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Three Ways Financial Services Companies Can Dial-Up Empathy

In the last 15 months, the world has vaulted years ahead in digital acceptance. As consumers gain tech experience, their standards get higher. They’ve developed the ability to tune out fake empathy and cringe at personalization efforts that are either lame or creepy.

Yet empathy counts more than it ever has before. During the pandemic, unemployment because of a harsh reality, many individuals lost or were separated from loved ones, several were forced to postpone milestone moments and no one was able to participate in the communities that made them feel the happiest and safe.  Brands and companies that build true connections are those that understand that context is everything. Personalization is only relevant and timely when it relates to what prospects and customers are going through at that moment.

Financial services companies have a clear advantage compared to other industries, with more data-driven insights that reveal specific struggles. While not every family’s finances have been impacted, 51% of consumers added to their credit card debt during the pandemic. Additionally, Pew Research reports 27% of consumers are worried about the cost of healthcare.

Catch Up With Missed Milestones

Financial services companies can improve personalization efforts by helping people catch up with milestones. The weddings, graduation ceremonies and retirement parties that were put on hold due to COVID-19 left emotional holes. Consumers are still coming to terms with the impact of that disruption. And as vaccination rates rise and cases drop, people are looking to reclaim those “lost” moments.

Weddings are a happy example. The Knot predicts this year will be the biggest wedding year ever, increasing by 20 to 25%. And many couples who got hitched during the pandemic will celebrate with a long-delayed bash.

Moving house – always a significant financial transition – has also taken on outsize proportions, with millions of millennials struggling to find affordable homes. They are trying to navigate a real-estate reality that’s markedly different, not just because of the pandemic. Housing prices are soaring, up 23.6% – a record increase. And after two decades of declining home construction, experts say America needs an additional 5.5 million units.

It’s a market more confusing than their parents ever faced­. Instead of buying dream houses or starter homes that make them feel financially comfortable, they’re often stuck. They need content that helps them make the best choices and financial partners that understand their frustrations and disappointments.

Consumers also need support for events that aren’t happening. The birthrate has been falling for some time, but experts believe COVID-19 caused a further 8.6% decline. Again, this loss is felt more keenly among millennial women.

But baby boomers and Gen Xers are taking some emotional lumps, too. About 40% of retirement savers say the pandemic has shaken their confidence in their financial plans, and 32% in their 50s plan to delay retirement as a result.

Even more disruptive? Nearly 2 million older Americans have been forced out of work into a retirement they aren’t quite ready for.

To handle these curveballs, people need new planning tools, focused content and a tone that recognizes new challenges. Even automated content needs to be more human, sensing what consumers crave at each touchpoint.

Understanding The Pandemic’s Lasting Economic Impacts on Women

The pandemic fundamentally altered life for many women in deep and profound ways. Not only did women lose more jobs than men, but one in four employed women have considered leaving the workforce or downshifting their careers, according to Lean In. The pandemic also pushed women to take on multiple roles including juggling more family responsibilities. Lean In says moms are 1.5 times more likely to be spending three or more hours a day on housework and childcare.

And while many companies just spouted generic “We’re here for you” messaging, some built genuine relationships. For instance, fintechs like Betterment and Ellevest are personalizing marketing and content messaging to emphasize what female customers can do for themselves in light of COVID career setbacks and how they can help other women directly impacted by the pandemic.

These enormous problems will shape family life for years to come. Companies that tailor valuable content, compassionate messaging and thoughtful timing can achieve relevance. Those that don’t risk getting dismissed or, worse, alienating a key customer base.

Three Ways Financial Services Companies Can Dial-Up Empathy

1) Give existing marketing messaging a compassion check-up.

How should personalization strategy change given the effects of the pandemic on life events? Which use-cases should take priority? How can marketing and content be more empathetic to new realities?

2) Identify changes in customer needs across the journey.

Using consumer interviews and behavioral insights, identify how customer needs have shifted because of the pandemic’s wide-sweeping effects and how that impacts their customer journey. How might products and services need to adapt to best meet these needs?

3) Develop personalized experiences around life events that are more likely to occur post-pandemic.

From the brand’s perspective, prioritize the most relevant life events that relate to the customer journey and develop personalized touchpoints for them.


FINAL THOUGHTS

As the world continues to open back up, consumers’ financial needs are evolving. It’s time for financial services companies to think even more carefully about how those changing needs best align with their digital transformation priorities. It requires an empathic ear to hear how customer priorities are shifting and an agile mindset to adapt quickly. Life has changed in fundamental ways for so many, creating an opportunity to build brand relevance in this post-COVID-19 environment.

To learn more about the latest market and consumer trends impacting your business, reach out to Prophet.

WEBCAST

Webinar Replay: The Insurance Customer of the Future

We take an in-depth look at sweeping demographic and psychographic changes shaping the insurance landscape.

