Financial Services: Insight and Trends
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The document discusses the evolving expectations of consumers in the financial services sector, highlighting issues such as the broken relationship between customers and businesses, the paradox of choice leading to decision fatigue, and a growing desire for self-directed financial management. Solutions suggested include leveraging digital tools for better customer engagement, simplifying financial choices, and fostering community support in financial decision-making. Additionally, there is an emphasis on the importance of brands adopting a purposeful approach that focuses on ethical responsibility and customer trust.
Financial Services: Insight and Trends
- 1. prilFINANCIAL SERVICES: Insight & trends March 2013 @NadsBads @InnovationSoc
- 3. #1: the relationship is broken, now to mend it - problem Growing sense of defiance and resistance among customers Patience for businesses that have put customer interest on the backburner is thinner than ever. People are standing up to voice that they are not happy as they realize they‘ve grown complacent, and that maybe they‘re not being treated as fairly as they think. Reinventing Financial Services: what consumers expect from future banks and insurers. Roger Peverelli, Reggy de Feniks / 2013Edelman Trust Barometer. Trust in financial service.
- 4. #1: the relationship is broken, now to mend it - solution “There's no such thing as love; only proof of love.” Cocteau Re-instating trust i.e. the willingness to be vulnerable to the actions of another person – will be a slow process. It will require word and action to rebuild both affective and cognitive trust. We need to look for more opportunities to interact and each time make sure we add value. Pace in which trust is restored Quality of interactions Frequency of interactions = X Reinventing Financial Services: what consumers expect from future banks and insurers. Roger Peverelli, Reggy de Feniks.
- 5. #1: the relationship is broken, now to mend it - solution Mobile and digital are key to drive frequency of interaction and increase satisfaction as well as advocacy. Push and pull: be there even whenever they need you (even if they don‘t know it yet). Google Now is the one tool that brings together virtually everything Google knows about you and where you are and then turns all of this information into a useful dashboard on your phone. State Farm (US) realised that they only had one point of contact a year with consumers - a negative one to announce an increase in premium. So they created the Pocket Agent, a mobile app that is ‗always ready to help‘ – from claims and driving tips to insurance covering and financial planning.
- 6. #2: The paradox of choice - problem Reinventing Financial Services: what consumers expect from future banks and insurers. Roger Peverelli, Reggy de Feniks./ Huffington Post. 2013: The Year Fatigue Set In. January 2013. While each decision by itself may sound simple, the seemingly endless stream of decisions— and the pressure to make the ―right‖ choice for each one—can really deplete time, energy, motivation, and even happiness. It reinforces shortcuts and bias, which leads individuals to make ―wrong choices‖. Fiscal Phobia has been identified as a real condition and is exacerbated by things that are out of people's control. "We have known for a long time that being able to manage your finances effectively leads to increased well-being and a better quality of life, at every given level of income."
- 7. #2: The paradox of choice - solution Reinventing Financial Services: what consumers expect from future banks and insurers. Roger Peverelli, Reggy de Feniks./ TED. Barry Schwartz: The paradox of choice | Video on TED.com. 2009 “If you can't explain it to a six year old, you don't understand it yourself” Albert Einstein In the eight years since psychologist Barry Schwartz published The Paradox of Choice, decision fatigue has been settling. Simplicity and transparency will be key yet they will require differentiation through standout experiences.
- 8. #2: The paradox of choice - opportunity Developing more pleasant and seamless experiences to stand out WSJ. Italian Bank Cuts Costs but Builds Business. March 2011. / BBC News. Investment decisions based on your personality. January 2013. CheBanca! makes a point of having customers look at the same computer screen as the branch employee. The bank also sends customers a text message after every remote transaction, which "drastically lowers anxiety" . Another key tactic is product simplicity. "We offer the same terms to all,― The uniformity boosts clients' confidence they are getting a fair deal. Developing personality based banking e.g. according to perceptions of risk / behavioural archetypes? The Barclays behavioural finance team asks clients to complete a financial personality assessment that is aimed at tailoring their investment portfolio to their psyche. This goes beyond the typical financial adviser's questions and ultimately ultimately draws up a set of rules to govern their investment behaviour e.g. "weekend- only" investment rule.
