Murray Howe, Head of Industry Strategy, APAC at Adobe.
For Most Of Us “Wait & See” Is No Longer An Option
The 2017 Digital Trends Report is now out, and for the first time, Adobe & Econsultancy have delivered a deep dive special report for Financial Services & Insurance (FSI). For you business leaders and strategy heads out there the message is clear; ‘Wait & See’ is over, ‘Me Too’ product focus is dead, and your ‘Fast Follower’ strategy rhetoric may now not be fast enough.
For the 4th year in a row, Customer Experience has been identified as the most important priority for marketers, now consistently regarded as the primary competitive differentiator for organisations across all industries, and FSI is no exception (91% cite CX as a top 3 priority).
Laggards Under Pressure
In FSI, the pressure on incumbents to act is driven in part by the number & amount of Fintech investment lined up to unbundle & disrupt the status quo; not only from other incumbents, but also startups and large technology leaders from previously unrelated industries (think Apple, Ebay, Amazon, Alibaba, Tencent). Since 2010 investments in Fintechs have grown from US$1.8 – 24Bn, with the number of Fintechs invested in growing similarly from ~300 – 5000. Of concern to incumbents, ~70% of all Fintech investment is directed towards the last mile of user experience in the personal and SME market sectors (Thanks to: CITI GPS Digital Disruption, March 2016 & KPMG Pulse of Fintech – Q4 16).
Customer data & marketing analytics are recognised by most respondents as a critical enabler for competing on Customer Experience, unfortunately accessing & controlling it is proving more difficult with FSI lagging other industries (64% FSI vs 75% rest reporting to be in control of their marketing data).
In respect to becoming a digital first organisation and realising competitive experience based outcomes, most respondents are reporting slower progress year on year, possibly as they realise the enterprise implications and adjust expectations; FSI is lagging here too with just 9% identifying as digital first versus 11% for other industries, and 22% & 19% for Media & Technology respectively.
Regulation Is No Excuse
With FSI being the most heavily regulated of all industries, regulation is often cited as a barrier to progress or excuse for slow / no action amongst incumbents – this is a mistake. Insurers are overcoming regulation by creating new ways of collecting and using data to attract & retain customers; wearables, connected homes and cars are making it easier for insurers of all types to do so.
Regulators themselves are taking steps to drive participation & innovation for both customers & competitors alike, for example; the Australian Financial Systems enquiry is leading to greater competition amongst Super funds, Reserve Bank of India seeks to link Aadhaar bio metric identification to small businesses & launched the Payment System Innovation Awards, and Chinese government messages of tolerance & encouragement results in one of the most innovative & digitally oriented banking systems in the world.
Updating legacy core banking systems & overcoming siloed organisational structures are proving to be a more serious impediment to progress for incumbents than regulation.
An Opportunity For FSI To Shine
Data & data driven marketing should be an outstanding competitive skill set for FSI incumbents, and indeed is seen-as-much, with +70% of FSI respondents identifying it as a strategic priority.
Looking ahead, Machine Learning & Artificial Intelligence are emerging as key themes for competitive competency & innovation (#1 most exciting prospect to 2020). In fact in 2016, CB Insights recorded over 600 AI related investments totalling US$5+Bn.
Potential AI applications are being explored across middle office (decision assistance, cost reduction) and front office for customer experience (simplifying decision making, improving access, speeding up service interactions) from both incumbents and new entrants alike, for example:
– Capital One (one of the largest credit-card lenders in the U.S) has opened a Machine Learning Centre of Excellence as part of its goal to become a ‘preeminent machine learning company’
– UBS announced a partnership with Amazon to test the limits of banking applications on Amazon’s Alexa (AI) service that can be paired with its ECHO voice controlled in-home speaker.
– Recent insurance start-up Lemonade makes AI the central pillar of its customer enrollment & service experience, demonstrating that some claims can be handled and resolved as fast as within 3 seconds.
– Wealth managers look to ‘robo-advice’ as a way to lower costs and open up their product to a larger audience.
You ‘Can’t Flick The Switch’ To Success
Realising these exciting capabilities & innovations is not as simple as flicking a switch; for incumbents especially, these outcomes have been the result of years of investment in capability and earned competency in analytics, decision making, collaboration and experimentation. Note that UBS is reported as first investigating AI opportunities in 2014, three years before announcing the partnership with Amazon; and Capital One has been known for its data & analytical capabilities for decades prior to launching the Machine Learning Centre for Excellence.
For the rest, waiting to see and following fast now may not be good enough, as competitors that consistently lead in investment and continual improvement pull farther and farther ahead from the pack. Consider that Digital First organisations are twice as likely to invest in data driven marketing, twice as likely to deliver significant personalisation in their marketing activities, and derive twice as much business from mobile & digital channels.
Great, What Do I Do Now?
All is not lost and this year’s report closes with four things you can do to start closing the gap.
1. Watch and learn from the challengers. Yes Fintech start-ups can move fast, but large incumbents benefit from years of experience, robust support systems and vast amounts of data. So, watch disruptors carefully, learn from their success and apply your scale to dominate at the leading edge. (Yes, this sounds a lot like Follow Fast)
2. Data is an opportunity not a barrier. Competition is being fought at the intersection of data and experience, and FSI incumbents are rich in data. Start by viewing data as your strategic asset to be invested in and leveraged accordingly.
3. Collaborate internally. Next to legacy platforms, rusted on siloed organsiation and fractured decision making is the biggest competitive disadvantage to FSI incumbents. A sustained executive focus is needed to overcome internal barriers to information flow and decision making.
4. Continual improvement in content & experiences. Start now in understanding your customer’s interactions across devices and channels, what experiences work and don’t, develop audiences and experience segments, and invest in relevant (read current) content. Start small, learn from your mistakes and successes and don’t stop.