Restoring trust in financial services in the digital era - Salesforce - Deloitte
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JULY 2018 Restoring trust in financial services in the digital era Salesforce
TABLE OF CONTENTS
Contents
00 Executive summary 3 03 Technology will shape the future of 24
of financial services
3.1 Artificial intelligence 25
3.2 Internet of Things 27
01 Trust is not a campaign,
it demands sustained effort
5
3.3 Data analytics 29
1.1 The trust deficit 6
1.2 Managing trust 11
1.3 Privacy and data 13 04 Financial firm of the future 30
4.1 New platforms, partners and 31
ecosystems
4.2 The rise of fintechs 32
02 Remaining relevant in the face
of growing customer expectations
15
4.3 Emerging players 36
2.1 Digital expectations today 16
2.2 The agile organisation 23 05 Time to act is now 39
Appendix 40
References 41
Authors 42
2 | Copyright © 2018 Deloitte Consulting Pty Ltd. All rights reserved.
EXECUTIVE SUMMARY
Executive summary
In recent years, the Australian financial
Top 10 key insights from customers: Customer expectations are outpacing
services industry has experienced a series firms’ ability to deliver
of significant shocks, including rising Trust in financial services has taken a
6. 20% of customers believe the financial
dive
customer expectations, technological services industry fails to meet most or
advances, new competition, regulatory only meets some expectations
1. 32% of customers said their trust in the
challenges, and more recently, the Royal financial services industry has 7. Customers believe their financial
Commission. Now, with the biggest deteriorated in the last 12 months services providers are failing in
personalised products and services,
disruption of all, open banking, around 2. 25% of customers do not trust the
proactive advice and alerts
financial services industry, with
the corner, it is a critical time for financial
banking and insurance the least
services providers to rethink their Customers are open to alternative
trusted sectors
providers
strategic priorities. They need to prepare, 3. Almost half (47%) of customers do not
8. 38% of customers would consider
and do so quickly. trust their own financial services
personal financial management
provider
fintechs; this was followed by
To understand the challenges financial 4. Key drivers of trust were systems to superannuation at 35%, and digital
services providers face, Deloitte has been protect data and privacy, ethics and banking fintechs at 34%
social responsibility and the belief that
commissioned to examine the key trends 9. 23% of customers would consider
the firm is putting customers’ interests
financial services from an airline
which are impacting the financial services first
carrier; this was followed by 22% for
industry. To better understand current technology companies
Privacy and data is an increasing
customer trends, a fresh survey which
concern 10. Nearly a third (30%) of wealth
included 1,005 Australian consumers, was management customers and a quarter
5. 29% of customers are less willing to
conducted. of insurance customers intend to
share personal information and data
switch providers in the next 1-2 years
than 6 months ago
3 | Copyright © 2018 Deloitte Consulting Pty Ltd. All rights reserved.
EXECUTIVE SUMMARY
In this increasingly uncertain future, Here are our top five tips: In the following chapters we discuss in more
there is only one certainty – firms must detail our survey findings and research:
adapt and innovate or risk becoming 1. Manage trust. Restoring trust will need
irrelevant. to be an ongoing priority and will impact Chapter 1: Trust is not a campaign, it
how firms operate, interact and deliver demands sustained effort
How should financial firms position towards customer outcomes. Current climate of trust towards the financial
themselves for a future of increasing change services industry and own financial providers
2. Embrace data. Data capabilities to
and disruption? and how firms can practically manage trust.
capture and draw critical insights will be a
key enabler to maintain relevance and Chapter 2: Remaining relevant in the face
market share in a world of increased of growing customer expectations
competition and product The digital trends shaping the customer
commoditisation. experience, what customers expect today
3. Act quickly. With customer expectations and in the future.
changing at increasing velocity, the new Chapter 3: Technology will shape the
age organisation will need to challenge future of financial services
traditional ways of working to move at The new technologies which are set to
pace. influence the future of financial services.
4. Invest in the right technology. Chapter 4: The financial firm of the future
Technologies, particularly Artificial A look into the new players entering the
Intelligence (AI), will be critical, but not all financial services industry, evolving business
will be relevant. Ensuring alignment models and new partnerships and
between investments, capabilities and ecosystems which are emerging.
strategy is key.
5. Leverage strategic partnerships. Invest
in the right platforms, partnerships and
ecosystems to drive strategic priorities.
4 | Copyright © 2018 Deloitte Consulting Pty Ltd. All rights reserved.
Trust is not a campaign, it demands sustained effort.
TRUST IS NOT A CAMPAIGN, IT DEMANDS SUSTAINED EFFORT
Trust is not a campaign, it
demands sustained effort
Today, the reputation of the financial 1.1 The trust deficit Restoring trust is an urgent challenge for
services industry is in turmoil. The Royal financial services providers. Today, the
Winning consumer trust is the cornerstone of
financial services industry is the least trusted
Commission has exposed significant successful businesses today. Research shows
industry in Australia (Edelman, 2018).
that trust is a critical driver of loyalty. Trusted
failures of financial services providers
organisations are also more than two and a
including; failing to act in the best Our survey results confirm there is a clear
half times more likely to be high performing
trust deficit. Nearly a third (32%) of
interests of customers, fraudulent revenue organisations than low-trust
respondents said their trust in the financial
documentation and breaches of companies (Harvard Business Review, 2016).
services industry has declined in the last 12
Trusted organisations also benefit from
responsible lending obligations. months. An overwhelming 42% of
greater enterprise resilience and can recover
respondents said their trust in the banking
more quickly from shocks such as regulatory
industry, in particular, has deteriorated
The social licence of financial firms is or reputational crises than non-trustworthy
significantly.
organisations.
threatened. Regaining trust can not be
achieved with a one off campaign Trust plays a fundamental role in the
promoting corporate values. To drive financial services industry. The inherent
personal nature of the products and services
meaningful change, firms need to invest
provided and its potential breadth of impact
in managing trust across the organisation. on lives of customers makes trust core to the
customer relationship.
