Bryan Van Dyke, managing director and head of digital at Morgan Stanley, started his career in digital before there really was digital—at least the way we think of it today. In the early nineties, there was no WWW or GUI—only BBS systems, dial-up modems, and painfully long waits for text to load. In his 25 years of leading digital strategy for a host of companies, he’s ridden the ever-escalating waves of digital transformation. A few years ago, he joined financial services giant Morgan Stanley. Back then Morganstanley.com was a typical corporate website. Functional yes, but not engaging—and certainly not a driver of growth. Van Dyke knew the industry was changing rapidly and he—and the firm—had to accelerate the pace of transformation.
“There was a notion in financial services that it was okay not to be very good in digital. The attitude was always ‘Let’s be a fast follower. Let’s not blaze trails.’ But users don’t care if you’re a big bank or a startup. They just want an enjoyable experience,” says Van Dyke.1
Today when you visit Morganstanley.com, you may think you’ve landed at Fast Company or Wired magazine: blazing fast, responsive HTML5 content from journalists and researchers on the most timely financial topics—edited by former WSJ journalist Yu Wong.2 And their results have been spectacular: a 60 percent increase in search engine referrals, a 38 percent increase in time spent on their properties,3 and newfound category leadership, as it was recently named one of the top 10 brands on LinkedIn.4 They’ve also received industry recognition with the People’s Choice award for best financial services website at the Webbys.5 Fast follower no more.
But Morgan Stanley is not the only one realizing that the financial services industry is changing. The once quiet path of the fast follower—who matches demands once a concept has been proven by others—must be abandoned if that company wants to thrive. The race is on for financial services companies, and they must embrace the role of pacesetters if they want to succeed in the long term.
The fast follower mentality has its roots in the very DNA of the financial services industry. As a regulated industry, financial services faces hurdles to innovation that others simply don’t. And for years, FSI firms didn’t have to be leading edge. Traditionally, customers have been slow to switch banking, wealth management, or insurance providers.6 Once acquired, a customer typically remained loyal to that provider.7
But this now has changed. A younger generation thinks mobile first and expects their FSI providers to offer similar experiences to Google, Facebook, or other digital firms. The demographics facing the industry are plain—40 percent of the global population was under 35 in 2015.8 And millennials’ assets are growing, with a US$19–24 trillion aggregated net worth projected by 2020.9 But it’s not just their numbers—their attitudes are different too. Thirty-three percent believe that in five years they will not need a bank, while 71 percent would rather go to the dentist than listen to what a bank says.10 Technology is at the center of their world, and they expect their financial institutions to meet their standards. Fifty-seven percent would switch banks just for a better technology platform solution.11
A host of new start-ups has seen this opportunity and entered the arena to challenge existing FSI firms. Companies such as Prosper, Personal Capital, Betterment, and SoFi deliver on the mobile and digital experiences that the new generation expects—without the burden of legacy technology. Globally, nearly US$23 billion of venture capital and growth equity has been deployed to fintechs over the past five years.12
With online and mobile sales goals are expected to increase by 33% by 2019, the pressure is on for your digital channels to drive revenue.13 Accenture estimates that competition from non-banks—companies like Google, Amazon, or Apple—could erode one-third of traditional bank revenues in North America by 2020.14 Ouch. FSI firms must grow by courting a new generation, while staving off the new disrupters. The timeline for transformation has been accelerated, and following the traditional conservative path will make it hard to survive—let alone compete.
Thinking holistically about experiences—both offline and on—will be the way FSI firms can compete and differentiate. Financial services firms must understand their customers better than ever, reach them wherever they are, and provide a seamless experience within context—all while facing higher regulations than other industries.
No one said transformation was easy, but the good news is that becoming a digital pacesetter is possible. Much like the teams who race in the Tour de France, getting out in front is a strategy for not only winning that specific race but also for surviving the entire journey, as the team in front can dodge crashes and set the pace that others have to follow. The strategy for leading is just as important as the right equipment or training for riding. Financial firms similarly need the right focus, processes, team, and technology.
According to a recent survey of financial services firms conducted by Econsultancy, financial services companies are significantly behind those in many other industries in their race to digital transformation.18 With the narrow exception of investment firms, a full 88 percent of executives surveyed describe their firms as only “halfway there” or worse on their paths to digital maturity.19
This doesn’t mean they aren’t trying—spending on digital engagement rose sharply in 2016, with 71 percent of financial services companies increasing their 2017 budget. And they’re focusing on the right thing: 34 percent of responders surveyed said that optimizing the customer experience is the single most exciting opportunity for their organizations this year.20
They see the opportunity—emerging demographic trends, growing assets, and a thirst for new services—and they’re rising to meet these challenges. “Close to a third of companies in the FSI sector identified digital customer experience and customer service as the primary ways they will seek to differentiate themselves from their competitors over the next five years.”21 But they are also well aware of the threats. With this massive disruption, FSI firms won’t be able to compete on price or basic service differentiation—and can’t solely rely on loyalty—so quality of personalized services rises to the top of how companies will win.
