12 minute read 20 Mar 2018
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When navigating your digital transformation, is paper the elephant in the room?

12 minute read 20 Mar 2018

EY’s survey of the financial services industry discusses the continued use of paper and the barrier it creates for digital transformation.

The UK financial services industry continues to be disrupted. Ongoing regulatory pressures, continuous technology innovation, new market entrants and an ever-evolving FinTech ecosystem is challenging traditional business models and the ability to remain relevant to changing customer expectations. In a digital era, banks, insurers and wealth managers seek new ways to retain or increase competitive advantage, while improving profitability.

As we enter the 4th industrial revolution, it would seem there is little need or place for paper. But why is it still in demand? To find out we conducted a survey across leading financial services organizations, grouped in to sub-sectors across:

  • Survey methodology

    EY’s 2018 survey of the financial services industry throws light on paper’s continuing importance in financial services and explains the drivers behind its continued use, and the barrier it creates for improved interactions across multiple parties, and digital transformation more broadly.

    This survey was conducted across leading financial services organizations, grouped in to sub-sectors across general insurance; commercial and specialty insurance; life pensions and wealth management; and banking.

    Detailed benchmark statistics have been formulated by the financial services sector, covering inbound and outbound paper journeys, barriers and blockers, and strategic initiatives being undertaken to increase digital adoption and competitive advantage.

Customer: A closer look at general insurance
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Customer: A closer look at general insurance

Customers’ expectations and the requirements of insurance are being shaped by their digital experiences of other retail industries.

There have been many efforts over the last few years to improve customer experience and drive omni-channel engagement in general insurance, but the reality is that most customers still receive paper communications. Our survey has highlighted that, on average, only 18% of general insurance customers are engaged through paperless processes.

Digital transformation requires a better understanding of customers, their preferred journeys for consuming products and services, their behaviors, and preferences.

Not every customer is the same. Going paperless means changing the hearts and minds of customers who have their own expectations and feelings about paper. Many have a long-established reliance on it and find it difficult to trust a process which doesn’t rely on physical letters and contracts.

But attitudes continue to evolve. Based on broader market research and customer testing, we identified four major types of customers and their appetite for digital vs. paper-based communications.

  • Digital Natives live in a digital world. They may not remember or even know how things worked before digital. Paperless is not a thing.
  • Digital Migrants existed in a world of paper well before everything turned digital. They are embracing digital, and test & learn when they trust the brand.
  • Paper Purists existed in a world of paper well before everything turned digital and formed habits that are impossible to break. They do not trust digital. 
  • Paper Natives existed in a world before digital. They may use digital to complement their strong paper-based habits.

Effective customer segmentation remains a priority

However, a key outcome of disruption in a digital era is that cross-sector convergence will become increasingly common. This is leading to a fundamental redesign of traditional value chains, and the need to enter into new types of partnerships. For insurers, participating in digitally connected ecosystems or partnerships and the resulting shift in traditional customer journeys will require very different behaviors, commercial approaches and communication mechanisms compared to the prevailing norms.

Technology: A closer look at commercial and specialty insurance
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Technology: A closer look at commercial and specialty insurance

Blockchain and smart contracts will have the biggest impact on the specialty and commercial insurance market.

The commercial and specialty market have been characterized by brokers and underwriters dealing through huge quantities of paper. However, the fulfilment of these contracts is changing, and the papers from initial submissions and field notes are rapidly digitized. In the next stage of the value chain a significant level of commercial and specialty business has become largely digital via email, attachments and semi-structured data sets (spreadsheets).

A big step has been taken, driven predominantly by cost-reduction programmes and investments to improve interoperability across multiple parties. But it is a first step among many.

Email and e-documents, such as pdfs are not structured datasets, and are only a small digital improvement over traditional paper. The ability to extract meaningful data to support downstream processing or extract additional insights from the information that flows around the market is key. New and disruptive technologies represent a big and ongoing agenda to further reduce friction across the value chain. Increasing investments in intelligent automation to combine robotics and business process management tools with optical character recognition (OCR), text mining and other natural language processing (NLP) techniques are underway.

Amid these changes, the business model remains relatively unchanged. Further disruption is coming, and the vision of streamlined pre-bind, risk placement, post-bind and claims interactions across parties is getting ever closer. According to our survey respondents, blockchain and smart contracts are expected to have the biggest impact on the specialty and commercial insurance market compared with the rest of financial services.

The pace of digital acceleration is set to continue. Autonomous vehicles, wearables and the internet of things (IoT) are just a few of the changes financial services will need to navigate and adapt to in the next decade or so.

At least for commercial and specialty insurers, the promise of enabling new ways to transact more safely, transparently and in real time is the pivotal step needed in one of the oldest insurance markets in the world.

