances. The transformation has been very visible in the personal and retail banking sector. Thirty app transactions take place every second in the UK and almost 21m people use banking apps on a regular basis. A recent survey indicated that 27% of Millennials have used a smartphone mobile banking app to make a payment at a check out in a shop or restaurant in the last month. Even contactless debit or credit cards are starting to look old fashioned.
Existing banks have responded to this new wave of changes by updating their customer management strategies to include apps, web chats and chatbots as an essential part of any banking service. A range of challenger banks such as Atom Bank and Monzo have launched and offer a fully online banking service without any physical branches.
We have also seen the introduction of products such as Revolut, a smartphone app which allows customers to upload foreign currency to a prepaid debit card. Customers can then avail of inter-bank exchange rates to make payments in a foreign currencies without incurring the commission and fees that are linked with traditional foreign exchange transactions. Interestingly, it is often third party providers who are developing these apps and not the traditional banks. The Competition and Markets Authority has flagged this kind of innovation as being key to opening up further competition in the banking sector.
It is also clear that this innovation has extended beyond the retail banking sector and into the business and corporate banking world.
Banking giants such as Credit Suisse and J.P. Morgan have invested huge amounts in developing new technology which goes beyond the automation of back office services.
The focus for this investment has been to move beyond automation of more mundane tasks to creating a platform which will allow customers to have direct access to accurate, real time information in relation to their own accounts but also in respect of wider market conditions and general market research.
For smaller businesses this is likely to translate into a greater degree of control over the day to day operations of bank accounts and services with enhanced response times to queries, applications for new services and funding lines. It may be the case that we are in an initial phase of the digital revolution in banking when existing products and services are digitised but it’s possible that there’s a second and more transformative phase where completely new products and ways of delivering services are coming to the market.
There is another facet to the story. In a recent survey 79% of 2000 UK consumers declared their concern at the prospect of customer service dropping due to widespread automated processes being introduced into their banking experience.
Another recent study conducted by First Source showed that 44% of consumers see being able to have a bank branch as their number one deciding factor when choosing their banking provider, paradoxically bank branches were responsible for less than 20% of all transactions in 2015. It seems clear that customers still value human engagement, especially in interactions where trust plays a critical role.
Perhaps the lesson for us all in the financial services and professional services sectors is that trust and choice are the fundamentals of building any relationship with a client. While the appetite for automated service will no doubt expand and develop in ways which we can’t yet anticipate, we still have to listen to what our clients tell us about how they want to engage with us, be that via an app or face to face.