- 9. #3: aspiring to self directedness - problem Reinventing Financial Services: what consumers expect from future banks and insurers. Roger Peverelli, Reggy de Feniks / Curve. Getty Images. Visual trends in financial services. 2013 / International adviser. The psychology of protection. May 2012 / Parliament UK. Financial education in schools . January 2013 / Future thoughts. The Hyper Individual. December 2012. / More people want to take control and decide themselves. They value expert advice but in later stages of the purchase cycle. TNS Finance said that in the UK 54% of private investors are self directed. Numbers are huge and growing due to gen y and x coming to market – who grew up digitally and for who being self directed is second nature - but also due to the abundance of tools and advice on the web which make people think they can do it themselves… Yet they often remain under-informed and subject to bias. 94% of people think that financial education for young people is important in the current environment. Society is changing, making financial education ever more important. Parliament UK.
- 10. #3: aspiring to self directedness - solution Curve. Getty Images. Visual trends in financial services. 2013. “The most courageous act is still to think for yourself” Coco Channel Following on the crisis consumers are determined to regain control. This is translated into a desire to progress financial education as well as being empowered to make better decisions - notably through data.
- 11. #3: aspiring to self directedness - opportunity Curve. Getty Images. Visual trends in financial services. 2013. A sharpened focus on finance creates the opportunity for coaching mechanisms. Combing coaching with community could also pave the way for services that let consumers turn to their peers into supporters and advisors. At the heart of the E.ON energy experiment are five energy tracking apps. Each app helps cover different audiences and needs. All the apps tie up to a website that enables users to relate their efforts to those of the wider community. There is also an opportunity to teach and help consumer to achieve higher level of self directedness. For instance can we take part in government initiatives?
- 12. #4: No to commitment - problem Simple living Consumer are more cautious of financial commitment and pending across sectors compared to just a few years ago. This is part of a broader movement towards simpler and decluttered lifestyles – making life smoother, quicker,more convenient and a lot less stressful. Future Foundation ―Ish‖. 2013 / Experian. Young and not so reckless; how to engage digital natives over the long term. January 2013 20% less than the so called middle aged ‗safe bets‘ due to their awareness of potential financial penalties. Experian According to the You Gov debt tracker, there has been a four-fold drop over the last three years in younger groups taking on large financial commitments without considering the consequences. Experian
- 13. #4: No to commitment - solution ―Freedom is the power to choose our own chains‖ Jean-Jacques Rousseau Consumer are increasingly non-committal – more hesitant to enter into long-term contracts and more likely to shop around. They will more than ever be asking just what does my loyalty to my insurance company actually bring me? Should I start to de-clutter my lifestyle and stay free of commercial entanglements? Future Foundation ―Ish‖. 2013
- 14. #4: No to commitment - opportunity To build value in the long term, we will have to work harder to be relevant to our audience‘s specific interests. Or is it about going with the flow and developing products that fits this short-term mindset?
- 15. #5: The new financial unit / insight Future foundation. Finance 2020 / The Telegraph. Boomerang generation force parents to retirement dreams on hold. October 2012/ Pew Research. The Sandwich Generation. January 2013. Say hi to the sandwich generation The rising costs associated with education and housing coupled with a competitive job market mean that parental responsibilities stretches further into the adult lives of their offspring. And, as populations age increase, retired relatives become a growing financial concern too. The ―sandwich generation‖ has to displays a growing sense of responsibility for the welfare of the family.
- 16. #5: The new financial unit / challenge TED Rachel Botsman: The currency of the new economy is trust. September 2012. “Happiness is having a large, loving, caring, close-knit family in another city” George Burns New financial pressures are prompting families to manage finances together – functioning increasingly as financial units – with financial advice and support shared across generations. Financial service providers need to adapt their products and services to this demographic evolution - this shift towards group-oriented product can already be observed in other categories. Future foundation. Finance 2020 / The Telegraph. Boomerang generation force parents to retirement dreams on hold. October 2012/ Pew Research. The Sandwich Generation. January 2013.
- 17. #5: The new financial unit / opportunity Opportunity to create new familial / multigenerational product offers As well as new technology that allow families to manage finances together.