6 | Copyright © 2018 Deloitte Consulting Pty Ltd. All rights reserved.
TRUST IS NOT A CAMPAIGN, IT DEMANDS SUSTAINED EFFORT
Chart 1.1 Change in trust in the financial services industry over the last 2 months
5 7 3 5 4
Improved significantly
12 14
16 14
19
Improved slightly
39 Remained the same
50
65
66 55
Deteriorated slightly
23
Deteriorated
20 significantly
16 15
10 19
12
3 3 5
Superannuation industry Wealth management Insurance industry Banking industry Financial services industry
industry overall
7 | Copyright © 2018 Deloitte Consulting Pty Ltd. All rights reserved.
TRUST IS NOT A CAMPAIGN, IT DEMANDS SUSTAINED EFFORT
Only 34% of customers believe the financial
services industry can be trusted. The banking
industry was the least trusted, with 29% of
respondents claiming they were extremely or
quite untrustworthy, followed by insurers at
23%.
Chart 1.2. Trustworthiness of financial services industries generally
10 5 9 6
12 Extremely trustworthy
33 29 28
Quite trustworthy
38
47
Neutral
33 41
38
35 Quite untrustworthy
28
17
17 17
8 Extremely
11
8 12 8 untrustworthy
4 6
Wealth management industry Superannuation industry Insurance industry Banking industry Financial services industry overall
8 | Copyright © 2018 Deloitte Consulting Pty Ltd. All rights reserved.TRUST IS NOT A CAMPAIGN, IT DEMANDS SUSTAINED EFFORT
Customers were more trusting of their own
financial services provider than the industry.
The least trusted were banks and insurers,
with 53% and 55% of respondents saying
they trusted their own bank or insurer,
respectively.
Chart 1.3. Trustworthiness of own financial services provider(s)
9 15 10 11 Extremely trustworthy
Quite trustworthy
45 42
53 43
Neutral
31 Quite untrustworthy
33 34
27
11 Extremely
8 7 9 untrustworthy
2 2 2 6
My wealth management provider(s) My superannuation provider(s) My insurance provider(s) My banking provider(s)
9 | Copyright © 2018 Deloitte Consulting Pty Ltd. All rights reserved.TRUST IS NOT A CAMPAIGN, IT DEMANDS SUSTAINED EFFORT
Across different financial services industries,
there were different drivers of trust. Overall,
our survey found that the key drivers of trust
were systems to protect data and privacy,
social and ethical responsibility and a belief
that customers’ interests were being put first.
Chart 1.4. Associations of attributes with financial services industry; ratings of industry as trustworthy versus untrustworthy
Difference in % *Arranged in descending order
association*
of difference (+/-) between
Systems to protect data/privacy 36 69 +33 ratings amongst respondents
who viewed the financial
Socially/ethically responsible 22 54 +32 industry as trustworthy, and
Customers' interests first 47 +32
those who viewed the industry
16 was untrustworthy
Innovative products and services 24 48 +24
Personalised advice/recommendations 28 52 +24
Aggregate different sources for insights 14 38 +24
Easy to deal with (timely, proactive) 45 68 +24
Rated industry trustworthy
Empowers with tools/support 29 52 +23
Rated industry untrustworthy
Financial experience / expertise 28 51 +23
Value for money 29 51 +23
Transparent fees/charges 36 58 +22
Customer support for queries/issues 41 63 +22
Access to different markets/investments 22 43 +21
Range of products/services 45 60 +15
UX on mobile app / online 31 46 +14
10 | Copyright © 2018 Deloitte Consulting Pty Ltd. All rights reserved.TRUST IS NOT A CAMPAIGN, IT DEMANDS SUSTAINED EFFORT
1.2 Managing trust
It is not sufficient for financial services firms
to simply talk about trust – organisations
must actively diagnose, improve and manage
for better trust outcomes. Deloitte research
has found that an organisation’s
trustworthiness is impacted by three pillars:
ethical intent, capabilities and an alignment
to customer interests.
Chart 1.5. The trust equation
Make Be able to Want to
suitable
promises + keep your
promises + keep your
promises =
Alignment Capability Ethics Trustworthiness
Do we work towards the same Can we keep our promise? Do we care about people?
goals as our customers? Or do our tools, people and Are we honest and
processes let us down? transparent?
Or we just think we do?
11 | Copyright © 2018 Deloitte Consulting Pty Ltd. All rights reserved.TRUST IS NOT A CAMPAIGN, IT DEMANDS SUSTAINED EFFORT
Alignment Ethics
To rebuild trust, there must be alignment Ethical organisations understand the Case study: Monzo
between business and customer goals. promises they make to consumers and Monzo is a challenger bank in the UK
Internally, this involves ensuring the intend to keep them. In a survey Deloitte which has experienced considerable
organisation is working towards delivering conducted, it was found that when it comes success in building a community of
the promises it makes to customers. This to trust, customers are far more likely to loyal customers. The digital bank’s
involves going beyond simple metrics such as question the ethics of the organisation than biggest growth driver has been its
customer satisfaction metrics, rather, firms its products and services – it was fifty times customer base. According to the
must address the critical shift to embedding more important. Our survey also confirms company, 80% of new customer growth
a customer centric culture. this, with a belief that social and ethical comes from referrals or word-of-
responsibility are an important driver of mouth.
