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Experience-Driven Practices Redefining the Industry's Future
The turn of the decade has shown a change in how people and institutions are interacting with money. With the advent of rapidly advancing technologies in the fray, an era of the informed consumer has been embarked, with evolving expectations and a changing regulatory landscape, also clawing its way to disrupt the most traditional sector of our economy.
Welcome to the world of crypto-currencies, peer-to-peer lending, big data and financial technology (FinTechs) innovations capturing the attention and imagination of investors, customers and incumbents (the large, well-established financial institutions).
82% of banks, insurers, investment managers plan to increase FinTech partnerships; 88% concerned they’ll lose revenue to innovators*.
The technology-driven change is so pervasive that no financial institution is immune.
Key trends that are changing the BFSI industry
1. Traditional institutions not in pace with Digital and emerging FinTechs
Fintechs are fast moving companies, often startups, high-tech, low-footprint organizations with a huge potential to drive down costs and offer better customer experience. Focused on a particular innovative technology or process in everything from mobile payments to insurance, their global investments are reaching more than $12 billion, more than tripled since 2014. An important share of revenues and the traditional ways of doing business are at risk due to the emergence of these new market entrants along with delays in synergized transitions to leverage new-age digital technologies.
2. Inability to leverage Customer Intelligence as a precursor of growth
Research shows that the new age consumers do not understand the value of the available financial products; or offerings simply don’t reach customers whose banking experience centers around their phones. A key demographic: millennials(people born between 1980 and 2000; comprising 24% of the world population) and Gen Z who is poised to become the most powerful consumer group in the next decade – more than 75% of them use digital payment apps or P2P apps.*. As the first digital natives, less brand loyal & allowing experiences to drive their decision making, one-third of them are open to switching banks in the next 90 days, representing a distrust in the present financial ecosystem.
*Source: Study Business Insider, 2019
What could be some major impediments to the above:
- Existence of a transactional relationship with banks, which has created a gap between the needs of the customer and the services banks offer.
- Most financial applications and services(such as transactions)are unexciting and cumbersome to use complex to understand and engage with.
- Financial institutions not seen as catalyzing financial well being as they are not able to dispense financial advice, strategies, and support effectively and in a robust manner.
- Delay of traditional players to shift to digital and adopt technological and design innovations on the fly.
Estimated percentage of business revenues that will be at risk by 2020 due to disruption in banking is 28% and 22% in insurance, asset and wealth management*.
Technological solutions are definitely important to reckon with to ease off the risk while re-engineering the face of the sector, yet technology without design is as obsolete in value, as ideas are without language.
Futuristic leaders need to be increasingly agile in considering the implications of design as a key component of their strategy. Not only to position the business model of their firm by understanding the underlying customer needs and behaviors, but by building out prototypes, testing and learning from them, and finally launching their products and services that will help them succeed.
Designing superior fintech solutions
With these changes, the bottomline is to also keep an eye on key innovations taking place around customer experience which can transform the way users engage with products.
Design Thinking and UX can bring indispensable value on the table by:
1. Understanding Needs through thorough research:
Relying on a mix of data, intuition, experimental design research can provide more relevant insights than just validating a problem with the current means of data analysis. UX specialists pay attention to human psychology in order to conduct the proper research, not relying necessarily on what the customer says (that is, customer research), but rather on what the customer actually does.
2. Making it Simple
Creating user-friendly front-ends, simple elements and lines, clear icons, minimal copy and frictionless flow, where banking design switches from static to dynamic by implementing rich micro-interactions based on descriptive animation. Providing an omnichannel strategy(including major mobile platforms, responsive desktop service and, in the near future, wearables, IoT or even VR solutions.), and facilitating fast response.
3. Bracing for the future
Dynamic data visualizations and dashboards can prepare for possible future patterns of behavior if the same reasons remain in play; Utilizing predictive analytics and insights will ensure the ability to craft a pleasant user experience by matching user needs on a deeper level.
4. Reducing complexity, latency and ensuring safety
Instant and imperceptible authorization based design which can ensure the secure exchange of user data in an atmosphere of increased regulatory demands and concerns of cybersecurity.