- 18. CULTURAL TRENDS
- 19. #1: Purposeful brands/ trend drivers Reevaluating values: Values and morale are increasingly important around the globe, which has led to growing focus on ethics. This has translated into demand for common decency – i.e. recommend and sell only products that you would sell yourself and treat customers like you would treat yourself. Durable lifestyles: realization that we‘re in for a marathon not a sprint with a move towards betterment, and more sustainable living. Companies need to pay longer term dividends as consumers are increasingly looking for brands that last. Déclassé consumption: anxiety about the value of money - how wealth disappeared so quickly. This loss of belief is experienced by consumers – how solid are my investments? What is my money really worth? Is my home worth the same or less than when I bought it? Reinventing Financial Services: what consumers expect from future banks and insurers. Roger Peverelli, Reggy de Feniks / 2013Edelman Trust Barometer. Trust in financial service. / John Gerzema: The post-crisis consumer. October 2009. / Curve. Getty Images. Visual trends in financial services. 2013.
- 20. #1: Purposeful brands / trend Consumers and financial services companies both need to address the theme of responsibility, moving on from looking at one‘s own future to showing responsibility for the collective good. But brands will have to lead the way. Developing a purpose beyond commercial objectives delivers a competitive advantage. Brands are now launching initiatives adding value to society (not restricted to sustainability), not just shareholders – understanding the ―why‖ as well as the ―what‖ and how‖. The most forward thinking programmes have been company-changing. Reinventing Financial Services: what consumers expect from future banks and insurers. Roger Peverelli, Reggy de Feniks /Curve. Getty Images. Visual trends in financial services. 2013. / Contagious. Purposeful brands. February 2013. “The notion that the only thing we can do to restore prosperity is just dismantle government, refund everybody's money, and let everyone write their own rules, and tell everyone they're on their own— that's not who we are.”
- 21. #1: Purposeful brands / best practice ―Paul Polman, the chief executive of consumer goods giant Unilever, is in a league of his own when it comes to being the leader of a multinational company challenging the corporate status quo. The leader believes there is a fundamental readjustment going on as a result of the financial crisis, from a rules-based society back to a principles-based society. Unilever‟s Sustainable Living Plan: Polman launched the company's Sustainable Living Plan in November 2010. The programme seeks to double sales and halve the environmental impact of its products. There is also a commitment to improve the nutritional quality of its food products – and link more than 500,000 smallholder farmers and small scale distributors in developing countries to its supply chain. Polman says the plan has already had a profound impact on the way the company does business: "When we look at our supply chain, we think about smallholder farmers, we think about women and employment, we think about land rights, we think about biofuels and because we think about this holistically, our plants are getting better, our sourcing is getting better, these communities have a chance of functioning." "I don't think our fiduciary duty is to put shareholders first. I say the opposite. What we firmly believe is that if we focus our company on improving the lives of the world's citizens and come up with genuine sustainable solutions, we are more in synch with consumers and society and ultimately this will result in good shareholder returns.” Link to the plan The Guardian. Unilever's Paul Polman: challenging the corporate status quo. April 2012.
- 22. #2: being closer / trend drivers Equals: consumers are more likely to trust peers and experts than brands. Nielsen showed that 70% of global consumers trust online consumer reviews, an increase of 15% in four years. With less control over their image, brands gain by putting the needs of their customers first. Small is beautiful: Economist EF Schumacher‘s book ‗Small Is Beautiful‖ suggested that we need to downsize, re- organize how we make things and how we live. Today, ―as confidence in big banks has been falling, the public‘s trust in small ones has been climbing.‖ Janet Novack in Forbes. With less control over their image, brands gain by putting the needs of their customers first. On demand: consumers are expecting instant information and gratification – on and off-line. This is accentuated by a feeling of being time- starved. Datamonitor found that 44% of consumers now say that it‘s difficult to manage their daily obligations and find time to relax. Brands need to satisfy consumer demand for ultra-convenience and empower them to make the most of their service. Trendwatching. Trends briefing: servile brands. October 2012 / Contagious Magazine. Marketing as service design. September 2012 / Forbes. Americans' Trust In Banks Falling; Thank You, JP Morgan. July 2012. / Curve. Getty images. Small is the new big. 2013
- 23. #2: Being closer / trend . / New consumers. Economies go alternative. December 2012. For lots of people, globalization didn‘t bring much good. So they‘ve been turning to something they know: the local, authentic and human. This leads brands to behave differently – on a smaller scale and more human way. For service and commodity brands, there is an opportunity to create positive ―moments of truths‖ during those few interactions when consumers have an unusual amount of emotional energy invested in the outcome. This notably means being present when consumer are more likely to be warm and receptive.