The financial services industry has traditionally proven itself very resilient in the face of disruption. Just look at the dotcom boom of the 90s. There were 450 new start-up disrupters in the financial services industry, but today only PayPal survives from that era.23
While the threats today are more complex and present than ever, all is certainly not lost. In fact, financial services companies can use their intrinsic strengths—customer inertia, a wealth of customer data, and experience in a regulated industry—to become leaders in digital transformation. But only if they take action with urgency and with the right technology, people, and processes.
Let’s examine five strategies for leadership in financial services digital transformation and look specifically at how a few agile innovators are pulling ahead in the race.
In the past, when technology decisions were a matter of life and death because of the time it took to change, many FSI technology and marketing executives decided that being an innovator wasn’t an option, at least if they wanted to keep their jobs. But technology, the consumer, and the competition have all changed, and being a Johnny-come-lately now may translate into a Johnny-out-of-business. The biggest advice from leaders in this space is to court innovation and become an agile competitor, not a bloated behemoth. You don’t have to be the very first mover in everything, but the complacency of yesterday’s fast follower mentality will lead you to the dustbin of history.
“Banks and financial services companies have a reputation for being very conservative, very slow-moving, very slow to react. We need to react at the pace of our customers’ expectations, and certainly their expectations digitally are at an all-time high and they’re only accelerating,” says Giles Richardson, head of analytics at Royal Bank of Scotland (RBS). “We have to take risks, because if we stay at the same level for too long, we’re going to get left behind.”
There are also fewer risks to being an innovator than there were before. Cloud computing, agile methodologies, and more interoperability between solutions means companies can innovate and lead without past first-mover risks of total failure. So, test often and start with a proof of concept, but most importantly, start.
Staying in the game and keeping a competitive edge in this complex world requires an investment in the right resources, including advanced analytics, targeting, and experience management tools.
Both RBS and Morgan Stanley identified creating a vision and getting buy-in from the team and executives as the most important things you can do. “No individual software, specialty, or method will lead to excellence if pursued in isolation,” says Bryan Van Dyke. Morgan Stanley created a cohesive vision to lead their efforts: Deliver at the speed of our clients. “This means we are flexible and innovative. Defining the vision allowed us to all point in one direction,” says Van Dyke.
How much do you rely on IT? Do you have any challenges tracking customer experience across channels? Do you know which channels and campaigns are most effective in driving revenue? If your current system poses more questions than answers, it may be time to consider moving to a single platform.
When you have multiple audiences with unique needs, this creates a compelling case for customization. For Stephen Jenvey, principal architect at Capital Group, the ability to offer business users a toolkit for content and campaign creation allows a whole new realm of empowerment and innovation. Where IT had the arduous task of building all the campaigns and subsequently creating organizational bottlenecks, now the marketers are in control. This allows you to put power in the hands of people who can innovate and push the envelope.
A single rider can’t win the Tour de France without a full team of support members. From “domestiques” (team riders who support the star), to staff providing water and food, to trainers keeping the riders limber, it takes a host of people working toward one goal to cross the finish line. Similarly, you can’t become a pacesetter in financial services without the right support team. Companies that have successfully made the voyage to digital transformation realize that people, processes, and organizational structure are the secret to winning. “Digital transformation is change management. It’s not about technology, it’s about people and getting people motivated to rally around a common cause,” says Van Dyke.24
Consulting firm Capgemini agrees. In their report “Digital Transformation: A Roadmap for Billion Dollar Organizations,” they state: “The key to digital transformation is re-envisioning and driving change in how the company operates. That’s a management and people challenge, not just a technology one.”25 All too often FSI companies are fragmented by product, physical location, or business line.
Morgan Stanley realized they had to change the way they work together to implement their vision of innovation. “We created the digital planning forum to bring our experts together on a monthly basis,” says Van Dyke. “These people were spread across the world, in different cost centers with different objectives. They never had a structured way of coming together on a regular basis and asking the question of how requests coming in related to our digital vision.”26 Putting the group together in a forum also signaled to staff that the company wanted to shake things up and there was a newfound emphasis on digital across the company.
