The younger generations don’t bank like older ones do. They tend to think of banking as the management of money – earning, spending and investing – and Financial services institutions are struggling to figure out their place and relationship with these new clients.
“They [younger generations] tend to think of banking as the management of money – earning, spending and investing”
Back in the day (this expression just made me feel old…), there was no alternative, you needed to go through the grinder process of setting up an account, singing a bunch of paper copies and waiting, waiting without any visibility on what was going on with your information. The days of the black box a coming to an end – blockchain has a preponderant role to play in the coming years – and because of the digital banks emerging with decent user experiences, as well as other services that help you actually manage your finances.
Take Squirrel – a quite interesting use of gamification to convey banking notions millennials don’t understand or care about – and ultimately provide a value add service your bank doesn’t provide.
Startups “use of gamification to convey banking notions millennials don’t understand or care about”
In this transparency game FS institutions (as well as other industry incumbents) will need to break down their value chain into modules or components – and make a decision on which blocks they want to own, and which ones they will partner with 3rd parties or even use their VC strategies to acquire the relevant pieces! A solid API strategy will make or break this strategy as it will be far more important to banks than anything else.
“FS institutions will need to break down their value chain into modules or components …A solid API strategy will make or break this”
Banking services will be ubiquitous so every channel where I can’t pay, save, lend or invest (IoT, Connected Car, Home, Drones, OOH Advertising or Retail stores) will be a gap for startups to enter. Banks might still have a chance if they play the open and transparent game before they are regulated out of it (PSD2 is only the beginning), and then it might be too late for them to play a role in the economy of the future.
This example from Tesco’s in South Korea is only the first step! Scan the barcode on the shopping list on the OOH advertisement and add the product to your shopping basket. One payment, one delivery.
The second paradoxical change is authentication as it’s the key enabler for all of the future use cases. All of the new devices and transactional contexts will not use a credit card to pay or any other form of authentication – you as an individual will have a preset way of payment that will be triggered by authentication – and it’s also not a password: it’s voice, retina, fingerprint.
There a fundamental new set of expectations from younger generations of not only what they expect, but also what they are willing to share. This discussion is a great example. I was having a chat about the possibility of having a chat bot listening to users’ conversations on their favourite instant messaging channels – facebook, whatsapp – and for instance when a friend comments they are going to a party this weekend, and it’s a hipster themed party and it’s happening outside, that same chat bot can enter the dialogue and apply not only the data points shared in a conversational user interface but also import open data like weather, trends from people like them, or even based on other similar parties from social media.
This is coming: “…the possibility of having a chat bot listening to users’ conversations on their favourite instant messaging channels – facebook, whatsapp”
The argument was generated around the fact most of us would find this creepy, but maybe a younger and more open generation would think of this as a cool feature to enable on their dialogues – my very own fashion stylist, that knows who I am and doesn’t ask about my preferences twice.
To close the point imagine what’s the frictionless means of payment this profile of user would consider?
So this seems like a big cultural hurdle more than anything – either FS institutions disrupt themselves, or they will be forced to do it too quickly.
The most interesting fact in all of this is there are already services on the market that are taking this approach, and that’s not only a sign it’s evidence. Take a look at Spixii – your insurance chat bot that uses IoT to activate services in specific points of interest.
So the 3 key enabling capabilities for Financial Services institutions in the future will be:
Ubiquitousness (should we call it PSD2-siness…)
I would add the extra feature of Experience-led, as context is the key trigger to have the right tools, information and approach at any point in time!
Please share your thoughts about what you think is key in the future of Financial Services.