The consumer is king in the digital world; experiences are the new product. This represents a different way of thinking about achieving growth, and requires a re-engineering of how the organization acts, organizes, invests, measures and more.
For example, FIs have made great strides in bundling products and services for customers, but have yet to create the connected, “super-fluid” experiences that can make managing financial lives as seamless as purchasing a book on Amazon. Taking that next step by embracing what we call “personal financial operating systems” — artificial intelligence-driven financial health platforms filled with transactional, advice and predictive capabilities to help guide customers’ digital journeys — is the new objective for many forward-thinking institutions.
Reorienting around customers, as opposed to product or business silos, is as much a cultural challenge as a process or technology one. And it must be executed amid a rapidly evolving competitive landscape.
While FIs still count trust as a differentiator to help fend off nimble FinTech and Big Tech competitors, for example, that advantage is eroding. Consider that 24% of our survey respondents identify PayPal, a FinTech, as the most-trusted financial brand — more than double the figure of the closest bank.
Large technology firms, such as Amazon, Google and Apple, are gaining ground, as well. They possess reams of customer data and already operate fluid ecosystems. To them, financial services offerings are necessary — and potentially lucrative — parts of their broader “super app” ecosystem strategies.
This represents an existential threat to incumbent FIs. While they still possess important regulatory imprimaturs, long-term relationships and product expertise, nonbank platforms can now offer many of the same capabilities via M&A or partnerships. For example, several FinTech firms, including SoFi, have leveraged acquisitions to obtain banking charters. Green Dot, another FinTech, provides a platform and back-office support to allow nonfinancial firms to design their own customized banking and money movement solutions.
The digital evolution has put FIs in direct competition with this new generation of nimble rivals, and it seems a good part of the battle will be fought on those rivals’ turf. To keep pace, FIs will need to fundamentally reframe their strategies and business models to meet evolving customer needs and create the lifestyle-enabled, ecosystem-based experiences those customers now expect. In our survey, 63% of consumers said they would “highly value” open banking and embedded finance solutions that curate, connect and personalize their experiences with trusted third parties.