by Bert-Jan van Essen
If you’re watching closely, you can see how consumers’ relationship with money is changing.
This transformation has been brewing for some time and now it reached a tipping point, catalyzed by the pandemic’s far-reaching effects. People are keenly focused on their finances right now. It’s not just that they’re looking to ensure their short-term stability. They’re actually paying more attention to their role as decision-makers for their financial future.
Uncertain about the support they can get from their employers and their governments, consumers are looking for options to make more out of their income.
There are more of them who do so too, especially in regions such as South-East Asia, the Middle East, and Africa, where a mass affluent explosion is underway.
From saving all they can — and triggering historical spikes — to seeking out financial news, billions of people are involved in the global conversation about money.
Now is the time to listen to what they’re asking for — and act on it.
Customers are ready to be served
But are banks ready to serve them?
The 2008 crisis induced the corporate reflex of cost-cutting. Today, it echoes again in online meetings.
Unsure of how things will play out, their instinct is to optimize and reduce. But these reactive measures are unlikely to yield meaningful results. Nobody ever shrunk their way to greatness.
Productivity hacks aren’t going to help bank employees improve their performance. What financial organizations need are new clients, new channels, new partnerships.
The market opportunity is there.
In South-east Asia, the mass affluent population is set to rise from 57 million, in late-2018, to 136 million by 2030. This represents a massive opportunity for financial services companies in the region. To capture it, they will have to find a way to shift from a credit-led society to a more balanced approach that includes savings and wealth generation.
Unlocking the growth opportunities that abound in the ecosystem relies on proactive actions, such as tapping into emerging distribution opportunities through SuperApps.
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Two ways banks can seize the moment
I strongly believe incumbents can reach the mass affluent population much more effectively than some of the neo-banks can.
To achieve this, they don’t need to rebuild their entire core banking system — in spite of common-held beliefs. Providers of financial services don’t even need to build a new platform or live with the overhead of such a duplication effort.
To move fast on this market opportunity — and contribute to a healthier financial future — banks can simply add an orchestration layer. White-labeling can be a huge time and budget-saver, enabling these organizations to launch their new platform very quickly and in a frictionless manner.
From the client’s perspective, they can certainly use the banks’ support to get better at saving, managing, and multiplying their money. Giving the mass affluent nudges to help them develop a habit of saving their disposable income is a huge growth opportunity waiting to be tapped.
For example, an orchestration layer enables banks to help their customers save through superapps they already like to use. Think of ride-hailing or food-ordering apps.
The tech is here so banks can actually use any type of wallet or any type of channel to get closer to their customers and onboard them frictionlessly.
Skip the renovation
From where I stand, it’s very clear that financial institutions overinvest in renovating their systems of record — which are important, but aren’t going to make the critical difference to experience-driven, embedded banking.
What puts banks in the winner’s seat is using their resources to build new client offerings for new market segments (e.g. the mass affluent in Asia or the underbanked population in Africa).
Using systems of intelligence allows banks to access these new and exciting markets and deliver fresh value propositions that build on consumers’ pre-existing habits.
Case in point, the rate of bank account penetration in Africa was only 16.1%, according to the European Investment Bank.
But what really matters is the incredible speed of mobile phone and smartphone penetration. Based on the data, fully mobile and app-based banking services are the ones best positioned for growth.
This is yet another example of how incumbents can compete with new-banks — or start one themselves.
The customer sets the rules of engagement
And banks should use them as indicators for growth opportunities.
It’s easier for financial services providers to meet customers at the point of distribution instead of spending exponentially more to build their own.
There’s no need to emulate an advisor network and a branch network and all the places where all banks used to be. It’s much simpler — and cheaper — to be where the customer is right now.
Are your customers playing a game on their smartphone?
Are they hailing a ride or ordering their favorite food?
Are they exchanging instant messages with their families and friends on WhatsApp or WeChat?
Be there for them with savings nudges, investment tips, and financial education nuggets. The tech is here to help you do it — fast and cost-effectively.
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To win in the long term, focus on behavior
I’d urge banks focusing on long-term, compound effects to look at educating, nurturing, and supporting consumer behavior around saving and wealth management.
The financial sector should take a page from the consumer goods industry’s book and see how companies in that space managed to create new habits through thoughtful, personalized nudges.
Because they serve very different client groups, providers of financial services should also use microsegmentation to engage these customers through relevant prompts. With that comes less friction and a shorter time to action — and result.
From saving to multiplying
While saving makes perfect sense for most people, wealth generation is not as appealing, mainly because of historical events that led to the dissolution of their assets (think of inflation surges from Eastern Europe in past decades).
What helps overcome this mental barrier is transparency and putting consumers in control of their wealth management.
With features like daily reports, banks have a straightforward way of showing their customers how much they have, how much they can spend, and how their assets perform. Consumers can learn how to manage their wealth while they multiply their money — definitely a win-win!
Tackling this fear of the unknown, opaque financial system and debunking the myth of having to rely on industry insiders to access wealth management levers are instrumental to making financial wellbeing a reality for more people around the globe.
How banks can capture this moment and gain momentum
Make it simple for people to start saving.
Make it easy for them to start investing.
The first priority should be to move fast and keep it simple. As I wrote in my last blog, banks can take a building block approach to launching new services, which greatly increases speed to launch new services. It is myth that any new solution you launch needs to be fully comprehensive from the outset. The market moves faster than your planning and delivery cycles could and so it is better to introduce simple use cases quickly.
From there, the key is to introduce new services on your journey to digitalization. And, while it makes sense to add services in a piecemeal fashion, it does not make sense to take the same approach to architecture. To orchestrate a winning digital strategy and the richest customer experience requires putting in place a system of intelligence that sits between customer channels and record-keeping systems. This generates the intelligence to build the individually-optimized wealth services as well as the content and ideas to drive engagement, not to mention the ability to embed third-party services and tap third-party distribution channels.
At additiv, we have proven you can launch new investment and savings services, underpinned by our market-leading system of intelligence, in under three months. So what is stopping you?