- 24. #2: Being closer / Best practice Create moments Eat better Minimise effort Save money With Live Well For Less, Sainsbury‘s aims to inspire and enable people with real lives and budgets to make the most of their everyday experiences through great products and services.
- 25. #3: Beyond prices / trend driver Reinventing Financial Services: what consumers expect from future banks and insurers. Roger Peverelli, Reggy de Feniks / Admap. Retail emotional affinity. February 2013. WARC Exclusive / Kantar retail. The Future Shopper . 2013. Cut through: There recession has led to a surge in price driven promotions. In the UK grocery market, for example, over 70% of advertising in 2011 was still estimated to be purely price-driven To survive this onslaught, some service brands have tried and make an emotional connection with shoppers. In search for quality: Frugality is a coping mechanism not as an aspiration. The ambition is not to trade off everything for price because consumers everywhere still want value-added products. There is an opportunity for brands to create preference by developing value-added product and services. Knowing the Joneses: An increasing reliance on peers and community has helped take consumers‘ attention to higher priorities than just price. Added value and service becoming more important purchase drivers. This surge in information and peers exchange has led consumers to expect more but pay less.
- 26. #3: Beyond prices / trend Warc Best Practice. Value propositions. September 2011 Admap. Retail emotional affinity. February 2013. / Kantar retail. The Future Shopper . 2013. Consumers are redefining what value means to them and, thus, what does or does not warrant the extra dollar. So the most important question facing marketers is what sort of value will animate the connection between consumers and brands. ―For the future shopper, value will move beyond simply price to a message from the retailer that the shopper is making a ‗smart‘ decision to purchase from them. Retailers catering to the ‗smart‘ need state of the future shopper are experts on one of the components of the new value equation: In the Discipline of Market Leaders, Michael Treacy and Fred Wiersema suggested that companies can create value in one of three ways: operational excellence (experience), product leadership (quality), customer intimacy (service)
- 27. #3: Beyond prices / best practice John Lewis's commitment to 'Never knowingly undersold' was introduced by John Spedan Lewis in 1925. He already intended it not just as a price promise but as a total trading philosophy: all products will be the best quality for the price and expert advice will add additional value. As the recession continued it was felt that the time was right to return to the broader meaning of 'Never knowingly undersold„ and put it back at the heart of the brand. The resulting communications including were emotional demonstrations of John Lewis's constancy through the key moments of a customer's life, implying that in a world that now felt very changeable John Lewis remains a beacon of stability, offering permanent and multi-dimensional good value. Institute of Practitioners in Advertising. Gold and Grand Prix, IPA Effectiveness Awards. John Lewis: Making the nation cry...and buy. 2012
Editor's Notes
- #9: Rather than separating clients and employees by a traditional counter, CheBanca! makes a point of having customers look at the same computer screen as the branch employee. This not only gives a feeling of greater transparency, but clients see how easy it is to use the Web portal. Most then start using the portal for most of their banking transactions.The bank also sends customers a text message after every remote transaction, which "drastically lowers anxiety" for clients monitoring their accounts and cuts down on paperwork. "We only send out one paper statement, at the end of the year" Mr. Miccoli says.Another key tactic is product simplicity."We offer the same terms to all," Mr. Miccoli says, contrasting that policy with the discretionary terms regularly offered by branch directors at other Italian banks.The uniformity boosts clients' confidence they are getting a fair deal and also allows CheBanca! to standardize its product portfolio, further lowering costs, Mr. Miccoli says.
- #12: At the heart of E.ON experiment are five well energy tracking apps. Each app helped cover different audiences and needs from a child-friendly Tamagotchi to a more money oriented one. All the apps tie up to a website that enables users to relate their efforts to those of the wider community – a behavioral economic strategy that has already proved really efficient in the past. But this experience was also successfully translated into wider above the line communication. Contagious comments: “This is an impressive and comprehensive example of how emerging technology and smart marketing ideas have combined well to produce a really powerful piece of communication”.