Design hence becomes incumbent in today’s world as it takes a consumer-centered approach that puts the discovery of highly nuanced, even tacit, consumer needs at the forefront of the innovation.
It takes into consideration feasibility, including both the available technological landscape (can we do it?) and viability (will it have a commercial market?), created an integrated solution to current challenges.
Detailed Impact and future trends in the Financial Services sector:
Various trends and disruptive innovations are reshaping the way financial services are structured, provisioned and consumed*.
of incumbents expect to increase FinTech partnerships in the next 3-5 years
expect to adopt blockchain aspart of an in production system or process by 2020
expected annual ROI on FinTech related projects
1
Insurance
Homogenization of Risks
The development of autonomous vehicles and advanced sensors will inherently reduce risk with home and auto while the proliferation of sharing economies will homogenize risks. These and other forces are standardizing and commoditizing individual risks.
Self Insuring gains momentum (reducing overall revenue for the industry)
Online aggregators that allow customers to compare prices and purchase insurance products online(insurance schemes added to e-commerce products) may displace traditional distribution channels as customer preferences change and more insurance products are commoditized. Also sharing economy platforms like pay-as-you-go rentals to shared vehicles and houses, the concept of ownership may radically change, challenging traditional insurance models developed based on one-to-one ownership structure.
Growth of personalized and customized insurance
Increased connectivity may allow “personal” insurance policies to be adjusted frequently to match customers’ usage patterns. The ubiquity of connected devices will enable insurers to highly personalize insurance and proactively manage clients’ risks (IoT, wearables, smarter cheaper sensors).
Think Design’s Recommendation
In this scenario capturing desirable customers early in their lifecycle will become critical to building revenue. It would become incumbent to gather behavioral data from customers and become more sophisticated in understanding risks, customers’ financial status and needs. To compete with new sources of capital and investment management capabilities, such as hedge funds and investment banks, companies would need innovative securitization of products, offering more cost-effective options to fund policies.
2
Payments
Towards a cashless economy
Digital wallets to automated machine-to-machine payments will reduce the use of cash and make payments less visible to payers. They will also enable financial institutions and merchants to use data-driven customer engagement platforms.
Integrated and seamless payments
Increased use of mobile payments, integrated billings, e-wallet, will cause banks to lose customer’s transaction experience; becoming the default card will become critical in an environment of reduced visibility.
Emerging alternate payment rails
Cryptocurrencies, p2p, mobile money; radically streamline the transfer of value; pain points remain to enable rapid and inexpensive value transfer between countries; Decentralised payment schemes leverage cryptographic protocols to transfer value virtually in a secure, low cost, near-instantaneous manner.
Think Design’s Recommendation
Modifying front-end processes to improve the customer and merchant experience can go a long way to make payments seamless, quick and effortless. To gain more visibility into customer’s spending patterns, build a more holistic understanding of customers, and create a more competitive offerings. The use of the blockchain network by all platform participants, the adoption of PSD2 analogs and integrating visual design cues by financial institutions, will ensure maximum safety, transparency, convenience and speed of payments UX.
3
Deposits & Lending
Customer-centric banking
New entrants will make meeting customer demands more important, creating an imperative for banks to reconsider their roles; Virtual Banking 2.0, Banking as Platform (API), Evolution of Mobile Banking as customer expectations for financial institutions continue to rise.
Emerging alternative lending models
P2P, Lean, Automated Processes, Alternative Adjudication create both competitive threats and evolutionary opportunities for financial institutions, making it important for incumbent institutions and alternative platforms to develop more integrated partnerships and learn from and share each other’s capabilities.
Think Design’s Recommendation
Financial institutions will be required to create a fuller virtual experience that is more customer-driven, potentially changing the role of primary account providers. Increasing customer demand and growing trust with tech companies may enable non-traditional firms that excel in creating digital customer experiences to assume control of the customer relationship, while traditional institutions focus on manufacturing financial products. Learning from alternative lending platforms leveraging P2P models which have experienced rapid growth would be advantageous.
