Gartner predicts that by 2030, 80 percent of incumbent financial services firms will go out of business through commoditization and ineffective competition.
The Age of Assistance, a term made popular by Google, is turning the financial services industry on its head. With ease of access and exposure to a large and diverse set of digital services, customers are no longer satisfied with just getting what they want. Today’s consumer demands flexibility in how and where they engage financial services to get what they want.
"Banks that take advantage of this shift will outpace their customers and seize a new generation of customers across a multitude of channels. Banks that fail to adapt, risk extinction," said David Donovan, executive vice president of financial services at Publicis Sapient, in a recent whitepaper.
Thinking outside the app
"Customers think about banking while they’re doing other things, like shopping, making travel plans, and talking to their friends,” said Citi’s head of technology for its consumer bank, Gavin Michael.
Banks shouldn't focus all their digital transformation efforts on making their brand visible and present everywhere. The true power of a digital transformation initiative is when banks understand the power of invisibility, suggests Donovan. By partnering, leveraging customer trust, and building an embedded ecosystem centered around the customer, banks can find a way to be more relevant for their customers.
Donovan, whose financial services practice at Publicis Sapient develops technology for many of the world's top banks, encourages banks to think ‘outside the app’ and place their customers at the center of their strategy. This new digital embedded finance ecosystem provides opportunities for banks to integrate with other products and services to offer their customers.
Using Amazon as a model
Today’s banking customers expect similar experiences from their banks as they have from non-financial industries.
Amazon has, through its drive for customer obsession, become the platform of commerce by allowing third parties to participate in their ecosystem, from e-commerce services to cloud-based platforms.
Today more than 50% of Amazon's revenue comes from being a platform to sell services from third parties. Amazon has implemented a consumer-centric business model that provides the customers with an experience such that they get what they want (the product), but also how (ordering online) and where (to their own homes) they want it.
"The ease of experience and the customer focus has provided Amazon platform an incredible trust equation with their customers," said Donovan.
How banks are adapting to this shift
Several banks are already in the process of taking advantage of the opportunities provided by embedded finance. Goldman Sachs is a leader, according to Donovan. They've built their new platform from the ground up around an ecosystem to plug and play the right partnership model, according to Donovan. Their acquisition strategy also seems to be around enhancing their platform capabilities and services.
PNC Bank’s cooperation with OnDeck’s ODX Platform Service is an example of two companies coming together for mutual benefit while making the loan application process seamless for customers. "Not only does this provide great value to the customers, but it also creates a competitive advantage for both of these companies," he said.
The partnership ecosystem
China's ecommerce platforms are examples of banking services putting on the invisibility cloak, according to Donovan. Banks can look to WeChat, with over 1 billion users, as an example of a company that has integrated messaging and finance. WeChat has optimized the user experience by combining online payments with communication. Customers use the communications platform for a diverse set of financial transactions.
"As companies in the financial sector are making these adaptations, the elevated customer experience is becoming the new norm," said Donovan. "Companies that can be on the cutting edge of this will have the opportunity to get a large amount of business from customers who demand this level of service and will not settle for less. Companies that do not adapt will lose out on those customers. Over time, the majority of consumers in the market will fit this description."