Externally, firms need to communicate how
trust.
they are delivering towards customer
outcomes and actually deliver it. Alignment Key to building trust with customers
In the current environment of increased has been a strong emphasis on
makes ethics and capability visible to the
cynicism and growing distrust, firms need to transparency and honesty. Monzo has
customer. Our survey confirms this – a belief
demonstrate their commitment to putting a dedicated “Transparency Dashboard”
that the organisation was putting customer
customers’ interests first. But they need to on its website, which provides
interests first significantly impacted trust in
engage in these conversations with customers with the ability to easily
the organisation.
customers in an open and transparent way – access information about the company.
no sustainable business can deliver customer In the Monzo community, customers
Capability outcomes purely at the expense of business are invited to vote on features they
Having ethical intent is not sufficient if the profitability. In our survey, 22% of customers want the company to build and the
organisation cannot deliver the promises it said that their financial services provider product roadmap showcases when the
makes. Organisations need the right people, failed to meet expectations in relation to delivery of certain features will be
systems and processes to execute ethical being transparent with pricing. available. Pricing of new financial
intent and deliver promises. products are discussed openly in the
forum to gather feedback and insights,
Having visibility of the end-to-end experience before launch.
across the organisation will be a critical
enabler to delivering towards these
promises.
12 | Copyright © 2018 Deloitte Consulting Pty Ltd. All rights reserved.TRUST IS NOT A CAMPAIGN, IT DEMANDS SUSTAINED EFFORT
1.3 Privacy and data The CDR will help address some of the failure telecommunication providers at 50% and
of firms in meeting consumers’ expectations airlines at 49%.
Consumers are increasingly concerned about
of transparency, by empowering customers
the security of their personal data – 29% of The results puts into perspective that open
with the information they need to make
respondents reported a decrease in banking is unlikely to be an overnight big
better decisions. For example, consumers will
willingness to share their data in the last six bang. There is still significant resistance to
be able to share their data with comparison
months. Strong governance and controls to share data, which can be explained by a
websites enabling them to access enhanced
protect privacy and data was found to be a multitude of factors, including low levels of
product recommendations. With survey
key driver of trust. This was also rated as trust, general privacy concerns and the low
respondents citing comparison websites as
extremely important when choosing a perceived benefits of sharing.
the second most influential source when it
financial provider.
comes to choosing between financial services
providers, after friends and family, this is Now, more than ever, financial services firms
Given the nature of data financial services can no longer be passive recipients of
likely to be a valuable use case.
providers hold, they are particularly customers’ financial data and need to
vulnerable to data breaches and are often demonstrate their value-add in the data
Are consumers ready for open banking?
key targets. Firms need to ensure exchange. But first, they need to win back the
appropriate data privacy systems are in place The premise of open banking is that trust of their customers.
internally but also for their partners in the customers are willing to share their personal
ecosystem. and financial data to access greater benefits.
The future of trust A study by Accenture conducted less than 6
months before open banking became a
Trust will be even more important when
reality in the UK found that two-thirds of UK
open banking becomes a reality in Australia.
customers would not share their personal
Under the Consumer Data Right (CDR),
financial data with third-party providers.
consumers will be given more control over
how their data is used, and by whom.
Australians appear to be much more
Consumers will be able to request their bank
receptive to open banking than UK
to transfer their transaction data to
customers. In our survey, 58% of customers
accredited third parties. The CDR will
would share their data with their own
encourage free flow of information and
financial providers to access to higher quality
foster greater innovation in the financial
products and services. In relation to the same
services industry, providing consumers with
data, 56% were willing to share with energy
greater choice and confidence.
providers for similar benefits, followed by
13 | Copyright © 2018 Deloitte Consulting Pty Ltd. All rights reserved.TRUST IS NOT A CAMPAIGN, IT DEMANDS SUSTAINED EFFORT
Chart 1.6. Benefits that would encourage sharing of personal and financial data with financial provider
No
42 43 44 47 48 48 48 51 54
70
Yes
58 57 56 53 52 52 52 49 46
30
Higher quality Access to free Promotions and More convenient, More accurate Recommendations Faster access to New products / Useful analysis or Advertisements
services services discounts that you user-friendly information (for that are relevant the information services that summaries of your that are relevant
are interested in services example, financial to you and services you appeal to you activity or usage to you
advice) need
Chart 1.7. Willingness to share data with non-financial providers in exchange for similar benefits
44 50 51 No
58 60
72 74
56 50 49 Yes
42 40
28 26
Energy providers Telecommunications Airline carriers Technology companies Fintechs Social platforms E-commerce
companies companies
14 | Copyright © 2018 Deloitte Consulting Pty Ltd. All rights reserved.Remaining relevant in the face of growing customer expectations.
REMAINING RELEVANT IN THE FACE OF GROWING CUSTOMER EXPECTATIONS
Remaining relevant in the face of
growing customer expectations
The Royal Commission has found a 2.1 Digital expectations today
divergence between shareholder and In our survey, 53% of customers believed that
customer interests where returns to the digital experience with their financial
providers still needed improvement. Banks
shareholders have been put before Digital and mobile
performed the best in terms of user
meeting customer needs and experience, while insurers performed the Customers expect organisations to be
expectations. worst. This is consistent with Forrester’s 2017 present on the digital channels they prefer.
CX Index which found that Australian insurers In our survey, 45% of customers expected to
were laggards in customer experience be able to access customer service via text or
Customer expectations are constantly globally (Forrester, 2017). social channels, while 24% expected it in the
evolving. These expectations have been next one to two years.
irreversibly changed by new technology Our survey reveals there are clear gaps in
terms of what customers expect today and In a country with the highest mobile
offerings and are increasingly what firms are delivering. Greater adoption rate (88%), mobile interfaces are
benchmarked against their leading personalisation, more proactive advice and now an expectation in Australia (Deloitte,
experiences in their ecosystem of alerts and more innovative products were 2017). In our survey, 76% of customers
key gaps in expectations. expect mobile interfaces from their financial
providers.
services provider today or in the next one to
Firms must act quickly to address gaps in two years.
expectations, or risk churn. Our survey
reveals a correlation between customers who
believed their provider failed or met only
some expectations, and the likelihood of
switching.
