REIMAGINING RETAIL FINANCIAL PRODUCTS IN THE DIGITAL AGE

By Manas Praharaj , Global Business Manager for Wipro and Harihara Subramanian, Consulting Partner, BFSI, Wipro

Today, millennials expect a lot more than just digital savviness from their banks – they want a bank that understands their financial aspirations and offers advice and support in achieving financial independence. With the ongoing and rapid advancements to online banking, financial service providers have the opportunity do more to influence and improve their customers’ financial habits.

Traditionally, banks have offered a mix of financial products that consumers have to choose from. This style of producer-driven financial consumption has dominated the retail financial scene for decades with products such as checking accounts, savings accounts, credit cards or loans. With the arrival of financial technology, (better known as ‘fintech’), new ways to save, invest, spend, and borrow are available. Today, fintech companies directly compete with banks in most areas of the financial sector, selling financial services and solutions to customers. Conventionally banks possess a more rigid offering of financial services (prioritising sales and often driving revenue). On the other hand, fintech companies enable flexibility and choice of banking style.

The consumption of financial products has dramatically changed in recent years. How can banks and fintech companies successfully leverage this change in consumer consumption and lead the change in retail finance?

The results of a recent survey by American investment management firm, Legg Mason, show that half of UKmillennials want to do their financial planning on a smartphone. Engaging with consumers around long term financial plans for significant life events as well as developing better their financial habits over time, financial service providers can build fruitful long term relationships with consumers while selling them a portfolio of products.

A financial reality for most millennials is that they will end up using different financial products at various points to achieve the long term objective of saving for university.  For example, plan for university starts with a savings account. Then, they try and capitalise on tax-efficient investments and as they get closer to joining university and finally look at borrowing if they don’t have enough when they go to university.

The above exemplifies the great potential for retail financial service providers to leverage their understanding of the nuances in long term customer consumption patterns in order to tailor offerings and engage with millennial consumers in a meaningful way.

The moment the consumer chooses to develop a plan with a bank, they will customise its approach to the consumer’s financial profile. For example, someone who has a tendency to overspend may have not enough saved for university but may require more borrowing and spend control features, whereas a “saver” may be cutting on essential university expenses just to pay tuition. Also someone in university already will require a very different type of funding solution compared to one who has started the plan well before going to university.

Both traditional banks and fintech companies approach retail consumers with financial products that reflect traditional Line of Business (LoB) thinking; hence the prevalence of savings, investment, and lending products. However, digital savvy consumers expect much more from service providers in the form of truly integrated and engaging financial solutions for life events such as university, retirement, home and car purchases. Consumers also expect service providers to take an active role in helping them achieve their financial objectives.

Digital technologies expand the “art of the possible” allowing service providers to develop intelligent tools that take an active role in changing the consumer’s financial habits. Banks and fintech that take advantage of such emerging trends will have the opportunity to lead the next digital revolution in retail finance.

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