The changing face of Financial Services amid a post-covid world
7 May 2020
Author: Linzi McGuire
As covid-19 causes financial uncertainties and lifestyle changes throughout the nation, what are consumers demanding and how will the financial services industry respond? We take a look at what’s driving change now and how consumer habits and needs will change as a result of this in the new world, potentially changing the face of the financial services industry forever.
Financial services is an industry that’s known for process. It’s an industry that was never designed for remote working. Now, it’s being forced to juggle restrictions, old and new, all while redefining strategy and resolving brand issues that will define their future, as market forces and consumer behaviours shape their new normal. We look at 3 areas of financial services where trends are emerging already:
Increasing demand in the insurance industry as consumers seek to protect themselves
In the midst of the pandemic, there has been an influx in consumer demand for insurance. In a time where uncertainty has taken hold, consumers have felt the need to grab hold of something they are in control of, so they’re taking practical steps to protect their finances, their income and their health, should they be impacted. This means that the demand for life insurance, income protection, redundancy cover, travel insurance, motor insurance, and private medical cover should all expect to see an increase. Consumers are reassessing their priorities and insurance may be viewed as a more desirable investment in the new world.
But it’s not just insurance that consumers are interested in - with a looming financial crisis or recession on the way, many consumers want to quickly prepare by investing in protecting the assets they have. The demand for investment products could be on the rise…
Consumers face choices on where and how to invest
Unfortunately, Covid-19 arrived when the global economy was already showing signs of a slowdown so consumers may seek to invest or release equity during this time, depending on their financial circumstances, and those of their loved ones.
If they invest, what’s a safe bet and how can they be reassured that they’re being smart with their money? Well, it all depends how long you want to play the game. If you’re in it for the long haul, a smart investment in travel may be a beneficial as once it crashes there is only one way up, but it will take a long time to recover. Likewise, as the world is experiencing more sustained remote working, and it’s ever more dependent on technology to operate and connect, it’s likely that tech will continue to perform well, but the entry price is high. And ‘stay at home’ shares, such as Netflix, Zoom and Walmart have outperformed predictions for obvious reasons, but will they continue? Our client Canada Life’s report might be a good place to start if investing is an option for you.
The abandonment of traditional banking for a new digital world
There are a lot of questions when it comes to banking in the new world. Where incomes are disrupted and spending becomes more considered, will consumers seek to restructure their finances and debt? Will governments and society demand a cashless future? Will consumers abandon the traditional branch network due to relevance? The answer to all of these questions is likely to be yes, at least to some degree.
One trend that is already established and is likely to rocket is digital banking. In fact, for the first time ever, the popularity of digital banks are overtaking the institutions of old when it comes to account switching.
A recent Which? report shows that Monzo finished the year at the top of the switching table, beating the likes of Nationwide, HSBC, Barclays, Halifax, Santander and TSB. And Starling Bank, another online challenger bank, is quick on their heels in the switching tables too.
These slick new brands have attracted new customers through low fees, speedy customer service, personalisation, modern design, and great user experience via their apps.
As consumers move online, retail banks will have to follow. The problem is that most banks aren’t ready…
What’s next for Financial Service brands?
“While consumers may be thinking about how to slow down, this is the time for brands to go even faster because more is being demanded of them during these times of uncertainty. This is the time to go full steam ahead and set themselves up for future," comments Phil Sumbler, Head of Financial Services.
Consumers want to get their finances in place and the need to do it as fast as possible, all without leaving their homes. But is the industry set up to deal with these requests at a time where they are also being forced to work remotely? How can they support the communities and customers they serve while balancing medium to long term positioning?
In a time like this Phil thinks it’s important for financial services brands to focus on 3 things:
1. Communication & community:
A crisis often brings out the best in us, and the financial services industry is in a unique position to play a vital role in restoring our communities. Whether that’s providing mortgages to growing families or loans to growing businesses, insurance policies that offers security and reassurance to those who wish to protect their assets and health, orequity products to allow consumers to invest to protect their futures, financial services brands have a long history of promoting social and economic success. Brands here need to rethink what drives loyalty. How brands are thought of by consumers in the future may very well be based on their response today. Those who instil trust and support the cause or communities will be the ones to come out on top.
2. Digitising services:
In a world where face to face is not possible right now and new consumer habits are being cemented, do we really think we can go back to the old ways once covid-19 restrictions are lifted? Brands need to act fast and get the services online and use f2f as a means for additional support for occasional or exceptional use rather than the cornerstone of their services. Digital disrupters are paving the way for the future and it’s time for the rest of the market to catch up.
3. Leading the revolution and embracing transformational change:
Brands will need to respond to lasting social changes, including how consumers select channel preferences, products, and providers for their individual financial needs that are likely to result from the current crisis. Behavioural changes may accelerate the shift of the branch concept away from transactions toward a more complex, high-value operation. Now is the time for Financial Services brands think big – think agile services, agile people models, agile working patterns to service consumers according to their new lifestyle and demands during this time and beyond. It’s an industry that’s not known for outsourcing. but this could be about to change as brands who want to not only survive, but win, make quick strides to get ahead. Partnering with third party agencies, some of whom may already be FCA approved, could be a quick win to lighten the load in the short term while they redefine service offerings for the future. Agency partners could enable call handling, potentially 24/7, offer advice remotely, and crunch data to discover the best way to engage and create communities in whatever the new world looks like. All in a cost efficient and scalable way.
If you want to talk to us about any of these trends or services, please contact us. To follow our series on what a post-covid world may looks like across consumers, brands and environment visit our LinkedIn page for regular updates.
ABOUT THE EXPERT:
For more information on Phil Sumbler, Head of Financial Services, visit his LinkedIn page.