16 | Copyright © 2018 Deloitte Consulting Pty Ltd. All rights reserved.REMAINING RELEVANT IN THE FACE OF GROWING CUSTOMER EXPECTATIONS
Personalisation Proactive advice and alerts Chatbots
While traditional financial products are mass- Proactive advice and alerts was another Intelligent chatbots have enabled 24/7
marketed, consumers are increasingly clear unmet need – 25% of customers servicing of common queries and basic
demanding greater personalisation, driven by believed their financial services provider tasks (e.g. opening accounts, retrieving
their experiences in other industries such as failed most expectations or only met passwords). According to Grand View
retail. some expectations. An overwhelming research, 45% of customers prefer chatbots
59% of customers expected this from as the primary mode of communication for
Our survey shows there is a clear unmet their financial providers today, with a their inquiries (Grand View research, 2017).
need for more personalised financial further 20% expecting this in the next In a survey with financial services firms,
products and services – with 24% of one to two years. over a third already had a chatbot in place
customers expressing that their financial (Finextra, 2018).
services providers failed to meet There is a clear demand for providers to
expectations or only met some expectations. play a greater role in helping consumers Our survey confirms that chatbots are
manage their financial affairs. The market becoming mainstream – nearly half (45%)
The extent of personalisation needs to be is responding. Trussle, an online of customers expected their financial
considered against feasibility and viability mortgage broker, monitors the market services provider to have chatbots today
criteria. Financial services providers need to and notifies the customer when there is a while 24% expected this functionality in the
make strategic decisions on the choices they better deal to switch to. HSBC’s Beta app next one to two years.
offer to consumers, while still ensuring there incorporates research from behavioural
is a net benefit to the business. science by sending “nudges” when people
overspend.
17 | Copyright © 2018 Deloitte Consulting Pty Ltd. All rights reserved.REMAINING RELEVANT IN THE FACE OF GROWING CUSTOMER EXPECTATIONS
Voice in financial services
Today, voice has been used in the
financial services industry for diverse
Biometric authentication Wearables use cases:
Biometric authentication has provided Wearables, from smart watches to fitness
greater convenience and security. Forms of trackers to rings, have been used in the Banking: Westpac’s Amazon Alexa skill
authentication vary and include fingerprint, banking industry to enable customers to allows customers to ask about their
iris, face and voice. In our survey, 25% of complete tasks such as making account balance, past transactions,
customers expected biometric payments. In our survey, 17% of credit card rewards points balance and
authentication to be available today and customers expected this functionality the latest financial news from Westpac.
31% expected this in the next one to two today, while 27% expected this as an Planned future functionalities include
years. option in the next one to two years. making payments or transfers via voice.
Biometric authentication is expected to Wealth management: UBS has
become increasingly mainstream. Today, introduced an Alexa skill which enables
around 42% of smartphones have customers to ask financial and
integrated fingerprint sensors, with a usage economic questions such as whether
rate of about 29% (Deloitte, 2018). By 2023, U.S. equities are undervalued.
Deloitte predicts that 80% of smartphones Voice-activated conversations
will have at least one dedicated biometric Superannuation: NAB has launched a
sensor, and over three-quarters of Consumers can now interact with firms MLC superannuation virtual assistant
smartphone users in developed countries via voice such as through their Amazon for Google Home which answers
will use some form of biometric Alexa or Google Home. In 2017, 37% of common questions such as; opening an
authentication. adults were using voice assistants daily account, changing investment options
(Gartner, 2017). In our survey, 14% of or finding lost super.
As advances in biometrics are made, customers expected this capability today,
customers’ preferences for form of while 30% expected it to be available in Insurance: Ladder, a US life insurance
authentication may change. ANZ the next one to two years. company, allows customers to answer
customers can now make payments using a few questions via Google Home or
their Voice ID technology on their mobile Amazon Alexa and receive an
without having to log into their banking immediate ballpark insurance quote.
app or remember passwords or pins.
18 | Copyright © 2018 Deloitte Consulting Pty Ltd. All rights reserved.REMAINING RELEVANT IN THE FACE OF GROWING CUSTOMER EXPECTATIONS
2.2 Link to switching
Our survey found that 21% of customers
believed that their own financial services
provider failed most or only met some
expectations.
Chart 2.1. Extent which financial services providers meet expectations
7 9 5 7 7
Exceeds expectations
33 27
30 31
38
Meets all expectations
Meets most expectations
46
41 41 43
35
Meets some expectations
17 14 16 15 16
Fails most expectations
3 6 4 4 5
Wealth management Banking Insurance Superannuation Financial services overall
19 | Copyright © 2018 Deloitte Consulting Pty Ltd. All rights reserved.REMAINING RELEVANT IN THE FACE OF GROWING CUSTOMER EXPECTATIONS
Nearly a third (30%) of wealth management
customers and 25% of insurance customers
intend to switch providers in the next one to
two years. Customers who reported their
financial services provider failed to meet
most or only met some expectations were
more likely to switch across all industries.
Chart 2.2. Likelihood of switching financial providers in the next 1-2 years
4 5 4
10 Highly likely
13 13
21
20
Quite likely
30 29
27 34
Neither likely nor
unlikely
23
25
Quite unlikely
29 22
27 31
Highly unlikely
14 19
Wealth management Insurance Banking Superannuation
20 | Copyright © 2018 Deloitte Consulting Pty Ltd. All rights reserved.REMAINING RELEVANT IN THE FACE OF GROWING CUSTOMER EXPECTATIONS
In respect of switching, customers were most Beyond price, a significant portion of
influenced by price across all financial customers said they would consider
sectors. Insurance customers were the most switching for better features, customer
price sensitive, with 78% of customers stating service and digital user experience. The
price would make them more likely to switch, weighting of these factors varied across the
in comparison to 57% of wealth, banking and different sectors.
superannuation customers.
Chart 2.3. Aspects that would make customers more likely to switch to a new provider
78 Wealth management
Insurance
57 57 57 Banking
54
47 47 Superannuation
42 42
36 35
32
27 26
22
17
3 3 6
2
More competitive Better features Better customer service User experience on mobile / Other
pricing/fees online
21 | Copyright © 2018 Deloitte Consulting Pty Ltd. All rights reserved.REMAINING RELEVANT IN THE FACE OF GROWING CUSTOMER EXPECTATIONS
There were also generational differences. capabilities to deliver against customer
Compared to other age groups, millennials expectations is important, ensuring bad
were the most likely to switch providers. customer experiences are addressed and
Millennials were also more likely to switch for prevented today is critical. Poor customer
a better user experience, while less experiences are not only more likely to
influenced by price than the other age result in churn, but also to be shared with
groups. friends and family, and online, where
customer voices are amplified.
