How does the new wave of digital transformation affect financial services?
New companies backed by big investment groups add pressure to legacy companies’ efforts to move their businesses into the digital age. Learn how this new wave of digital transformation affect financial services and download our e-book, Digital Disruption in Financial Services: How to Manage Change.
For years now, consumers and companies have been moving their activities online. In the first wave banks, insurance companies and investment groups moved their existing services online and made self service a part of everyday life. The second wave of digital transformation saw the dawn of new, small and highly agile companies with specialized services who succeeded in attracting clients from legacy companies.
Now, a third wave is coming, and surfing on top of it are newly-formed companies backed by big money.
“The main thing that has changed recently is the entering of some very heavily invested new companies with a lot of financial backing from large investors around the world,” says Lucas Santacruz, Customer Service Director at AlfaPeople.
Most of the old banks have very heavy legacy systems, which have been developed and expanded on for many years. Suddenly, new companies have appeared with the opportunity to build their software architecture from scratch.
“This allows them to be more innovative and modern right from the start. They could only do that because they were financially backed, because it costs a lot of money to make it happen,” Lucas Santacruz says.
Whereas the former disruptors were small, innovative start-ups, the current wave is heavily backed by large investors. This increases the pressure on legacy companies to fully embrace the digital transformation and meet the demands of a highly-digitalized public.
Where are the financial services going?
The new companies in financial services are particularly successful in doing two things better than legacy companies: Providing clients with relevant choices and making communication easy.
These are the two primary drivers of mobility in the market at the moment.
The ability to pick and choose your services freely instead of having to rely on ‘pre assembled’ packages is very attractive to the modern consumer who values individual choice. The new companies provide exactly the types of specialized services that meet this trend.
Legacy companies must embrace free choice in order to compete effectively with these newcomers. Trying to force service packages on clients with promises of discounts and the like will only further alienate legacy companies in the eyes of the modern consumer.
The customer decides where to engage
This coincides with today’s second major driver, communication. Making communication between clients and service providers easy is a big challenge for legacy companies, whereas ease of communication is already baked into the apps and business models of new companies.
Lucas Santacruz explains:
“One of the main changes is being present wherever the customer is or wants to be – I’m talking about the relevance of using different channels,” he says. “In the past it was more like a decision from the company, where they wanted to be present, but nowadays we are seeing the opposite. So the customer decides where to engage, where to start a conversation and where to demand different services.”
In other words, it is important for legacy companies to be aware of where and how the clients wish to communicate. If that communication calls for having an account on Facebook, Twitter, WhatsApp – or all of them – that is what the company should do.
This applies to both B2C and B2B. In the end, we are talking about people.
“Even though we are discussing the relationship between large investment banks and a company, the managers might want to discuss matters using Telegram or WhatsApp or something like that. So the relationship itself has changed a lot. The engagement models have changed a lot,” Lucas Santacruz says.
So how does digital transformation affect financial services?
Moving forward, legacy companies will want to focus on tailoring services to the clients’ needs through an approach based on dialogue and flexible communication. This typically requires the implementation of new digital structures, first and foremost on the frontend, where the clients get their initial experience with the company.
Learn more about how companies can navigate a changing financial sector in our e-book, Digital Disruption in Financial Services: How to Manage Change.
Interested in learning more? You can always contact Alfapeople