Navigating Digital Disruption in Financial Services

Like most industries today, digital innovation now serves as a primary success factor. Allowing consumers to understand and easily manage finances without a traditional broker or bank presents an existential threat to the industry. By embracing new technologies, disruptors like LendingClub, a peer-to-peer lending company, and FutureAdvisor, a digital investment manager, are pushing traditional banks to find new ways to stay relevant to the ever-evolving consumer.

The New Financial Consumer

Today’s consumer is digitally savvy and always on the go. They’ve come to expect simple user experiences coupled with information that is easy to understand and accessible wherever they are. Millennials in particular tend to bank differently than other consumers. According to the 2015 Nielsen Report Millennials in 2015: Financial Deep Dive, “Millennials are cautious bankers, wary of traditional financial and investment strategies.”

They’ve taken a do-it-yourself approach to finance. And with the influx of mobile services like Apple Wallet, Android Pay and apps like Stash that enable consumers to invest as easily as ordering an Uber, rarely do they find a need to balance a checkbook, visit brick-and-mortar bank locations or talk to a Financial Adviser. The always on and on-demand mentality is more present than ever before and is moving beyond banking to all aspects of financial services.

Interestingly enough, while 42 percent of millennials surveyed put their spare cash after covering essential living expenses into a savings account, only 11 percent put it into a retirement fund or invest in stock/mutual funds. If this is any indication on how they perceive banks and advisors, traditional financial institutions have a lot of work to do.

So, how can the incumbent financial institutions maintain market share as consumers expect the same digital experience from their bank as they do from Amazon or Uber?

Consider the Customer Journey

The biggest challenges facing financial organizations don’t stem from insufficient technology. They result from the difficulty of integrating emerging technologies within established systems. This means shifting from siloed, department-centric organizations to agile, customer-centric organizations that leverage digital technologies to create better customer experiences.

It’s no longer adequate to passively wait for consumers to make a purchase decision after they’ve become a client. Instead, banks and financial services organizations need to engage consumers at every stage of their purchase journey. This isn’t just because of the immediate opportunities to convert interest to sales, but also because the decisions that consumers make are informed by the quality of their experiences.

Consumers are constantly inundated with messages across a variety of channels and devices. Financial organizations need to craft compelling consumer experiences in which all interactions are personalized. To do this, financial companies should engage with consumers using the right channel(s) and at multiple touch points along the way. The most successful organizations have learned that digital marketing is not an add-on to their marketing. They understand the importance of integrating it into their overall planning, analytics and messaging strategy, enabling teams and individuals to foster near real-time customer engagement. This brings value to the consumer while also delivering bottom-line results to the organization.

Focused on delivering an innovative customer experience, services like Wealthfront, FutureAdvisor, and Betterment, have established themselves as leaders in the emergent “robo-advisor” field. Their approach isn’t new. Using personal income, net worth and attitudes to assess a client’s risk tolerance, they recommend and build portfolios similar to a live broker but with better content, explanations and tutorials. What’s also different is that since two-thirds to three-fourths of financial advisors don’t make it beyond five years, trust is much higher knowing that they’re not relying on the advice of someone in a transient commission-based role.

Bring Digital to the Forefront

Banks are great at risk management, financial governance, investing and asset management – the core competencies of a financial institution. For most financial services companies, digital isn’t a priority because it’s simply never been a part of a bank’s DNA. In order to bring technology to the forefront, banks must make cultural and institutional changes to let technology drive enhanced customer experiences.

To truly drive innovation in the customer lifecycle, financial institutions need to leverage the vast amount of consumer insights and data to effectively guide multi-channel marketing initiatives and personalization. Organizations must apply advanced analytics to the vast amount of structured and unstructured data that’s at their disposal to gain a holistic view of their consumers. This includes analyses of the consumer’s current relationships, recent behaviors and past experiences with the company. This requires thinking like an eCommerce company more than a bank, while still maintaining a high degree of customer privacy and protection.

All players in the “robo-advisor” space have taken advantage of this array of data. While many financial service providers look to demographics to tell them who their prospective client is to craft ad campaigns and plan media, it’s rarely used to personalize and improve the experience. New players in the space go further to understand psychographics to create a truly holistic profile beyond explicit information. These new entrants can ultimately create more responsive and tailor-made experiences by utilizing information like customer login frequency, social graph data, and mobile vs. web use. Through this, they can simplify the investment process, provide feedback to a broad base of consumers in various life stages and mimic the customer experience of a seasoned and more expensive financial advisor.

Earn the Trust of Consumers

Over time, confidence in banks and financial advisors has eroded. According to Nielsen Report, Millennial consumers, especially, want a transparent and authentic relationship with their financial institutions. Because of this, many financial institutions are faced with re-evaluating the way they offer products and services to a new generation of digitally native consumers. Smart financial institutions are building trust through increased transparency, re-aligning products and direct education. In order to build relationships, earn greater trust and reap the advantages of consumer loyalty, financial institutions will have to successfully leverage innovation, balance their needs and safeguard their wealth.

Companies can do so by giving consumers an easy way to understand how their money is working for them. Education and transparency will help them feel like they’re in the driver’s seat. With the diminishing patience of digital consumers, any process or privacy concerns that are overly complicated will likely turn them off and lead them to choose a different service.

Financial institutions that come out on top will shift the messaging model around simplicity and transparency, not assets under management or years in business. Owning consumers’ trust can be acquired by large institutions and newcomers alike. It can be achieved by putting customers first  —  in the ways departments are structured, employees are incentivized and capital investments are made.

Invest in Partnerships or Acquisitions Rather Than Building In-house

For many financial service institutions, the concerns of organizational leadership are typically far-removed from the consumer. Ask a CEO at a bank or financial institution what success means to them. They’ll likely be more concerned with managing risk, liquidity and return on investments for shareholders. Critical, yes; but it’s rare to hear success that’s tied to excellence in digital marketing, innovation, analytics or understanding the customer journey. As technology continues to change the customer experience, financial organizations should look outside their organizations to help shift greater focus to a digital solution that meets the needs of the end user.

For those financial services institutions where consumers and digital are an afterthought, find a partner that understands how to marry financial services, especially the regulatory aspects, with an overarching digital strategy. A solid partner should be thinking about the customer relationship and full customer lifecycle rather than a single transaction.


Financial services organizations that ultimately succeed in navigating disruptive innovations show an ability to effectively leverage data and digital touchpoints to drive growth and reduce costs. Further, real-time content management and partnerships with agile companies will help bring products or services to market faster and create exceptional customer experiences. Finally, and arguably most importantly, the institutions that will rise above are the ones that put their consumers first.

This article was written by Ready Set Rocket Co-founder and Chief Strategist, Alex Lirtsman. To read the original piece on ATM Marketplace, head here.

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