As we move away from the battle of the balance sheet and on to the war of winning and retaining customers, firms have to start delivering on the promise of a customer-centric model.
Threats don’t just come from FinTech’s relative newcomers, like Nutmeg and Transferwise, that in a few short years have become familiar brands – but also from long established brands with huge customer bases and data; think not only Google and Facebook, but Starbucks and even Dunnhumby. These are companies with a wealth of knowledge on customer behaviour, habit and loyalty.
Much focus has been on utility banks who are seen as slow and cumbersome, dragged back by legacy systems and legacy culture, however, both Investment management and Insurance are under increasing threat. It’s well documented that portfolio managers are under scrutiny to justify their existence as they struggle to compete with passive index funds – but traditional investment models are also under threat by what Norton Reamer and Jesse Downing term, “democratised investing” in their book, ‘Investment: A History’.
Looking after the assets of high-net worth individuals is still huge business, but investment disruption has come in the form of introducing asset management to a wider audience. Nutmeg, a well-established disrupter of investment formed in April 2011, invites investments for as little as £1,000. Both index-trackers and exchange-traded-funds offer low fees for small investments and in Nutmeg’s case actively court the next generation of investors through their advertising and branding strategy. Incumbent invest banks need to actively seek the investment patterns of the future to maximise return and justify their position – all within a strict regulatory framework and amid the glare of a risk-averse general public.
Insurance is being disrupted two fold. First the products that are synonymous with insurance are under threat, leading to incumbent insurers funding new technologies hoping to be at the forefront of the driverless car transformation. Secondly, by the emergence of real time data – and the ability to process it increasingly faster. Insurance has to move from reimbursing to prevention.
All of these changes require investment in technology and increased investment in smaller firms by the big banks. The ability to co-create, share and collaborate is fundamental to the future of banking: Nationwide’s Alison Robb, at a recent event on Changing Internal Behaviour stated “Collaboration is the most important next step for banking culture and innovation”. For innovation to be sustained at the rate customers will demand it, collaborative spaces like Level 39 and the UBS Innovation Lab need to evolve from projects led by a talented few and become the responsibility of every employee – everyday.