4
Investment Management
Automated investment management platforms
Empowered with intuitive and affordable tools selling and sharing their investment expertise via social trading platforms; retail algorithmic trading could commoditize traditional high-value services and reduce the value delivered by wealth managers across all customer segments. eg. hedgeable, covester, algofast
Process Externalization of services
Many processes within investment institutions are considered as “core” to their business operation, such as data collection, analysis, trade strategy & execution, monitoring, risk and compliance. However, a new breed of process externalization providers is using highly flexible platforms (typically based in the cloud) to provide financial institutions with increased efficiency and new levels of process sophistication/excellence.
Think Design’s Recommendation
Enable traditional wealth managers to focus on providing more personalized, bespoke services to a broader customer base. As externalized financial institutions become increasingly dependent on 3rd parties for continuity (big data, natural language processing, advanced analytics, process as a service, capability sharing) strong visualization dashboards and smart search interfaces would supplement the overall user experience by improving investment decisions through smarter insights made visible.
5
Market Provisioning
New information platforms
These are improving connectivity among market constituents, making the markets more liquid, accessible, and efficient.
Growth of algorithmic trading
As the popularity of high-frequency trading declines, the focus of algorithmic trading may shift to smarter, faster response to real life events; Using Machine Accessible Data, Artificial Intelligence / Machine Learning, Big Data to build these changes
Think Design’s Recommendation
The new age trader is going to be more cautious in exploring options, equipped with data-based real-time insights. Increased accessibility, personalized and convenient suggestions, and quick, comprehensible data-based insights would be used to make decisions. Tools and digital platforms agile to meet these requirements would win customer trust and facilitate long-term engagement, as customers view them as their new financial advisor and strategist, to bank upon.
Think Design’s approach and recommendations to achieve superior banking customer experiences
1. Segment right
Segmenting users right goes a long way in making our technological initiatives relevant to their users… if we do not get our segments right, chances are that we create many features and functions that potentially frustrate our users. We recommend segmentation using weightage of Qualitative & Quantitative scores. By addressing the two, we open the floodgates for possibilities.
2. Design for journeys
We are no longer living in a world where users are kicked about technology. The overwhelm surrounding online transactions, mobile payments and “tweet to pay” is fading… and our users are constantly asking us, “What’s in it for me”? Contextualizing and Personalizing our design to user journeys makes us immediately relevant and thus, shift focus back to our services from the charm of technology. We recommend creating data driven or insight driven journeys; and further augment users’ journeys with opportunities of personalization.
3. Detail interactions
Without detailing interaction design enough, we could end up providing unresponsive interfaces that will leave our users cold. If we want to create a service experience through app interfaces, we better be responsive and interactive. And that would mean ensuring impeccable technological implementations as well as detailing design components that complement.
4. Focus on affordances
Continuing the discussion around perceived seriousness in transactional interfaces, affordances is a thing where many of us could go wrong. Affordances define the right size of call to actions, logical spacings, comfortable margins, readable typefaces and hierarchical visual layout. By focusing on these elements, we will be making ourselves credible, trustworthy and usable. Isn’t it exactly what the doctor ordered?
5. Always test
Many of us shy away from testing due to the logistics involved… it’s actually not that complicated when we are clear about the methodologies and test cases. We are not talking about formalized methods of user recruitment, focus groups or closed location tests. While all these are also needed, online or one-to-one tests are highly recommended through the process of creation. Whether it is through low fidelity wireframes or visual walkthroughs or interactive prototypes, we align tools and techniques to what our context demands. What is central is the commitment to test before we commit design to our developers!
Impactful partnerships across Banking, Financial Services, Insurance and Fintech
Over the last decade, Think Design has been at the helm of redefining User Experiences (UX) and Customer Experiences (CX) in the Banking and Financial Services Industry. Leading Banks, Financial Services and Fintech companies have trusted Think Design for advancing their initiatives. Drop in a word or call us; and we will be happy to demonstrate why.
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Fintechs, Banks, Insurance, Payments, Wallets, Lending, Trading, Investment, Blockchain, Currencies, Wealth management.
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