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Emerging technologies and radically changed consumer
preferences threaten the financial industry with the biggest
shake-up in 400 years…
The interlocking trends in technology, demographics and
shifting consumer attitudes that are busily re-shaping the
future marketplace offer major opportunities for the financial
services sector. But they also pose growing challenges, and
the evidence suggests too many banks, insurance companies
and pension funds are falling behind in harnessing technologies
to transform their offer to 21st century customers. Critics
say this verdict is nothing new. But if action is delayed,
agile new entrants with no track record in the industry will
carve out the lion's share.
First, the technology outlook. Special purpose portals will
take over from more limited existing web services, making
cross-related products and services for customers possible.
Collaboration between different providers, across all consumer
markets, will mean greatly enriched selling propositions.
There will be increased integration of channels, seamlessly
connecting up computers, digital TV and mobile telephones.
Wireless technologies will drive new selling techniques,
especially in commodity product
areas of insurance and savings.
Internet-related innovations will make possible exciting
and hugely cost-effective ways to replace traditional, cumbersome
processes. But is the industry seizing the opportunity? The
evidence seems to confirm its slow-moving nature, not least
of which are the banks.
Take the e-cheque, a digital signed payment authorization
device that current technologies and encryption expertise
could easily perfect. Yet almost 250 years after the first
printed cheques appeared in London, the banking system still
relies heavily on them for non-cash transactions, despite
the billions lost through fraud. The true reality of e-cheques
seems a long way off.
The same lethargy seems to afflict other promising innovations,
such as cheque imaging and voice authentication. Concerns
over security must surely be outweighed by the huge cost
and criminal vulnerability of outmoded, inefficient processes.
But the biggest criticism is directed at the industry's response
to the Internet challenge. A study by Prof. Feng Li at Newcastle
University should be read in every bank boardroom. He concludes
Internet banking is causing the biggest shake-up in 400 years,
and traditional banks risk losing out. He reveals that although
Britain has more online banking providers than any country
in Europe, 35 per cent of them are hungry new entrants to
the market.
The second driving force is the radical shift in the sociology
of consumer buying habits. The vast majority of financial services
are converging with retailing. With the exception of specialist
financial products and the particular needs of a comparatively
small percentage of affluent consumers, financial services
providers will compete for revenues in a marketplace every
bit as transparent as a high street of shop fronts displaying
their wares and keen to do deals on price and convenience.
Today's consumer is defined by characteristics non-existent
a generation ago, characteristics that reach beyond technology.
These characteristics shape the framework in which buying
decisions are made. Chief among them are consumers aspirations;
their buying habits reflect their view of themselves.
Increasingly, 21st century consumers don't buy products
or services they buy stories. Does this product match who
I think I am or want to be?
Consumers also face a steadily growing information overload.
They want providers to take away this overload and simplify
the task of choosing. And people want a risk- free environment.
They want security in an uncertain world. Their financial
security is probably their top priority. Technology will
help providers engage with these future consumers. But people
want to trust and connect with the brand name offering them
a pension product, insurance, savings plan or loan. And that
reaches beyond technology into the values, reputation and
mindset behind the brand. Technology enables, but creativity,
flexibility and the intelligent use of information will win
the future.
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© 2004 The Global Future
Forum. James Bellini is a Professional Futurist of the
GFF, contact him at jamesdrbellini@aol.com,
and read similar work at www.thegff.com.
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