5 minute read 27 Mar 2019
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How greater connectivity can boost financial well-being

By

Jan Bellens

EY Global Banking & Capital Markets Sector Leader

Passionate leader on innovation in financial services, especially in emerging markets. Global citizen. Keen traveler.

5 minute read 27 Mar 2019

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Financial institutions have an opportunity to leverage data and technology to bring financial well-being tools to the everyday life of consumers.

Financial institutions have made huge investments in products and services that should aim to bring better financial well-being to all. But financial well-being is not exclusive to those 'financial moments' when consumers make purposeful decisions on their finances. It is driven largely by everyday behavior and decisions - some big and binary (such as deciding to get a college degree), some small and gradual (such as going to the gym). Despite their huge importance in the economy, financial institutions were operating in a small, and for many consumers, unexciting part of the big playground of life.

The future of banking

Now, strongly motivated by innovative competitors, financial institutions have an opportunity to leverage data and technology in new ways. For example, banks launch chatbots that use cognitive messaging and predictive analytics to help customers find ways to save money and avoid recurring fees. Most apps are still restricted to the banking ecosystem, but the ubiquity of data and the potential for customers to allow their data to be shared more freely, across sectors (accelerated by regulatory initiatives such as Open Banking and PSD2) may radically transform these propositions.

Think about your bank’s AI chatbot being connected to a digital wallet for all your payment needs. Your digital wallet has a wealth of data on specific product purchases every time you go shopping. Your bank knows the total value you tend to spend in certain shops. Now imagine walking into your local supermarket and not only having your phone identify where you are, but also ‘speaking’ to your digital wallet and banking app to identify the trades offs you could make based on your shopping list, or your historic preferences.

Visualizing this on my mobile will help me understand how much I am saving, and what the lifetime impact of such a saving might be on my financial well-being. Meanwhile, embedding gamification in my bank’s app encourages me to maximize my saving.

Imagine if at the end of my weekly shop the 5 dollars I have saved against my “typical” supermarket visit was swept automatically into a savings or investment account? I don’t need to think about it. I don’t need to actively engage with my financial service provider. It all happens seamlessly in the background.

The opportunities in this vision are absolutely endless - and exciting!
Jan Bellens
EY Global Banking & Capital Markets Deputy Sector Leader

While existing banks have a window of opportunity to lead in this, they will need to move faster if they want to stay at the forefront of this amazing opportunity.

The use of customer data

The first and foremost is data. One of the most significant recent regulatory trends in financial services is around the use (and abuse) of customer data. The good news is banks remain trusted institutions for protecting and securing customer data. This means that they have an opportunity to play a critical role in facilitating this future vision, as data custodians, applying advanced analytics to give advice which is demonstrably in customers’ interests. The bad news is that while banks are robust at safeguarding their data, they have been much slower in manipulating, analyzing and leveraging the data for the customers' benefit.

Another challenge for the banks is innovation. Banks have been isolated for a long time. Operating in a broader ecosystem with agile technology development is certainly not their core strength. The consumer banks' leadership team needs to deal with the dual challenge of reducing costs in the 'traditional' bank and investing heavily in the 'new world' ecosystem.

How banks can continue to demonstrate value to their customers

The emerging platforms show that improving customers’ financial well-being is broader than the world of finance. It means having a deep understanding of their customers; knowing them better than they know themselves and supporting them not just through their major 'financial' moments, but in many key moments where a decision or transaction is made.

To do this successfully means providing an outstanding experience, where ‘good’ financial behaviors are suggested without people having to engage in a lengthy and painful process with their financial institution. Improving people’s financial well-being driven by their personal preferences and ethics should be at the heart of this vision. This provides an opportunity to Build a Better Working World when almost three-quarters of customers say they do not have a firm grasp of financial products and financial choices they are making.

Summary

Existing banks need to move fast if they want to stay at the forefront of this amazing opportunity and continue to demonstrate value to their customers.

About this article

By

Jan Bellens

EY Global Banking & Capital Markets Sector Leader

Passionate leader on innovation in financial services, especially in emerging markets. Global citizen. Keen traveler.