Regulation: A closer look at banking
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Regulation: A closer look at banking

To be a real winner in the transformative age, banks need to continue challenging, testing and unlocking richer customer communications.

Regulation is often cited as a factor hindering financial services institutions’ progress adopting digital communication approaches. Much of the paper generated in customer communications is driven by regulatory requirements and increasing focus on transparency, across the full product value chain and customer life cycle. Our survey highlighted that 40% of paper sent to banking customers is regulatory related. 

Regulatory documents

193 million

average number of regulatory documents sent to customers per year.

New regulations, such as the Markets in Financial Instruments Directive II (MiFID II) and the Insurance Distribution Directive (IDD) include enhanced requirements around financial promotions, marketing and the disclosure of key information, such as fees and charges. Organizations consider the easiest way to meet these requirements may naturally be by generating additional paper.

Another important consideration is the General Data Protection Regulations (GDPR) which came into force in May 2018. The requirements of the GDPR, including customers’ “right to be forgotten” are causing organizations to assess how they manage data protection and privacy on their path to becoming paperless.

Though customer communication is an area in which some prescriptive requirements do apply, regulators are responding to the challenge of technological disruption by exploring how digital communication tools can be used to improve customer experience, while adhering to core regulatory principles.

An important element of regulatory requirements is the concept of providing information to customers through a ‘durable medium’, so that its integrity is maintained and accessible in future. Historically, this has led firms to provide this material information in paper form, but regulators, including the FCA, continue to look at the relevance of the durable medium definition. They have assessed mechanisms, such as the use of web-based portals or digital vaults to store customer information as part of the implementation of new regulations. So, a positive step forward.

Another approach will be to better understand the types of communication across any given transaction and reinterpret their purpose. If banks can assess their current paper-based communications and re-categorize based on their purpose1 and perceived value to customers, partners or other third parties, they may unlock a pathway for increasing the level of digital adoption, while adhering to the principles of durable mediums and respecting any remaining paper preferences.

Financial services must continue to work within the requirements. But as the industry explores ever-more innovative digital approaches – beyond just replacing paper documentation with similar electronic versions, such as pdfs stored ‘digitally’ – organizations should work proactively with regulators to maintain the principles of transparency, preference and durability. But at the same time, continue to challenge and realize the common goal of achieving customer safety without stifling innovation.

Content: A closer look at life, pensions and wealth management
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Content: A closer look at life, pensions and wealth management

Change is gathering pace – but there is a legacy of old technology waiting to be renewed or replaced.

Given the prominence of paper in the life, pensions and wealth sector, it is no surprise that an increasingly complex portfolio of needs is driving an increase in the documentation being sent to customers – an increase in information which causes confusion or overwhelms customers to the point where they are forced to raise a query. This drives additional ‘failure demand’ into call centres, and valuable customer touch-points are often wasted.

Consequently, content represents a key area of interest for the paperless debate, including the volume, its meaning, relevance and how it is curated, maintained and standardized across a single customer’s holdings. The opportunities for efficiencies as well as improved customer experience are significant.

Paper documents or their pdf equivalents are constructed by the formulation of document templates. The more templates an organization has, the harder it is to maintain the document universe, which reveals a low level of maturity in the manufacturing of communications.

Our survey results show clear differences in the maturity of document rationalization across financial services, with 63% of respondents in the life, pensions and wealth sector either having thousands of templates, or not knowing how many they have. Only 12.5% of life, pensions and wealth respondents have rationalized their document types to fewer than 100.

Managing content centrally and driving a common look and feel or tone of voice also proved to be limited. Our survey highlighted that only 25% of life, pensions and wealth respondents have content creation owned by a centralized customer team, which leaves it in the hands of local product teams.

Content creation


of life, pensions and wealth respondents say content creation is decentralized.

While print fulfilment remains a highly outsourced capability (73% in life, pensions and wealth), other competencies further up the value chain, including content creation, are being targeted for external support. Currently over 67% of content is created in-house, and, with an average sourcing target much lower, it would seem there is question over its relevance as a core internal competency and competitive advantage.

The biggest question of all however is over format itself

While paper preference will remain for some, the real opportunity is finding an alternative way of engaging with customers around their financial holdings and enhancing their ability to better plan for the future – something paper cannot offer, and digital has yet to deliver.

    • Show article references

      1. Communication purpose: Looking through the lens of EY SAPIR, organisations can assess what is an inbound submission, or an outbound acknowledgement, promise, inform, or request, and explore alternative digital treatments.


    Understanding paper-based communications represents a significant stepping stone in digital transformation – from assessing document universe and priority opportunities across key customer journeys and processes, through to piloting and engineering market-leading digital solutions that drive efficiency and unlock new customer experiences.

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