Other parts of this series:
As I noted in the first blog of this series, I routinely hear from senior executives in Europe, North America and Growth Markets at financial services institutions (FSIs) that they understand digital will play an important role in their organizations’ growth: new strategic options, new business opportunities, including platforms, new operating models.
Focus is now on value creation, how to leverage all the above to drive profitability and value creation
I think it would be important to consider how digital disruptors have fundamentally shifted the company/customer dynamic: financial services are unique in their nature, but can definitely be inspired
A critical factor in the rapidly changing environment for FSIs is the increasingly important customer-to-business (C2B) business model. The top disruptive C2B players—Google, Apple, Facebook and Amazon, with Chinese e-commerce giant Alibaba also coming on strong (GAFAA)—are expanding their range of offerings beyond shopping, entertainment and travel. They’re now into products and services that affect consumers’ health, homes and wealth. The GAFAA customer-centric approach generates tremendous amounts of data that can be analyzed in real time to obtain customer insights. Those insights then can serve as the basis of opportunities to cross- and up-sell new and complementary products.
Adopting this approach would nicely support FSIs’ growth goals. But FSIs first will need to confront several key strategic questions regarding digital technology: What will be their total digital investment? How should that be allocated between “GO Digital” initiatives needed to improve existing systems and processes and “BE Digital” initiatives needed to create future revenue streams? What are the priority items in each initiative? Should FSIs go it alone or partner with financial technology (FinTech) providers?
In the near-term, insurers and wealth managers as well as banks ought to consider the three major GO Digital sets of platforms and/or businesses within the GAFAA banking portfolio. To that end, FSIs would need to:
- Develop digitally-powered FS platforms. FSIs can offer physical and digital choices in terms of access–allowing customers to decide when and how to engage with the organization—and an easy experience. For example, depending on its business strategy, a bank could develop a digital advisory platform could for affluent customers. Each step in the advisory value chain would evolve from prospect collection and onboarding to client engagement, investment portfolio proposal and illustration of various offerings and products. The wealth management value chain could evolve similarly to provide robo-advice, pay-as-you-go virtual access to advisors and an illustration of a range of service and fee levels. Insurers could deliver products and services across a variety of digital ecosystems, incorporating links to partners such as other carriers, suppliers from different industries, FinTech specialists and even some of the GAFAAs.
- Tap into experiential living services. FSIs could consider partnering with others to develop platforms that deliver “living services”–services that can adapt in real time to fulfil the needs arising in customers’ everyday lives. By embedding customized financial services propositions in various areas—including housing, health care, and travel—FSIs would increase their interaction with customers and garner extensive data on their behaviors.
- Develop new businesses to multiply customer interactions and generate new revenue streams. Potential opportunities for banks include entering new geographies; monetizing branch space by teaming with players like Amazon; and monetizing data by providing merchant-funded discounts to obtain market intelligence and business insight. Insurers could forge close ties with FinTech firms, using incubators, accelerators, technology hubs and venture funds to expand into new businesses across digital ecosystems. Wealth managers could provide clients digital self-investment tools.
Next times, I’ll look more into the digital value drivers and digital enablers that would allow FSIs to provide different products and services while performing the roles they have chosen.