Incumbents take the pedal off ad spending to compete with fintechs
- Banks and insurance companies are redistributing their ad spend budget to technology and innovation to compete with challengers.
- Insurance companies will account for 45.6% of the industry’s ad spend.
Digital ad spending in the financial sector is likely to slow down in 2021, according to Insider Intelligence. The rapid rise of fintechs will likely force the industry’s incumbents to reel back on ad spending. Instead, they’ll turn their attention and funds to technological innovations to compete with fintechs.
Financial services institutions are expected to spend up to $24.5 billion on digital ads in 2021. Although that’s still some $4 billion more on ad spend than in 2020, spending growth is expected to grow by 16.7% -- that’s down from the 20%+ growth in 2019 and 2020. This trend is expected to continue over the next three years. The financial services industry will collectively spend more on digital advertisements -- up to $30.8 billion -- but ad spending growth will slow to 11.3% by 2023.
When the pandemic reached the U.S. in March 2020, the financial sector redirected much of its energy to go digital. While banks and institutions helped customers migrate to their mobile apps, they also expanded their digital services to provide a more holistic online experience in the face of shifting needs. In some cases, the change required increased investment in their technology departments. Bank of America’s chief operations and technology officer Cathy Bessant told the Financial Times that BofA had been training some of its staff skills like coding and data analytics since 2018. In the last 12 months, more than 80% of hires at Bessant’s office have been internal-- a 39% increase from before the pandemic.
Incumbents will continue to focus on digitization and automation to keep pace with challenger banks. However, a decline in premiums might force insurance companies to woo customers with personalized advertising.