A hybrid “phygital” model strengthens financial services companies’ digital reach and the quality of their physical network.
Advances in digital technologies, coupled with significant shifts in consumer behavior, are presenting new opportunities for financial services companies to redefine their distribution models.
Our research shows that a growing number of customers are willing to consider alternative distribution models. For example, 60 percent of consumers would consider buying insurance from a bank, 38 percent from a home service provider and 30 percent from a retailer or supermarket.
Ecosystems of providers could play an increasingly important role in the distribution of insurance and other financial services, and trends toward increased product and process simplification, automated support and virtual intelligent assistants could speed up the adoption of non-traditional distribution channels.
What is a phygital distribution model?
One approach that is rapidly gaining traction is the idea of using a distribution model that combines physical and digital channels—a phygital model. By blending digital and mobile services with brick and mortar branches, financial services companies can take advantage of the strengths of each channel.
Digital channels offer companies a means of reducing the cost of distribution and offering a better cross-channel experience to customers. I see the use of digital channels expanding further as new technologies become available and enable financial services companies to offer customers a superior experience, competitive pricing and value for money, driving loyalty and satisfaction.
But even as customers are turning to digital and mobile channels, they continue to value human advice, often in person, making physical channels an essential service that adds value at certain points within the customer journey.
An effective phygital distribution model lets customers transfer smoothly between channels and gives physical channels the opportunity to drive higher value and long-term advice-led relationships with their customers.
Canadian companies who have already adopted phygital models
Achieving the right mix of the two, physical and digital, can be a challenge, but in Canada, a number of companies are already successfully moving forward with a phygital approach.
Mogo, for example, with its Mogo®Account, gives Canadians access to three solutions to help them improve their financial health:
- A free credit score with free monthly credit score monitoring.
- A digital spending account with no monthly fee, accessible through a Mogo Platinum Prepaid Visa® Card.
- Instant pre-approval on a personal loan.
The account is designed to work alongside customers’ existing bank accounts—no switching of banks required—and provides a free service they do not get from their bank or credit union.
Through this phygital approach, Mogo has grown its active member base significantly and been recognized by Deloitte on its North American 2016 Fast 500 Technology list for its impressive revenue growth.
Retail stores, such as Indigo Books and Music, are also focusing on a phygital future, including digital art in their physical stores, using technology to help customers shop in the store and enabling them to purchase items online and pick them up in the store. Canadian Tire is another business working hard to transform themselves from a traditional brick and mortar store into a global retail innovator, with their use of virtual reality headsets in store and catalogs that offer an augmented reality experience for customers who use them with mobile phones.
The future is phygital
As customer expectations continue to rise, and as distribution becomes the focus of many new entrants ranging from FinTech and InsurTech firms to companies outside the industry, it’s imperative that financial services companies be more competitive in both their traditional and emerging distribution models. While distribution is not the only area that will contribute to their future success, it is where many decisive battles are likely to be fought.
It’s my belief that the ability to accelerate the move toward a hybrid physical/digital distribution model will become a critical value lever for financial services companies in Canada. It will allow them to strengthen their digital reach and the quality of advice offered by their physical network, while promoting more convenient, lower-cost channel options for their customers.