Our survey reinforces the need for firms to
have a dual focus – while building digital
Chart 2.4. Percentage highly likely or quite likely to switch providers across age groups
18-34
46 35-49
50+
30 29 30
26 25
20 20
15
9 11 10
Wealth management Insurance Banking Superannuation
22 | Copyright © 2018 Deloitte Consulting Pty Ltd. All rights reserved.REMAINING RELEVANT IN THE FACE OF GROWING CUSTOMER EXPECTATIONS
2.3 The agile organisation
In a world of ever-changing customer Case study: ING
expectations, organisations are recognising ING Netherlands lacked speed,
that to survive in this new, fast-paced, dynamism, and customer-centricity. To
environment they need to rethink their better position themselves to respond
current structures, leadership styles and to digital trends and customer
talent strategies. expectations, ING undertook a large
organisational transformation.
The lack of organizational agility was
reported to be one of the biggest barriers The transformation involved moving
impeding firms from responding to digital away from its traditional organisational
trends and changing customer expectations model to a business model inspired by
(Deloitte, 2017). Spotify. Instead, multi-disciplinary,
autonomous teams with a mix of
To address this, new ways of working have marketing specialists, product /
emerged, challenging the core assumptions commercial specialists, UX designers,
of traditional organisations and data analysts, and IT engineers had
representing a shift from: end-to-end responsibility for specific
customer outcomes.
• Functional specialisation to
cross-functional teams The result was a more flexible
• Command-and-control leadership increased NPS with customers, faster
to autonomous teams time to market (from quarterly releases
• Hierarchical structures to to market to bi-weekly), increased
interacting networks productivity and increased engagement
with employees. ING also became the
The case study on the right demonstrates most attractive workplace to work for
how ING rewired the organisation to enable (from 3rd to 1st).
greater agility and make customer centricity
core to how they work.
23 | Copyright © 2018 Deloitte Consulting Pty Ltd. All rights reserved.Technology will shape the future of financial services
TECHNOLOGY WILL SHAPE THE FUTURE OF FINANCIAL SERVICES
Technology will shape the future
of financial services
The Fourth Industrial Revolution (Industry 3.1 Artificial intelligence advancements in the underlying technologies
4.0), the culmination of data analytics, AI, AI, the ability for technology to mimic human- (Deloitte, 2017).
the Internet of Things (IoT) and more, is like intelligence, has been described by
leading AI expert, Andrew Ng, as the The IDC predicts spending on AI and ML will
bringing more digital disruption to the grow from $12 billion in 2017 to $57.6 billion
‘electricity’ of the future. The potential for AI
financial services industry than ever to transform all businesses is huge. Leaders by 2021 (IDC, 2017). But AI adoption is still in
before. Business leaders agree. In a are also bullish – in a Deloitte study, 76% of its infancy. In a survey with cognitive-aware
respondents believed cognitive technologies executives in the US, the majority (60%) only
Deloitte survey with leaders of financial had a handful of implementations using AI
will substantially transform their companies
services firms, 90% of respondents agreed in the next three years (Deloitte, 2017). (Deloitte, 2017). These early adopters,
that these digital technologies are however, were already reporting economic
Whilst AI is not new, it has made significant benefits, and the benefits increased with
disrupting the financial services industry
strides in recent years due to the greater experience using AI.
to a great or moderate extent (Deloitte,
availability of data and advancements in
2017). Machine Learning (ML). ML, the ability for Back-office operational efficiency
machines to learn and improve through AI has been used to drive greater operational
The following chapter will explore how AI exposure to data without being manually efficiency in the back office. Combined with
programmed, is forecasted to progress at a Robotic Processes Automation (RPA), it has
and IoT in particular present both new phenomenal pace this year (Deloitte, 2017). been used to automate routine and time-
opportunities and challenges for financial By the end of 2018, Deloitte predicts that consuming tasks, significantly freeing up
services providers. companies will be able to perform ML using resources to focus on higher value-added
less power at a lower cost due to tasks.
25 | Copyright © 2018 Deloitte Consulting Pty Ltd. All rights reserved.TECHNOLOGY WILL SHAPE THE FUTURE OF FINANCIAL SERVICES
In banking, AI has been used to conduct Figure 3.1. Applications of AI in customer servicing
credit risks assessments, assist with fraud
detection and regulatory compliance. In
insurance, AI has helped automate claims
handling processes and detect fraudulent
claims.
Customer servicing and engagement
Marketing and sales Customer service support
AI has also enabled firms to deliver better
customer service. In a survey with financial • Analyse customer data to identify • Support human agents by surfacing
services firms, 66% of respondents believed consumption patterns, preferences, to relevant customer data, prompting
that customer service and retention was provide relevant products and staff with suggested ways of resolving
where AI would have the biggest impact recommendations issue based on learnings from similar
(Finextra, 2018). situations
Today, many firms are already reaping
benefits from using AI to service customers,
including greater engagement, increased
accessibility, faster time to resolution and
lower cost of servicing. Gartner predicts that
by 2020, 85% of customer queries will be Call centres Chatbots
resolved by AI (Gartner, 2017).
