“Personalize or perish” may be the mantra for financial services companies looking to remain relevant in this era of data generation and interpretation, Dr. Louise Beaumont suggests.
Dr. Beaumont is a strategic advisor at digital transformation agency SapientRazorfish and co-chair of the Open Banking Working Group. She believes the open future is one where consumers and small business will benefit from a hyper-personalized environment, with predictive and preemptive services based on our willingness to share the data we generate.
“That’s wildly different from the financial services experience so far,” Dr. Beaumont began. “Big, dumb vintage products are push marketed to you with no interest of you as a person.
“Customers should be in charge of their data. Banks think of it as their data and it isn’t.”
Adding to the sense of urgency are the growing financial services presence of companies who are masters at using data. Facebook, Walmart and Amazon collect massive amounts of detailed and personalized information on billions of us and are miles ahead of the financial services industry in their ability to innovate with it.
“What you see in these tech titans are huge customer bases, and an ability to be at the forefront of customer engagement while training us to adopt new services,” Dr. Beaumont said. “They do so digitally and collect massive amounts of data.”
While those companies have developed their followings they have worked out the kinks in service and engagement, giving them quite the head start over would-be competitors, Dr. Beaumont explained. Add in deep pockets, massive processing power and a clear roadmap for handling data and they are perfectly positioned to deliver adjacent services at scale and pace.
“It’s not theoretical,” she said.
Transfer funds inside Facebook Messenger, get cash back or pay via your Amazon app. The former knows what you are doing and where you are doing it, while the latter knows what you buy and when. Multiply that over billions of users and you have fertile ground for rapid innovation.
“Their approach is test and learn, test and learn, test and learn,” Dr. Beaumont said.
These companies also have a trust advantage, she suggested. We trust banks for logical and rational matters but when we cross into the emotional, they fall behind. When we think of Amazon there’s the smiley box and the assurance we get what we ordered by a promised date or they’ll make it right. Facebook and Google are happy places for many of us.
And while they have obtained some financial licenses, the tech titans don’t need them to carve off valuable parts of the customer experience, Dr. Beaumont said. Using their data stores to great effect, Amazon offers five per cent cash back on their site with lower rebates on other charges. Pay into an Amazon account which is similar to a bank account.
Whether you’re a bank or a tech titan, always look for ways to add value to the customer experience, Dr. Beaumont said. For busy small business owners, avoid direct financial literacy education embraced by many consumer finance startups in favor of using the data they generate to help them understand precisely what they are doing with their money. Automate savings by topping up every purchase to the next dollar and putting the extra aside for a predetermined goal like a present. Analyze interest rates and suggest the best financial moves based on future goals.
Make existing services more responsive. If you have purchased travel to Mexico and some diving equipment, your insurance can be adjusted to reflect your presence in Mexico and the likelihood you are engaging in a dangerous activity. Because you won’t be at home for a spell or driving your car, your plans may be able to be adjusted and the resulting savings from area applied to the added cost of another.
Another reason for the divide between banks and the Amazons are the diversity of the people shaping those organizations, Dr. Beaumont suggested. She compared the executive boards of Amazon and a large global bank on nine separate diversity measures. There was no difference on six but where they separated were on types of education, work experience and risk tolerance. Large banks tend to draw from banking, finance, accounting and law, while some Amazon decision makers also have backgrounds in behavioral psychology, for example.
Compared to institutions that have largely operated in the same way in some instances for centuries, disruptors, out of necessity, have fostered cultures of imagination, creativity, investment and scaling.
“Three deficits banks have, what’s missing in the boardroom, are the imagination of the future, the creativity of how to get there, and the willingness to do it,” Dr. Beaumont said.