For many decades, banks, insurance companies and mortgage lenders enjoyed dominant positions in high-margin markets, protected by strict regulation, strong customer lock-in and high capital requirements. However, even they have not been immune to disruption. New regulations in favour of innovation (for example PSD2 and Open Banking) have allowed a new breed of fintech disruptors to emerge, attracting customers with smart technologies and superior offerings. The newcomers variously stole margin from incumbents and passed it on to customers (for example TransferWise removed currency exchange markups), and transformed the customer experience of financial products (for example Lemonade collapsed insurance claim waiting times from weeks to minutes).
A host of online comparison platforms made the deficiencies of incumbents even more apparent, and further pressured prices, conditions and margins.
Responding did not come naturally to financial service providers, whose past dominance had allowed them to become complacent and lose connection with their customers. Instead of adopting the customer’s perspective, they thought first about their own needs and interests. This led in one direction to digital strategies that focused on reducing costs in their existing processes rather than improving customer offerings.
In the other, it created over-excitement about new technology trends (such as AI, blockchain, IoT, etc.), leading to heavy investment, but without much thought for how the new technologies were going to generate value for customers.
Some incumbents recognized the true value of digital was in enhancing customer experience, and focused on innovations like customer self-service portals and mobile apps. However they were still hampered by limited in-house digital talent and deeply entangled IT architecture (often the product of patched-together legacy systems and acquisitions). An altogether different approach was required.
We have guided several financial services providers through the opening stages of their digital transformations. In particular, we have helped shift the mindsets of senior financial executives by demonstrating the disruption patterns that have played out in previously-disrupted industries, and evidencing the principle that digital is always a means to serve the customer better, faster, and cheaper.
We have worked with a leading international bank to design their omnichannel branch of the future, and supported the scale-up of an online wealth management platform. We have also embedded a ‘test and learn’ mentality at a leading insurer for their product development process, and kickstarted innovative new initiatives on their behalf. And we have worked with multiple financial services clients to create technology and organizational structures that are geared for digital success, while transferring digital capabilities and taking on ad interim positions.
In our work with these companies, we have learned that it is important to determine where to focus the change, and to create an innovation pipeline that reflects the client’s risk profile and time horizon. We have also observed that ringfencing specific IT and organizational domains can be an effective way to ensure sufficient autonomy for digital product teams. By applying these lessons, we have demonstrated that large financial services providers can develop competitive digitally-enabled products and services, improve time-to-market and maintain agility.
We helped ING design the omnichannel financial services branch of the future. Together we co-defined key value drivers, requirements and ambitions, and translated these into a future-proof proposition. This was then successfully piloted at a concept store and is currently being rolled out to >150 branch offices, significantly contributing to ING’s ongoing ability to serve their customers along the omnichannel journey.
We supported Van Lanschot in enabling Evi, their fintech startup, become a fully fledged online wealth management platform. This included defining the proposition and ambition, implementing a new organizational set-up, and temporarily filling capability gaps – all contributing to a doubling of Evi’s customer base and assets under management.