• Voice biometrics to authenticate • Answer basic queries and tasks
customer and reroute customer to the • Anticipate customer needs
relevant department • Deliver proactive alerts and offers
• Detect emotional tone in customer’s • Provide tailored product
voice and divert to human operator if recommendations
it senses negative emotion • Divert more complex queries to
human support agent
26 | Copyright © 2018 Deloitte Consulting Pty Ltd. All rights reserved.TECHNOLOGY WILL SHAPE THE FUTURE OF FINANCIAL SERVICES
The untapped opportunity of AI 3.2 Internet of Things
Case study: Valiant Finance While AI can be used to help businesses do IoT, the ability for objects to connect and
Valiant Finance has created a digital things faster and cheaper than before, the exchange data, is another technology which
marketplace for business loans that biggest opportunity of AI in financial services has the potential to transform financial
brings together over 100 loan products is arguably still yet to be unlocked. services firms’ customer relationships and
from 80 lenders. restore trust. The rapid adoption of
This untapped potential relates to using AI to connected products such as wearables,
Leveraging intelligent loan matching discover novel insights and transform the smart speakers and increasing number of
and ranking algorithms, Valiant way things are done. For example, finding products which have in-built connectivity has
matches businesses to the right lending better ways to service and engage customers, resulted in a huge growth in the IoT space.
product. Once the algorithm has smarter, data-driven product development,
produced a recommendation, a or even new ways which the firm and its Growth in IoT-powered objects is predicted to
customer can choose their own journey partners could more effectively work continue. The average Australian household
and self-service via a digital application together. has 17 connected devices – by 2022, this is
process or receive guidance from predicted to more than double (Telsyte,
Valiant's tech-empowered Credit An example of a company using AI to inform 2018).
Solutions team. product development is Netflix. Netflix uses
AI to analyse user streaming data, metadata, IoT has paved the way for new business
This combination of digital and assisted what is trending in media on the internet, to models in insurance and provided insurers
channels and the use of engagement design a criterion to score content ideas for the opportunity to better engage with their
automation creates an unparalleled its original own content. Its success is customers. It has also provided banks the
experience for time-poor business reflected by Netflix’s original content rating opportunity to drive higher levels of
owners and a unique level of scalability on average 11% higher than its licenced engagement with their customers in the form
in the documentation and process- content. of more personalised and contextual offers.
heavy business lending space.
Applications of AI in this realm is rare in the Usage-based and on-demand insurance
financial services context. While more
technically complex, they have the potential In the insurance industry, IoT has enabled
to reward financial services providers with the introduction of new usage-based
more sustainable forms of competitive insurance propositions. This shift from asset-
advantage. based insurance is accelerated by the sharing
economy, with consumers’ increasing desire
for on-demand products and services.
27 | Copyright © 2018 Deloitte Consulting Pty Ltd. All rights reserved.TECHNOLOGY WILL SHAPE THE FUTURE OF FINANCIAL SERVICES
IoT technology enables car insurers to IoT also presents opportunities for insurers to By reducing claims, insurers can not only
monitor risky-driving behaviours and restore trust with customers. While benefit from increased profitability but also
introduce behavioural nudges to encourage traditionally insurance is a reactive product, improve customer retention rates due to
safer driving. Insurers who have access to with little to no customer interaction other reduced premiums and higher engagement.
data about not only the policy holder, but than at the claims stage of the journey, IoT- For example, smart home sensors would
aggregate data about a community of users, driven insights enable insurers to provide potentially detect level of moisture in a wall,
can leverage this information to influence more pro-active advice, to help customers and alert homeowners of any pipe leakages.
customer behaviour. For example, research prevent losses and avoid claims in the first This would save the insurer from a
has shown that ‘peer-pressure’ related place. potentially huge claim while saving the
nudges are the most effective in influencing homeowner from considerable
behaviour. inconvenience and the loss of valuables.
Granular
Driven by:
• Granularisation of risk units
• Un-pooling of risks
Nature of Risk
Individualisation Insurance as
of Insurance Portfolio
Asset
Ownership Policy Ownership Usage based
Based
Status-quo today Off-the-shelf Insurance as Driven by:
Insurance Utilities • Episode consumption of
insurance
• Commercial ownership of
policies
Driven by:
Commoditized • Commoditisation of risk
Source: Deloitte (2016) Turbulence ahead: the future of general insurance
28 | Copyright © 2018 Deloitte Consulting Pty Ltd. All rights reserved.TECHNOLOGY WILL SHAPE THE FUTURE OF FINANCIAL SERVICES
Personalised banking 3.3 Data analytics While open banking presents its challenges, it
is also an opportunity for financial services
As our survey has found, customers are Digitisation and technology has resulted in
providers. With consumers’ consent, financial
seeking greater personalisation in financial more data being generated than ever before.
firms will also benefit from access to greater
services. The growth of IoT-powered devices Near internet ubiquity, new devices with IoT
financial data from their customers. But this
and consequently richer customer data embedded capabilities, and an expanding
time, they can not afford to be complacent.
presents the opportunity for banks to do this. range of product and service providers has
They will need to develop capabilities to
By leveraging data analytics and location- resulted in an explosion of data. By 2025, the
extract valuable and relevant insights, and
based data, banks can engage customers at total volume of digital data is expected to
act on it. Only then will they be able to deliver
critical points in time, to not only encourage increase tenfold (IDC, 2017).
more and experiences and innovative
a transaction but deliver a more personalised
products and services to customers.
customer experience. Managing the velocity and volume of data will
be a challenge. Firms must manage IT
infrastructure integrations to ensure real-
Hypothetical examples of personalised time data flow across the business. This may
banking leveraging IoT: require modernising in-house legacy systems,
Scenario 1: A customer who has building or buying new systems, or
booked an overseas holiday and has collaborating with third-parties. Firms may
low savings in their account is informed need to establish governance and processes
of a round-up feature which rounds up to harvest the data so it is usable for the
their transactions and puts it into a business. For example, ML currently requires
separate holiday savings account. They labelling the data so that it can be used for
are offered a special credit card which training purposes.
has competitive FX rates, discounts on
ATM withdrawals and late repayment While financial services providers have
options. traditionally enjoyed exclusive access to a
wealth of customers’ financial data – few
Scenario 2: A customer walking into a have used this data effectively to gain
car dealership is notified via their strategic advantage. The open banking rules
banking app of how much financing will further open up customers’ financial data
they are approved for. They are to third parties. In this data-rich world, data
provided details of different repayment will no longer be as much of a competitive
options and their impact on their advantage – rather, the ability to manage and
current monthly spending, based on draw actionable insights from the data, will
their consumption patterns. be.