Van Dyke says the key to change management is process. “Trends will come and go, but if you have the right process in place you can adjust to the conditions present and continue to innovate.”27 You see this similarly in racing where dominant teams may change riders but still win year to year because they have the support, processes, and technology to thrive.
When asked what has the biggest impact on the advancement of their company’s digital maturity, 43 percent of respondents in a NetFinance survey reported organizational alignment and executive sponsorship. If your current culture and processes pose more roadblocks to transformation than opportunities, now is the time to overhaul your company’s digital marketing strategy.28 To help steer your organization toward a more digital-focused mindset, consider consolidating digital functions under a single leader and improving the alignment of digital objectives and performance metrics.
Individually owned channels can bog down processes and dampen creativity. According to the 2017 Econsultancy “Digital Trends in the Financial Services and Insurance Sector” report, (42 percent) of respondents said the inability to share data and manage the customer experience across channels was the key challenge in unifying the customer experience.29
New customer expectations require a new kind of corporate culture. In a NetFinance survey, 76 percent of marketers believe that they need to be more data-focused in order to succeed.30 Understand that developing your digital marketing will mean moving your culture from a primarily product-driven mindset to a much more data-driven approach—and your people will need to be equipped with the latest business intelligence and customer data to do it.
RBS employed a bold approach to gaining executive sponsorship. After reviewing the executives’ goals for the quarter, they presented a new “Superstar DJ” program and a realignment of digital with the standard slides and speech. But they didn’t stop there. They actually created a test in the marketing suite to solve this specific problem and had the executive run it himself so he could see the power and results of this approach. Dr. James McDonald, head of omnichannel analytics for RBS, cites this as one of the main contributing factors to the program’s success.31 Telling executives that something will help them solve their problems is much less powerful than having them experience the power themselves.
In the not-too-distant past, customers all too often experienced disjointed experiences with their financial services providers. They would check a balance on mobile, but if they wanted to change their address or transfer funds they had to use a browser on a computer. And for specialized services like cashier’s checks or new applications for products they were told to come into a branch. The financial services firms were focused internally, providing experiences based on how they were organized or how their technology was architected, not how the customer wanted them.
One venerable institution decided to change that, reinventing itself through the lens of the customer experience. RBS is a 300-year-old financial institution with over 60 million customers. RBS digital channels have taken on a greater importance in recent years, with 5 million of their customers using the mobile banking app an average of 70 times a month.
RBS realized they needed to compete on the holistic customer experience. “Our digital experience is so critical to us now, because our brand is our experience, and the experience of digital will be how people touch us more than anything else. So we had to get that right,” says Giles Richardson.
They reorganized their digital team into journey managers, giving each one full responsibility for a customer journey end to end. “That journey could be something small like, ‘How do I get the mobile app?’ or ‘How do I register for online banking?’ or it could be a larger journey like, ‘Help me arrange a mortgage to purchase a new home.’ We have someone who looks after that whole end-to-end process,” says Richardson.
But they didn’t stop at this reinvention. They created the Superstar DJ program to bring testing, agile iteration, and focus on the customer to everything the journey managers did. “We wanted them to be in a position where they could feel how the audience and how our customers were using this site. So it wasn’t just the starkness of a number of people, like ‘X number of people went to this section today.’ We wanted to make that journey very real so that you could see how many people, which bits of the site were they touching, where were they falling out, where were they going away, where were they going to, to paint that picture that you would have interacting with an audience if you were this superstar DJ,” says Richardson.32
Naming the program after Superstar DJs clearly was important, if a bit “cheeky.” “I think using humor in the program was key. Maybe it’s a British thing. We’re in the position where we’re data analysts working in a bank, so the Superstar DJs theme was hysterical. But that was the fun thing about it!” says Richardson.
But managing customer journeys isn’t just about banking. A recent McKinsey survey, for example, indicates customer satisfaction with health insurance is 73 percent more likely when journeys work well than when only touchpoints do.33 For instance, when someone has an automobile accident, they must contact their insurance company five to seven times. Usually those touchpoints are with different departments or silos within the same company. The customer doesn’t see it as separate and distinct experiences, however—they see it as one experience: settling their insurance claim. If at every touchpoint they are repeating their information, trying to convince the insurance employee of their status and so on, customer satisfaction quickly plummets. But if instead the customer and their claim are remembered, personalized, and quickly resolved, customer satisfaction rises, and you have a customer for life.34
It’s difficult today for most firms to see how customers engage with their brands across different channels (or in branch versus digital) or know the most important attributes (for instance, income, age, location, or behavior.) For example, knowing a customer has been researching auto loans online would be a powerful behavior to trigger offers and grow the relationship with them. Using a data management platform can be critical for unifying data across multiple data sets and expanding attributes to more than just name and email.
