By Suzi Bentley-Tanner, Strategy Director at digital and data consultancy Engine Transformation

The imperative for change within financial services has never been greater. Organisations have had to rapidly digitise and automate in response to the pandemic, in addition to addressing increasing demands in consumer behaviour, continued erosion of trust, and an increase in disruption from unlikely sources.

These changes are leading to a rise in traditional banks partnering with digital firms to drive down operational costs, as well as a decrease in branch networks, and an overall drive towards leaner organisations. Established FinTechs who have had to scale must now consider how to behave like grown-ups, with well-articulated customer propositions, and a seamless experience.

A roadmap for recovery and reinvention in the wake of COVID-19 is now required to address recent trends.

Looking at these trends in a bit more detail, from a customer perspective, expectations are changing, fast. The expansion of big data, social media, and the ease with which you can find or buy nearly anything you need, means that people are accustomed to rapid, personalised experiences, and those expectations extend to financial services.

In addition, COVID has forced people into different behaviours which are unlikely to be reversed, including online shopping, contactless payments and digital banking.

Although it was evident before COVID, financial anxiety and subsequent re-appraisal of risk have been accentuated in recent months. Edelman’s Trust Barometer places financial services and the end of the pack, with COVID driving a further 5% decrease from 2020 to 2021.

The financial services industry is also witnessing a continued erosion of trust in authority and institutions seen as part of the establishment. This isn’t an area where financial services has helped itself, from the financial crisis through to JP Morgan bankrolling the European Super League.

Companies outside of the financial services sector are also seeking new arenas to drive growth, accrue data and leverage their existing assets. This represents a real threat to traditional organisations, who are less able to connect into more tangible (and perhaps more appreciated) service offers.

Walmart may be in the spotlight for its “Hazel by Walmart” financial services trademark application, but the big-box retailer is not alone, as non-financial companies with a strong e-commerce operation are adding banking services for their large customer bases.

Advancements in payment technology and pandemic-era trends toward automated commerce provides these firms with the ability to register and store credentials for hundreds of millions of users internationally.

These trends present several challenges. For more traditional organisations, there is an increased risk of commoditisation, especially as the role for physical banks declines. Rigid, institutionalised thinking is no longer fit for purpose. But hamstrung by legacy technology and late to the relevance and personalisation party means that they are finding it difficult to move beyond providing purely economic value to align commercial priorities with societal contribution.

Established FinTechs who have had to scale rapidly must also take stock. Rather than sprightly ingenues, they now consider how to behave like grown-ups, shifting from a product focus to a more marketing driven organisation, by investing in well-articulated customer propositions, and a seamless experience.

Where to begin? Many transformation programmes over-index on technology, but we believe that successful change requires awareness and action across a number of interdependent elements and considers them as a formula specific to each organisation and project context. Each formula is unique, leveraging unique assets and advantage, and must be balanced in terms of focus and investment.

Transformational elements include:

• Brand: how strong, and well-articulated your brand is, and how well-aligned your brand ambition is to the experience you deliver
• Culture and organisation: how ‘transformation ready’ you are, and the extent to which you can break free from hierarchies and silos
• Customer: the quality of intelligence and insight you have about your customers, and the value they represent
• Data: how accurate it is, how readily you can access it and what capabilities you possess to turn data into action and competitive advantage
• Strategy: the degree to which your strategy is anchored in your advantage and assets, and the extent to which you stay true to a North Star
• Technology: adept at agile and adaptable delivery, and in deploying technology to drive additional revenues or efficiencies

The key is to evaluate the current state of play across each of these elements and determine where to focus and invest to deliver against a clear North Star. If you consider the industry as a whole, there are challenges across each of these dimensions, from an increased risk of commoditisation and brand invisibility as the role of physical banks decline, to the need to be less authoritarian, and more egalitarian and agile.

Transformation programmes need to focus on addressing these head on, and make a number of shifts; from ‘on the high street’ to ‘in the pocket’, from traditional hierarchies towards ‘ideas and innovation first’ models, encouraging more agile working practices and embracing ‘Test & Learn’. Organisations must also become more proactive and develop predictive solutions to improve customer wellbeing, financially and beyond, using data to deliver better customer outcomes aligned to purpose. Finally, they need to move from product focused to customer value-driven thinking, responding more quickly to changing market conditions and individual customer needs, and leveraging technology to humanise relationships with customers and staff alike.

If financial services institutions are able to successfully transform, they will be able to  future-proof their businesses and generate sustainable growth.