29 | Copyright © 2018 Deloitte Consulting Pty Ltd. All rights reserved.Financial firm of the future
FINANCIAL FIRM OF THE FUTURE
Financial firm of
the future
Now, more than ever, is a critical time for 4.1 New platforms, partners and Strategic partnerships are likely to be
financial services firms to rethink their ecosystems increasingly important. In an increasingly
competitive market, we are seeing more and
business strategy. To defend market Today, financial services firms face increasing
more partnerships being formed in the
competition from new fintechs but also non-
share, firms must find ways to add value market, collaborating to deliver more
traditional players who seek to expand their
to the customer relationship in ways they innovative value propositions and
offerings. The open banking rules will further
experiences. Open banking will help facilitate
did not have to before. To grow, firms lower barriers to entry, and is predicted to
integrations between banks and non-banks
need to continually innovate on their lead to greater disintermediation in the value
and may see the emergence of new,
chain and pressure on profit margins.
offerings and develop new capabilities. innovative business models.
To survive, financial services firms will need
Open banking should also see the shift from
But they do not have to do this alone. to develop deep capabilities and networks,
traditional industry silos to richly networked
and have the right platforms, partnerships
Increasingly, firms are joining forces with ecosystems of providers of multiple types,
and ecosystems.
others to arm themselves with new industries and sizes. Together, these
ecosystems collaborate together to deliver
capabilities, unlock greater value for To deliver against customers’ digital
more innovative go-to-market offerings and
expectations of the future, firms will need to
customers, access new markets and experiences previously unimaginable before.
invest in appropriate customer engagement
better position themselves for future The experience of Europe will be a useful
platforms. Leveraging data analytics
case study for Australian financial services
disruption. effectively to derive valuable insights will be
firms.
critical to deliver more personalised
experiences.
31 | Copyright © 2018 Deloitte Consulting Pty Ltd. All rights reserved.FINANCIAL FIRM OF THE FUTURE
Learning from the European Union (EU) 4.2 The rise of fintechs partnerships to offer customers more
competitive and innovative offerings. For
In Europe, the arrival of open banking earlier In recent years, fintechs have achieved example, Revolut, a digital challenger bank,
this year has already seen a new wave of exponential growth in Australia. In 2017, offers mortgage broking services with
innovation. Notably, there has been a shift fintechs reported an average growth in Trussle, credit lines through peer-to-peer
from the traditional banking business model monthly revenue of 208% (EY, 2017). lender Lending Works and geo-location travel
and the emergence of the marketplace insurance underwritten by Thomas Cook
model and platform model. Fintechs have offered more innovative and Money.
tailored financial solutions as alternatives to
In the marketplace model, banks analyse traditional mass-marketed financial products.
customer data to tailor offers of third party AI algorithms have enabled customised Case study: Study Loans
services and earn commission when products and policies to be generated
consumers sign up. In the platform model, instantly, while product design is increasingly Study Loans is an education fintech
banks open up their infrastructure to others shared. For example, Sbanken, a Norwegian provider dedicated to financing student
and provide banking as a service. For bank, allows customers to sign up in a loans in Australia. The company is
example, Fidor Bank has set up Fidor developer portal where they can design their focused on only funding loans for
Solutions which offers third parties the ability own banking platform based on their needs. courses and skills which are in demand
to leverage their white-labelled banking in the market, and deliver job outcomes
solutions. Using this service, O2,Telefónica, a Fintechs have also transformed how for students. Currently, Study Loans is
German telecommunications company has consumers buy and consume financial experiencing 40% month on month
extended their offerings to provide banking products, delivering seamless and delightful increase in loan applications.
services to their customers. digital experiences. For example, Lemonade,
a US home and contents insurer, leverages AI Core to Study Loan’s business model
Compared to their EU and US counterparts, and behavioural economics to design its success is its ecosystem of education
Australian banks have so far been sheltered frictionless on-boarding and claims providers. Students are able to access a
from competition, allowing the large banks experiences. Their seamless experiences are wider range of financing options from
to earn substantially higher Return on Equity. particularly appealing to younger markets. trusted educational providers with
However, like the EU, open banking is According to Schreiber, the CEO, 87% of their more flexible options and terms than
coming and will put increased pressure on customers are first time insurance buyers. traditional lenders.
incumbents to innovate or risk losing market
share. Along with its threats, open banking Their business models are also different.
offers new opportunities – but banks need to Unlike traditional banks which offer the full
be ready to embrace it. range of financial services themselves,
fintech banks are embracing strategic
32 | Copyright © 2018 Deloitte Consulting Pty Ltd. All rights reserved.FINANCIAL FIRM OF THE FUTURE
Fintechs were perceived to be superior in
many attributes in comparison to traditional
providers, but in particular:
• 53% believed fintechs will deliver a better
user experience
• 50% believed fintechs are more
innovative
• 47% believed fintechs were easier to deal
with and more timely and proactive
Chart 4.1. Expected benefits of fintechs over traditional providers
User experience on mobile app / online 3 3 42 34 19
Innovative products and services 2 4 44 34 16
Ease of dealing with (timely, proactive) 3 7 42 33 14
Access to new and different markets and asset/investment classes 2 4 47 33 13
Empowering me with the tools and support I need 2 5 47 34 12 Significantly worse
Ability to aggregate data from different sources to provide greater… 2 4 49 32 14 Slightly worse
Value for money to customers 3 7 46 31 13 No better or worse
Systems in place to protect customer data and privacy 4 8 45 26 18
Slightly better
Strong range of products / services 2 5 49 31 13
Significantly better
Customer support for queries and issues 4 9 45 27 15
Transparency on fees/charges 4 7 50 26 14
Personalised advice and recommendations 4 9 49 27 11
Placing customers' interests first 5 9 50 23 13
Financial experience / expertise 4 8 52 25 11
Socially and ethically responsible 4 9 52 23 12
33 | Copyright © 2018 Deloitte Consulting Pty Ltd. All rights reserved.FINANCIAL FIRM OF THE FUTURE
Despite their growth, the adoption of services
and products from fintech companies in
Australia is still relatively low, with the
exception of payments. Our survey reflects
key challenges fintechs face today, including
gaining awareness and trust. A substantial
portion of respondents were unaware of the
various fintech offerings available in the
marketplace, while only 22% of respondents
believed that fintechs were trustworthy.
