FINANCE
TRENDS
— 2017

Find out how new digital technologies are transforming services and user experience through innovation in financial services in 2017

Banking is getting personal

In 2016, we watched as consumer fintech providers scaled up and moved past the early adopters. Investments in managed funds investment services like Nutmeg and partnerships with established players helped fintech gain consumer trust, and services like Tide and Coconut helped widen the market to include small- and medium-sized businesses. In 2017, we see banks fitting into customers’ lives, available when and where customers need them. Banking is no longer a nine-to-five activity in the branch. Ross McEwan, the CEO of RBS, stated that the busiest RBS branch in 2014 was ‘the 7:01 from Reading to Paddington – more than 167,000 of our customers used our mobile banking app between 7 a.m. and 8 a.m. on their commute to work every day’.

In 2017 and beyond, financial services will harness artificial intelligence to generate unique products for customers – configuring terms to fit a customer’s needs and profile rather than choosing from a list of predetermined products. Advances in AI and Big Data mean that in the near future, AI could configure unique banking products in real-time. As seen with the recent Facebook block for Admiral Insurance, the use of data is a touchy subject and you would need to show genuine value add to configure products in this way. Companies will need to be transparent, not exploitative, in order to gain trust. With chatbots, there’s an opportunity for banks to ‘humanise’ and start talking with people in their preferred language and gain this trust. Take a look at Cleo, a conversational interface positioned as ‘Your AI friend that looks after your money’. Cleo avoids confusing jargon and makes banking as easy as texting a friend.

How might we remove unnecessary interactions in banking?
How might we use AI to create products that meet our customers’ needs?
How might we use data to give customer pre-cleared loans and products?
How might we explore partnerships with supermarkets or coffee shops to be where customers are?
How could bank employees be more mobile and go to customers?

Finance is moving from
self-serve to service

In 2017, we will see a wider shift to services, as digital fatigue, coupled with an increase in automation and AI, will lower the cost required to create services to serve the specific customer – moving away from just giving customers the tools to help themselves. These may be fully automated actions, like putting some money aside for a housing deposit when a customer’s salary is paid, or complex processes triggered by low-effort interactions like chat interfaces. Services like Betterment and Charles Schwab Intelligent Portfolios have made big inroads into this in the United States. There is a lot more opportunity there to explore this type of automated intelligent transfer model.

Your service is benchmarked alongside the Amazons, eBays, AirBnbs and Facebooks of the world – a second-class customer experience is no longer acceptable. Expanding on Barclays’ physical presence in Asda stores, for example, mobile bank employees could be meeting customers in a coffee shop or hosting remote sessions with advisors to conduct tasks for the customer. Customer centricity must be supported at the highest levels of the organisation to really create value for your customers. This means embracing the cultural trinity that makes service design successful in an organisation: support and an appetite for change from high-level leaders, space for experimentation and iteration, and regular customer interaction through qualitative research, behavioural observation and quantitative data.

Digital service Monzo has put these principles to good use, and is beta testing the idea of allowing users to set their own financial constraints and then ensuring those self-imposed constraints are adhered. Monzo links users’ bank accounts to a new debit card, which has a cap on spending per day and can be digitally adjusted to alter spending goals. Though yet to be profitable, Monzo has garnered a cult following that it hopes will stay loyal as the startup scales up and starts offering its own current accounts to users. 

How might we help customers make sound financial decisions?
How might we demonstrate community and social focus?
How might we make interactions easy, but help them remain considered by customers?
How might we harness AI lower the cost of traditional advisory?

Banking is opening –
for better or worse

The revised Payment Services Directive (PSD2) is being introduced by the European Commission to further open the markets to non-bank competitors and foster innovation in mobile and internet payments. Open banking gives opportunities and risks to the banking sector – but is banking resigned to be the plumbing in the background? Is this when large tech players will swoop into consumer banking and push banks out of sight?

In 2017, we will see more innovation departments launching public beta-versions of innovations to gain feedback from customers. Positive perception, transparency and learning will be greater than advantages gained from the veil of competitive secrecy. Technological advances in frictionless, invisible interactions like contactless mobile payments could threaten financial responsibility by making money less tangible, leading to difficulty in tracking finances and budgeting. But the shift towards social enterprises and the sharing economy has led to services like Tandem to co-create services with customers that will lead to greater buy-in and attachment to the service. Activities like this are more of a demonstration of brand than any typeface and colour palette.

How might we encourage innovation in large financial organisations?
How might we help integrate newly acquired Fintech startups into large financial organisations?
How might we involve customers and staff more effectively to co-create new services?

Blockchain will challenge traditional banking

Blockchain, a database for digital currency, has had almost meteoric success in the number of companies that are interested in and investing in this area, but most people struggle with the definition of what this actually is. In 2016, Gartner put Blockchain in the ‘peak of inflated expectations section of its Hype Cycle reports. In 2017, Blockchain will undergo a repositioning from companies operating in this space and Distributed Ledger Technology (DLT) will be referred to more frequently.

One of the key challenges will be to encourage collaboration and data sharing within organisations that are notoriously clandestine in this space. To succeed in this, organisations also need to weigh privacy and data security with the cost of operating in a market that is highly regulated.

In 2017, consumer fintech will continue to gain market share. Regulatory support, partnerships, and the launch of the Innovative Finance ISA will further increase trust in fintech companies as they expand their service offerings. How can service design and design thinking help facilitate these new services and ideas?