Customer-driven financial innovation
Meghann Fraser and Eryn Murphy
So far, 2017 has been all about delivering to plan. Most brands in the financial services sector are progressing against their respective five-year transformation plans with little turbulence, drama, or controversy. The priority they’ve put on cost reduction, optimizing innovation, and masterbrand alignment are paying off with 5.8% increase in brand value across the sector, up to USD $121,145 million this year. Everything looks satisfactory when comparing across the category, but the numbers are relatively disappointing when compared to sectors like technology, with 8.4% growth, or retail, with an impressive 18.7% rise. There is no doubt in the category’s opportunity to grow. Over the past five years, the 50 largest global banks and insurers saw shareholder value increase at an average of 10% per year, while the top 50 fintech firms delivered twice that—an even greater rate of growth than the major tech leaders. The question is: how can financial service brands pick up the pace and become benchmarks to follow in the quest to lead change and drive growth?
Changing the competitive reference
Change in customer expectation is nothing new to the financial services sector. With so many persistent basics to fix, few have been able to stake out and deliver on an experience that is innovative and differentiating. Financial service brands are conservative when benchmarking and tend to set the bar at surpassing market average, as opposed to aiming for best in class. Rarely are brands like Mercedes, an automotive brand, benchmarking against technology brands to identify how they can deliver a total customer experience that surpasses expectations and redefines their role in customer’s lives.
Financial service brands tend to look outside the category for specific touch points and other areas for innovation in the idea-generation phase. Once deployed, they revert back to looking at their peer groups and measuring progress against market averages. Just aspiring to beat the market average is not a goal that will inspire people to redefine the category or to elevate their experiences beyond baseline levels of customer satisfaction. The simple change from setting your sights on the market average to becoming best in class could be an incredible lens to objectively evaluate results, and continuously drive growth in customer advocacy.
Changing what it means to be customer-centric
There isn’t a brand in financial services that has not had some variation of customer-centricity as part of its business or brand strategy. Leading brands know they need to be customer-centric—the best know how to combine insights with creativity to produce customer-driven innovation that is simple to understand, fits easily into customers’ lives, and commands a price people are happy to pay. American Express has certainly done this with its OPEN small business program, and PayPal is continuing to innovate with Venmo. The arrival of insight champions like Apple with Apple Pay create doubt about financial services brands being up to the challenge of thinking and acting differently. While new brands to the sector have the benefit of starting fresh with different technology platforms, legacy brands have the strength of expertise, know-how, and judgment that comes from experience. Combined with data insights, the inherent know-how and expertise of established financial services brands is a growth force that hasn’t been fully leveraged—yet.
Changing the relationship with customers
One clear avenue for growth will be redefining the relationship with customers. Openness to a different customer and brand relationship is possible when there is alignment of interest (potential for a win-win relationship) and shared purpose (resonance with personal values). Carried over from the financial crisis and motivated by the millennial generation, brands have updated their brand platforms to reflect purposes that are more about changing the world, making life better, and helping people to live happier and healthier lives. From payments to insurance, brands are rallying around inspiring and motivating ambitions to steer the profound transformations they want to make from the inside out.
Moving from transactions to partnerships is the ambition of many of the brands in the Best Global Brands list, but the real difference will be in the authenticity and relevance of the customer experience. AXA knows this well. It is moving from a transactional relationship focused on claimants (20% of its customer base) to becoming an empowering partner for prevention, health, and wealth for the 80% of its client base that doesn’t make a claim each year. This is a lofty ambition requiring a big cultural shift. The clarity of the purpose and its values will be AXA’s guide to creating the exceptional customer experiences that will position them as category-redefining innovators. Making the shift from traditional insurer to everyday partner for better living is a lofty goal, but would represent a fundamental shift in the way insurers approach their brand propositions and business.
There is no shortage of growth potential for financial services brands. They are rich in the data, technology, and insights needed to create innovations that drive choice and positively impact people’s lives in small and big ways. This insight-driven innovation, when combined with a clear purpose and dedication to changing the relationship with customers, has the potential to redefine the category and increase the roll brand plays in their sector. Our finances are something we think about and deal with every day. Financial services businesses have every opportunity to form closer relationships with people through their brands. The organizations that are willing to go further and reinvent their relationships with customers are going to outpace change and attain real breakout success in the market.