Chart 4.2. Usage, consideration, and awareness of fintech types
6 6 5 5 4
14 13 I currently use this
22 26 28 28
54 29 38
35
Have never used, but
28 22 23 would consider
32
24 24
19
Have never used and
24
would not consider
44 48 46
12 31 35 32 36
Never heard of this
10 before
Payments Superannuation Digital Banks Personal Finance Blockchain Wealthtech Lenders Insurtech
Management
34 | Copyright © 2018 Deloitte Consulting Pty Ltd. All rights reserved.FINANCIAL FIRM OF THE FUTURE
Respondents were, however, interested in
particular fintechs. There was a significant Case study: Moneytree
interest in personal financial management
fintechs, with 38% of respondents saying Moneytree is a personal finance app
they would consider using these types of which displays a user’s bank accounts,
fintechs. credit cards, superannuation funds,
and loyalty programs in one platform.
The increased consumer demand for banks In the past 6 months, the Moneytree
to offer services to help with money platform has added 20% more
management, beyond simply providing enterprise partners, for a total of 40;
financial products has been recognised in the increased premium users by 25%, and
market. Banks are providing spending grown its user base by more than 40%.
insights and goal saving functionalities linked
to their transaction accounts. Others, are The Moneytree app empowers users to
partnering with others to provide this have greater visibility and control over
functionality. For example, Macquarie has their financial data. By connecting their
enabled integration with Pocketbook, a different financial accounts to the
personal finance and budgeting tool. platform, users can track their total
spending and have a portfolio view of
There was also an appetite for their investments.
superannuation fintechs, with 35% of
customers expressing interest. Indeed, The platform aggregates data from
superannuation was also seen as the least over 3000 discrete sources, providing a
innovative financial sector by respondents. single, secure, financial data API
connection for small businesses and
Finally, around a third of respondents would enterprises.
consider using insurance fintechs and digital
banks, which had interest levels of 29% and
28%, respectively.
35 | Copyright © 2018 Deloitte Consulting Pty Ltd. All rights reserved.FINANCIAL FIRM OF THE FUTURE
4.4 Emerging players Despite much discussion around Amazon
The benefits of partnership and Alibaba being threats to banks, 55% of
Non-traditional competitors, from social respondents said they were not interested in
More than 90% of banks and 75% of media platforms like WeChat, technology taking up financial services from these
fintechs expect to partner with each companies like Apple and e-commerce players. Interestingly, e-commerce
other in the future (World Retail giants like Amazon, are also eyeing the companies were also the second least
Banking Report 2017). financial services space. trusted by consumers. This result may be
Incumbents are quickly realising the due to the low level of interactions Australian
Many of these players strive to be the consumers have with these brands.
value of partnership, including: platforms that consumers deal with daily
New capabilities: Incumbents can for all facets of life. By enabling customers Appetite for taking up financial services from
to make payments within their services, these non-traditional providers closely
leverage the latest technological
customers do not have to leave their correlated with the level of trust towards
capabilities quickly without having to
ecosystem. these providers, as seen in Chart 4.3.
build themselves – this enables them to
bring innovation to market faster, and Providing financial services allows these
respond more quickly to customer’s non-traditional players to access valuable
ever-changing demands. transactional data. Combined with their
existing wealth of lifestyle and behavioural
New markets: Incumbents can access
data, they have enormous capability in
new markets previously difficult or
delivering more relevant and enhanced
impossible to access. For example, they products and experiences for customers.
can leverage the brand of fintechs to
target younger segments which are Are consumers interested?
otherwise difficult to engage under
their own brand. In our survey, interest in taking up financial
services from non-traditional providers was
New product and service offerings: relatively weak. Respondents were most
Incumbents can extend the breadth receptive to airline companies, technology
and depth of their product offerings to companies and energy providers, which had
customers. similar interest levels, at 23%, 22% and 21%,
respectively.
Note: for the purposes of the survey,
Amazon and Alibaba were provided as
examples of “e-commerce companies”,
while Apple and Google were provided as
examples of “technology companies”.
36 | Copyright © 2018 Deloitte Consulting Pty Ltd. All rights reserved.FINANCIAL FIRM OF THE FUTURE
Chart 4.3. Interest in uptake of financial services vs trustworthiness of non-financial providers
Interest in taking up financial services
(Extremely / very interested)
Technology companies Airline carriers
Energy providers
E-commerce companies
Telecommunications
companies
Social platforms
Trustworthiness of companies/service providers
(Extremely trustworthy / quite trustworthy)
37 | Copyright © 2018 Deloitte Consulting Pty Ltd. All rights reserved.FINANCIAL FIRM OF THE FUTURE
A closer look, however reveals clear These results reflect a genuine concern that
generational differences. Millennials were traditional financial services firms may lose
most interested in financial services from out on millennials to technology giants if
technology companies, with 39% citing they they do not effectively engage and deliver to
would consider services from these their expectations.
providers. This was followed by energy
companies and e-commerce companies, at
37% and 36% respectively.
Chart 4.4. Interest in uptake of financial services from non-traditional providers across age groups
18-34
35-49
39 37 36
35 34 50+
31
26
22 20 19 19 18
13 11
8 9
5 5
Airline carriers Technology companies Energy providers Telecommunications E-commerce Social platforms
companies companies
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