Personalization based on the wealth of data financial services firms have at their disposal is absolutely the most important aspect of focusing on holistic experiences for your customers. Use data to offer products and services that are tailored to your customers. Talk to each of them as an individual, not a number. Too many financial institutions have let customers down in the past by offering the wrong products—for instance, offering a HELOC loan to a customer who doesn’t even own a house. Cut through the noise by knowing your customer and giving them what they want.
No matter what level of market research, customer data, and targeting tools you deploy, it’s imperative to become expert at anticipating and exceeding your customers’ expectations. “The currency of success used to be peer review. ‘Was the thing that I put live well received internally?’ Now that’s switched to, ‘Has it been effective for customers?’ which is a much better place to be,” says Richardson. Successful companies are using A/B testing, live feedback sessions with customers, and of course, surveys to continually stay connected with customer expectations.
The RBS Superstar DJ program focused on improving all digital journeys across the bank. They started this transformation with organizational design. “We don’t view web pages as the important thing here. We view the customer’s end-to-end journey as the critical piece,” says Dr. James McDonald. “Therefore, we needed to have one person responsible for that journey. That journey starts when they start to browse products, and it ends when they purchase it, wherever they are.”35
RBS found these DJs (or customer journey managers) from various places throughout the company: marketing, analytics, technical platforms (online chat for instance). It was important to bring various skill sets to bear in this role. Journey managers needed to have technical skills but, most importantly, speak the language of the business. That means not getting hung up on a specific technical or analytical facet, but seeing the full picture of the business goal they were trying to achieve.
With more mobile devices being sold everyday than babies are being born, clearly all digital pacesetters need to think mobile first.36 But it’s not just about being on mobile. Pacesetters need to offer real services, support, and products through mobile to reach new customers. There is nothing worse than a corporate vanity app that has no useful application. (No pun intended.)
Digital pacesetters are focusing on acquisition and customer service in equal measures and are keeping an eye on new channels. Snapchat a few years ago was hardly on anyone’s radar, and now it’s driving customer growth in the millennial and younger demographics. In fact, Snapchat recently offered its own peer-to-peer payment method with Square called Snapcash.37 Followers are happy to wait to see massive growth in a platform before taking the plunge, while pacesetters know they must innovate and iterate if they want to take a commanding lead. As Snapcash shows, competition can come from all sides.
The types of devices are proliferating too. Wearables are something that the new financial services challengers have prioritized, and while there are a lot of choices and some risk, smart organizations are learning how to scan the landscape, commit quickly, and then iterate. Personal Capital (one of the start-up challengers to the financial incumbents), for instance, was an early financial services firm to offer an application with significant functionality on Apple Watch. Users can set up a spending target on the iPhone app, with the watch showing their current spending, goals for the month, and progress to date.38 Financial services incumbents must manage the brave new world of multichannel, multidevice products and services.
To keep up with an industry full of innovators and early adopters, you can’t just think of mobile in terms of form factor or resolution size. Rather, see mobile in terms of context—and that will change everything you do. Chris Ho, head of digital content at National Australia Bank, believes true mobility is about figuring out what your customer is trying to do and engaging them in that very moment.39 For example, being mobile could mean delivering targeted offers at a kiosk or sending push notifications to your customer’s wearable device as they near an ATM. This requires a deep understanding of customer needs—and the analytics technology to turn those insights into action. But when you’re able to analyze mobile use and experience metrics, you’ll be able to see exactly where customers are succeeding and struggling with your mobile experiences.
When moving between web and mobile channels, customers expect a fluid and context-aware experience. To keep up with this demand, make sure content is optimized for mobile. This becomes even more important for mobile users who make purchases from their mobile device. Take, for instance, RBS. When they realized that a large number of customers were struggling to apply for loans on their mobile devices, they analyzed the process and discovered the content displayed was very difficult to follow on a smaller screen. With the help of mobile content management tools, the firm was able to streamline and optimize the experience, resulting in less frustrated customers—and more completed loan applications.
