The Trending Customer

January 19, 2017

 

 

#Fintech #Bitcoins #BlockChain #BigData #RDR #KYC #RoboAdvice.

 

Of all the latest trends facing the financial services industry, none is as sweeping as #customer. Firms in the financial services industry have realized the importance of the trending customer, and are changing their landscape, offerings and processes because of it. The all-encompassing theme of #customer has brought about all the above tagged trends (and more), as firms compete to understand and meet the needs of their customers.

The trending customer, as the name suggests, desires to stay on top of the trends, he/she looks for convenience, appreciates innovative technologies and wants a personalized experience or product. The trending customer is armed with information, has countless options at their fingertips and is not afraid to look elsewhere if their current financial service providers do not meet their requirements.

This article explores these characteristics and their implications or resultant trends in the financial services industry. We believe that firms need to focus on three core aspects to keep up with the trending customer. These are convenience, customisation and empowerment.

 

Convenience: The experience counts (#Fintech #Bitcoin #BlockChain)

In a time where concepts such as the ‘social media effect’ exist, it is ever more important to ensure that your customers enjoy every experience they have with your firm. This means that you need to find the most convenient way to provide your customer with what they want.

From offering your services on multiple platforms, to minimizing the turnaround time of queries, applications etc. to cutting out the middle man (and thus unnecessary expenses), to providing benefits schemes; if your firm hasn’t found the most convenient way to work, a new fintech has or is on the way to exploiting the opportunity.

So what is a fintech and why are they trending? A fintech can be broadly defined as any firm that is using new software to provide financial services or disrupt existing financial models. Existing firms have created waves for larger institutions in various business lines, such as, lending and financing, payments and transfers and investing.

Some examples of this in the African continent include the Sun Exchange and Branch.co, which offer optimized lending and financing options through crowd-investing (which cuts out the middle man, lowers costs and eliminates geographical boundaries) and an altered credit approval process. Bitcoin and Blockchain technologies are on their way to becoming the new payments and transfer systems and various fintech companies such as Bitpesa and Cubebucks have realized and are taking advantage of this. Other companies such as ConnectAfrica Payments and VoguePay are changing the way in which business take payments. As for the investment world, new companies such as EasyEquities, Satrixnow and Iknowfirst are creating a shift in not only the way customers invest but what they invest in, as well as allowing smaller investors into the market.

So what can we learn from the fintech industry? Firstly, innovation is the key to success in the financial services industry. Larger and more mature corporations need to ensure that they have teams set up to drive and implement new and innovative ideas. Secondly, all processes and offerings need to be optimized. This applies to everything from operating and pricing models to application and approval processes. Optimization means lower costs and faster turnaround, and if coupled with innovative products or processes, it means providing your customer with what they want (even if they didn’t know they wanted it), when they want it (i.e. convenience).

 

 

Customer-isation: All about me (#BigData #RDR #KYC)

In the past, to make things more affordable and take advantages of economies if scale, financial service firms implemented the techniques and thoughts behind mass production. This resulted in customer segments and the creation of products to broadly satisfy each segment. This has served the financial services industry well in the past, however customers are no longer looking for the traditional financial or banking products. Customers are now more interested in solutions that help them reach their objectives. As such, financial service firms need to consider changing their business models from a product pushing approach to a customer centric approach.

So how do firms implement such a change in business model? The answer is through customization. This can be achieved through, personalized products (including objective based advice) and targeted marketing- all of which require significant information about the client. Hence, the latest trend of investments into big data technologies and advanced analytics teams. If you have heard of the term big data, but are not sure exactly what it means, it is all in the name- it is large amounts of data. The key differentiator however is that it includes various types of data; combining internal and external, structured and unstructured data. This allows a firm to build more comprehensive and astute customer profiles and if coupled with the power of advanced analytics such as predictive models, will help the firm not only acquire customers, but also engage with them and retain their business.

On another note, various regulations, such as the Retail Distribution Review (RDR) and Know Your Customer(KYC) have also come into play to help drive the movement towards customer centric business models. The RDR attempts to focus advisor’s efforts on providing sound advice rather than selling products to meet targets and KYC (while initially implemented more as an anti-money laundering initiative) promotes the customer centric business model by requiring that financial institutions attain and maintain key information about their customers.

 

Empowerment: Armed with Information (#DIY #RoboAdvice)

In an era where boundless amounts of information are available to a person at any time, the focus needs to shift from the provision of information to the empowerment of the customers to use it.

The trending customer is armed with information; hence he/she is more capable of conducting research, has more desire to understand the details behind the product or advice on offer, and prefers to make the important decisions him/herself. As such, firms need to ensure that customers not only have access to their information through multiple channels and devices, but also that the information is concise, easy to use, understandable and linked to an application process or contact point.

A step further is to enable the customer to use the information to make their own decisions (hence, cutting out the middle man). An example of this is EasyEquities, a fintech company mentioned in the first section of this article. This company provides information (in the form of video tutorials, blogs, social media posts etc.) to the customer and then empowers them to act on this information by walking them through the investment process- all of which is done online and without person-to-person interaction. Another example is the concept of robo-advice, which involves replacing the usual financial planning process, of meeting with an advisor and discussing your goals, risk profile etc., with an algorithmic process based on data inputs from the client

 

 

Conclusion

Fintech disruptions, big data technologies, new regulations, do it yourself business models- all of these trends are changing the way the financial services industry works. One thing that they all have in common is a focus on the customer. As such, the way to future success seems clear- follow the trending customer.

 

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