The Future of Financial Services: Becoming More Customer Centric Is Vital

Changing customer expectations, technological innovation and new regulation are transforming the face of financial services, but progress takes time. This is the conclusion of a round table discussion on the future of financial services hosted by Spotcap last week.

Representatives from Deutsche Bank, Figo, GP Bullhound, McKinsey and Spotcap debated how the financial ecosystem model will evolve, the implications for the customer, and the challenges and opportunities for fintechs and banks.

As competitive pressures mount, financial service providers try to better cater to evolving customer demands, but Nadja Schlössel, Head of Product Strategy at Figo, the first European banking service provider, thinks the industry is struggling to become truly customer centric.

“Customer segments are not being met by pure templates anymore, so the challenge for banks and fintechs alike is to find out what customers really want. Customer centricity starts where you really solve the problem and this is the biggest weakness in the industry at the moment”, observed Schlössel.

Panelist Julian Riedlbauer, Partner & Head of the German office at GP Bullhound, a leading investment banking firm was quick to point to changing customer demands in light of technological innovations. “Customers want choice. They don’t want to be limited to bank products – they want to access new offerings like robo advice, new ways of investing money or securing finance without having to register with ten different providers,”  stated Riedlbauer.

Listen to an audio recording of the round table available on Spotcap’s SoundCloud channel.

Most  panelists agreed that as customers demand more innovative products and greater choice, many banks will look to fintech companies for expertise and technology solutions. A survey among our audience of  fintechs, banks and corporates revealed that many of them were already collaborating (39%) or planning to do so (46%) this year. This emerging trend, will allow banks to build a financial ecosystem, where they can choose which fintechs to partner with, whilst retaining their customer relationships and expanding their offerings.

“To build a successful ecosystem banks have to identify their customers’ needs and then decide who they want to involve as partners. They need to have a strategy for the ecosystem they would like to build and the role they want to play in there”, explained Andre Jerenz, Associate Partner, McKinsey & Company.

Although legacy systems can make it difficult for banks to integrate new technologies with fintech partners, the right partnerships can be a win-win for both banks and fintechs. Jens Woloszczak, Founder and CEO of Spotcap encouraged both banks and fintechs to embrace the opportunities these collaborations present, but cautioned them to be aware of the challenges.

“Building a customer base takes time, effort and money. Partnering with a bank gives fintechs direct access to a large customer base, adds exposure and credibility, whilst banks can offer additional, innovative services. It obviously requires a strong product that can be swiftly integrated into the bank’s system”, said Woloszczak.

With tech giants such as Amazon and Google entering the market, creating an ecosystem may become an increasingly important strategy for the banks to fend off the competition. In fact, 50 per cent  of our audience believed that tech giants entering the financial services space would be the biggest force for change in the industry in the next five years, followed by regulation and customer demand for more innovative products (21% each).  Only 8 per cent voted for continued competition from fintechs and challenger banks as a main trigger for change.

“The major competitive advantage banks have is data protection and security – we’ll have to see how valuable this is from a customer perspective. Change will happen, but only gradually in the short term. I think in five years’ time the industry will still look similar to today. Banks will continue to innovate and fintechs will continue to progress.  In the more distant future, the big universal banks may become more like infrastructure providers,” says Milos Spiridonovic, CFA, Head of Startups@Berlin, Deutsche Bank.

The discussion was moderated by Nadine Schimroszik, IT Correspondent at Reuters.To listen to the entire round table tune in to the second episode of Spotlight on Fintech a place for all things related to finance, technology and innovation produced by Spotcap, available on iTunes and SoundCloud.

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