Insurance company Pacific Life found that the nonlinear conversations between clients and advisors were better supported through visual navigation done within a custom app versus multiple brochures and an extensive paper trail. No matter where the client wanted to go with their financial conversation, the app made it easy for the advisor to respond and inform. And it served as an efficient marketing tool that empowered team members throughout each consultation. Using an app for sales meetings helped steer conversations and drive sales with interesting product and service descriptions brought to life with images, videos, and direct enrollment tools. Pacific Life has had so much success with the app they have continued to invest in apps directed by internal sales and marketing teams.40
The Tour de France is one race structured over 23 days, with 21 separate races. The overall winner of the race is strategic about the entirety of the contest and sets the pace accordingly. Successful financial services firms similarly need to realize it’s a long season and continually court and deepen their relationships with their customers so they end up winning the overall race, not sacrificing the long-term relationship for a short-term win.
Research shows most customers leave banks because of emotional reasons, so predicting and responding to what customers really need is incredibly important.41 This doesn’t mean blanketing your entire customer list with marketing offers to drive short-term gain. It means understanding and segmenting your customers according to their needs and then only offering the “next best offer” for who they are and at what stage.
For instance, life insurance is an important product, but challenging when engaging prospective customers. Unlike home or car insurance, it’s a discretionary product that is far more complex, and, therefore, consumer interest is relatively low. How can you identify the ideal customers (new parents) who are active in the life insurance shopping process (from search, social activity, even website behavior)? How can you use data from previous and real-time interactions to nurture them through the lengthy purchase and application process?
Too often in the past, a financial services company would have a mountain of data about the customer, but it was all kept in separate business units and separate technical systems without a consistent strategy to unite the information and take business action. Much like personalization, the first step in deepening your relationship with your customer is integrating your data and doing advanced analysis on it to unlock the potential. For instance, you may have customer behavior data from branch interactions in one system, call center interactions in another system, and digital interactions in yet another system. Without a unified view of data from all touchpoints and channels, it will be impossible to segment the customer successfully and offer her the next best offer or service. You need to understand not only the priority of the offer to the business, but also the propensity of the customer to buy that offer.
Content is also a key piece of the relationship game with your customers. Most financial services businesses are built on trust. Customers rely on their providers to educate them on everything from retirement investment strategies to life insurance calculators. Morgan Stanley found they needed to act like a publisher and continually publish to the right audiences.
When they started the process of updating their digital presence, they found they had over 50 different sites but very low engagement. Customers and prospects spent less than two minutes on their properties before leaving. “People expect financial services firms to inform, not just entertain,” says Van Dyke. “Customers have higher expectations for financial services, and our content had to reflect that. We realized our content is our differentiator. It’s the closest thing we had to a product. We realized we could take this mountain of information and turn it into a format that will be engaging to those audiences.”42 Customer engagement on websites at Morgan Stanley has grown by 38 percent since this change, delivering a deeper relationship with their most valuable audiences.
Morgan Stanley broke their process down into three elements—your content has to be timely, differentiated, and compelling. For instance, when the Bank of Japan announced negative interest rates to the surprise of the world, Morgan Stanley published a commentary on that event within a few hours through its digital content management system. Being timely and compelling and acting like a publisher shows customers that Morgan’s insight—and customers’ relationship with the institution—are something they can’t afford to lose. They also drove engagement by offering content the customer cared about and could use—much more effective than relying on ads.
Are they looking for life insurance? Are they in the market for a mortgage or student financing? Audience management platforms can combine data from offline, online, and even third-party services so you can get a 360-degree view of your customer. For instance, a customer who has had a breach of their debit card is a great candidate for a new credit card. When the right segments are shared within systems, you can then provide content, information, or service that suits what the customer is actually looking for.
Testing and iteration are key to getting this right. You can’t improve what you can’t measure, so prioritize a culture of testing, analysis, and iteration so you can constantly be adjusting the mix for revenue and customer experience optimization. As RBS showed with their Superstar DJ program, you have to change what the company values by putting iteration and innovation into the very processes of how you deploy and optimize campaigns. Being wrong isn’t as much of a risk if the culture supports trial and error on the road to results.
As any financial services leader will tell you, digital maturity is about transforming your teams, your organizational structures, and your motivations as much as it is deploying the right technology. But remember digital transformation is a long season, and you want to be future proof with your choices. Look for partners, strategies, and tools that will ride the ever-accelerating waves of change in your industry with poise, flexibility, and grace.
At the end of the day, financial services institutions should not “sell products” but create experiences to guide, power, and enable the consumer to control their lives. Whether it’s holistically partnering with a customer on their financial goals and creating a personalized experience that fulfills their need for security, or creating an unforgettable rewards program for the highest status customers, the winning financial services companies are realizing people don’t buy things—they buy relationships. In today’s reality, the consumer is in charge, and successful financial services firms will provide the on-ramp for a personalized and fluid experience. The future will be experience driven. It’s up to you to set the pace.
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