Innovating in the Financial Services Industry
Post 2020, marketing changed. At Setup, we keep an eye on current marketing trends and behaviors. As we head into 2022, we’ve asked a number of industries about their predictions and focuses for the new year. Among those industries, we recently spoke with experts in the Financial Services industry to hear their thoughts.
The following contributions are from Response Media, Modo Modo, and Three Five Two - marketing agencies that work with Financial Services clients.
What innovative changes are happening in the Financial Services space? What changes do you think will remain permanent?
“Throughout the pandemic, the financial services industry saw a lot of volatility. Digitalization was a big Achilles heel for the industry. Fundamentally, financial services were caught with their pants down, woefully behind the times.”
Increase in Tech Spending
It is no secret that processes in every industry had to adapt quickly. Nearly every industry has turned digital over the last two years, causing current systems to uproot and restructure. Sarah Woodward, the EVP of Growth at Three Five Two, stated, “Lenders struggled to keep up with processing, reviews, and approval, seriously impeding the pace of business.”
The digital adaptation was not a choice, but a need. Because industries like Financial Services were not ready to pounce into digital, it is taking some time to “catch up.” Woodward continued, “Most core systems weren’t built to scale to the type of demand we saw over the last 18 months. Data processing speeds and methods are behind, hindering companies’ ability to respond as quickly as customers need them to. Forrester predicts tech spending by financial institutions will double in 2022 in order to catch up to infrastructure demands to support the market pace.”
Touchless Payments
Advancements in technology were already headed to touchless payment. The pandemic surged this need as consumers wanted not only convenience, but cleanliness with their purchases.
“Consumer demand is driving this realization,” stated Woodward. “Touchless payment, for instance, was no longer a nice-to-have or something only tech-forward institutions offered. We saw a 27% increase in touchless in 2020, and 3 out of 4 consumers expect touchless to be the norm.”
Digging Deeper into the Consumer Experience
“The newer players are fixing the disconnect.”
Doubling down on technological advancements like touchless payments are in an effort to make the consumer’s life easier. Companies are listening to their consumers and filling in the gaps to make the consumer’s life easier in every space. Josh Perlstein, the CEO of Response Media, pointed out these “traditional” financial institutions that have been ignored are now serviced by fintech startups. “Whether it's the insurance space (Lemonade), investing (Robinhood, Acorns, Republic) or banking/lending/financing (Chime, Kabbage) - the BIG shift is that consumers get immediate feedback in a simple digital environment.” He continued, “Waiting for approvals, having to talk with someone, or visiting a branch have always been the norm in the finance category -- but the newer players are fixing the disconnect -- and that’s exactly what younger customers want (think millennial and gen-z). Smart money keeps pouring into the space, so expect more innovations and smoother, faster consumer/customer experiences to come.”
Adopting an Account-based Mindset
Everything is connected and there is a lot going on behind the scenes.
Nicole Wedekind, the Group Account Director at Modo Modo, shares, “Financial Services is acknowledging how aligned and connected their functional teams must be in order to drive healthy customer relationships. Everything from how the customer is acquired and onboarded, to how they’re serviced and marketed to, determines the lifetime value of that customer.”
Instead of different departments in compliance or risk management serving customers in a siloed fashion, Wedekind mentioned that “things like customer data platforms and ABM technologies and processes are allowing them to take a more holistic organizational view and approach.”
What aspects of marketing for the industry are unique from other industries?
“Financial marketing has unique regulatory, targeting, and reporting nuances which a good marketer must understand before jumping into the space.”
Financial Services harbors on consumer trust. “Bain reports 54% of consumers trust at least one tech company more than their own bank,” stated Woodward. “Lending institutions and debt management companies walk a fine line between the perception of empowering consumers and preying on them,” making it tricky to develop and maintain that connection. Financial Services is investing in personalized experiences by integrating machine learning, automation, chatbots, and a mobile-first experience.
What are some predictions you have for 2022?
“Organizations will have to champion a culture of innovation in order to continue to drive net new product pipelines.”
More Innovation
“Despite having to come from behind, the industry quickly scaled to new product and service innovations to meet market demand. Now that they’ve felt what it’s like to work in an agile environment where speed to market is vital, financial service product teams are in no hurry to slow down,” shared Woodward.
Marty Fleischmann, the Chief Development Officer at Response Media, provided a perfect example of this fast-paced innovation. “While household income (HHI) and credit score segmentation and targeting spread to many marketing verticals in the 80s and 90s, this last decade we've seen the rise in custom, real-time lending decision algorithms by the new breed of small business & personal capital companies (OnDeck, Kabbage, LendingPoint, Greensky, etc). These advanced algorithms (now grouped under "AI") powered by more and more personal data collection are here to stay and the technique is spreading to other verticals, but only time will tell how they are embraced.”
Alternative Financing + Education
“We’re seeing growing interest and offerings around financing at the point of sale,”Wedekind stated.
“Consumers are embracing concepts like Buy Now Pay Later (BNPL) and more companies are cropping up to offer alternative financing—for everything from small-ticket items, to luxury goods, to things like rent and utilities.” She pointed out that these methods are helpful for consumers as they manage short-term cash flow, but it is on financial service firms and retailers to educate the consumer to ensure responsible lending.
Perlstein added, “Expect more democratization of investing products and services for smaller investors, and massive growth in the Alternative Investing space -- think greater accessibility to investing in real estate, crypto, sustainability efforts and the like. Where alt investing used to be the domain of high net worth individuals, institutions, and professionals -- I expect huge growth in this segment of finance in the next few years.”
Media Involvement
Companies are hopping on the Podcast train, and Financial Services is no exception! Wedekind believes, based on the age and experience of podcast listeners, that Financial Service firms will excel in the podcast world.
“A recent study forecasted monthly podcast listeners to increase more than 10% YoY in 2021 (to 117.8 million), and to ultimately hit 144 million by the end of 2025. More than 60% are of regular podcast listeners are 18 to 34, and they tend to be affluent and educated, making them a prime audience for FS firms looking to attract new customers and drive awareness around their full array of financial products and offerings,” shared Wedekind.
The Financial Services industry is working hard to catch up to the innovation of other industries to properly serve and keep the trust of consumers. After collecting interviews from industry professionals in an array of fields, three themes stick out:
Adapt to digital or become obsolete
Meet your customer where they are
Convenience is key
In the fast-paced world of digital marketing, it might feel impossible to keep up. Staying ahead of the curb is as important as having your morning coffee – miss it, and you might find yourself dozing off at the wheel.
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