59 min

Prophet’s financial services team leaders moderate a discussion with executives from MetLife, Thrivent and Shift Technology on the way customer behaviors are shifting and these shifts are impacting their transformation priorities.

Watch to learn:

  • The key findings about insurance customer behavior shifts – and predictions for their shift over the next decade
  • The ways financial services organizations – from a global insurance provider to an AI-native InsureTech company – are helping build better experiences for their customers
  • The top priorities of senior leaders advancing transformation agendas of their own

Panelists:

  • Michelle Froah, SVP Global Marketing Strategy & Sciences, MetLife
  • Rohit Mull, Chief Marketing Officer, Thrivent
  • Benjamin Braunschvig, Global Head of Partnerships, Shift Technology

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Three Ways Financial Services Companies Can Help Advisors Win in the Meme-Stock Age

Who cares if it’s trendy? Meeting digitally-driven new investors in their favorite channels can help brands win fans.

Some people – including the co-founder of Reddit – say that the tsunami of new investors snapping up shares of GameStop, Clover Health and AMC amounts to a “bottom-up revolution.”

Maybe. We certainly agree that the meme-stock movement, the viral stock surge of GameStop, AMC, and others in the first part of 2021, means new and old types of consumers are looking for financial advice in new places.  The pandemic-induced shift to virtual interactions made consumers open to new channels for receiving advice. As we look beyond the pandemic, and advisors need to find ways to establish credibility and win trust.

These digitally-driven customers represent enormous growth possibilities if served in the right way. For companies and advisors, this requires agility in responding to market changes and commitment to cohesive omnichannel experiences, especially when it comes to onboarding clients.

Companies that don’t adapt fast enough or don’t support their financial advisors with the right tools are pushed out of consideration. A recent study of more than 250 financial planners finds that 77% of advisors have lost business because they did not have the right technology to interact with customers. In fact, these advisors reported losing an average of 20% of book value as a result.

Redefining Target Markets

First, it’s time to ditch the negative “Reddit bro” and “FinTok” stereotypes. Yes, there’s plenty of over-the-top gambling going on in social media and some genuinely terrible investing advice. However meme-stock investors aren’t just young kids investing pizza money. In fact, meme-stock investors represented a major slice of America. A Yahoo Finance-Harris Poll found that in January 2021 – the height of the GameStop saga – 28% of American adults had purchased shares of viral stock that month. Nearly half of those people invested more than $250 and almost 17% were more than 45 years old.

But even before that, we saw massive increases in the demand for digital financial advice. The pandemic served as a financial reset for many, and consumers began reaching out to advisors with greater urgency. One study found that 67% of people said the pandemic had been a wake-up call for them to examine their finances.

“A recent study of more than 250 financial planners finds that 77% of advisors have lost business because they did not have the right technology to interact with customers.”

Another study from  Nationwide Financial, which surveyed more than 2,000 people, found that by the first week in April of 2020, 24% said the pandemic had ­caused them to contact a financial adviser for the first time. It also reported that 80% of respondents felt they had lost control of their ability to manage their investments and finances.

Fast forward eight months to the GameStop frenzy. “How to invest in stocks” surged in Google search rankings, proving how quickly people moved from feeling helpless to digital derring-do. These people, who are adults, want answers, with 73% of viral-stock investors saying they have researched the U.S. financial system and 20% consulting a financial advisor before buying.

“Since then, some advisors and firms proactively publish content with a clear point-of-view on how to navigate meme-stock fluctuations. They adjust their content strategy to anticipate the flood of customer questions and to educate and prevent hasty decisions.

The best of both fintech and legacy companies are stepping up their tech investments. They understand the elevated consumer demands for frequency and channel of advisor interactions. Facet Wealth, for instance, makes its sign-up process straightforward. Once a prospect becomes a client, the dashboard makes it easy for them to engage with their finances from one place and schedule an appointment with their advisor.

It’s smart since 53% of millennials and 29% of baby boomers say they would switch advisors if they can’t use satisfactory technology.

Three Ways Financial Services Brands Can Gain Relevance in the Meme Stock Era

  1. Survey financial advisors to understand what support they need to proactively initiate conversations about topics like viral stock options and to explore different channels by which to interact with customers.
  2. Create a market sensing function to respond to market changes. And compile a centralized point-of-view on hot topics, offering a range of responses to support advisors.
  3. Incorporate a regular placeholder within the marketing content calendar for market commentary to proactively address market changes and reinforce brand credibility.

FINAL THOUGHTS

Firms that win in the market use digital-first thinking to create agile experiences and proactive communications. They’re stepping away from dated ideas about who invests and why. These innovators are working to establish trust and meet customers where they are right now. They’re striving to support remote customer-advisor relationships that meet and exceed technology table stakes. In doing so, they’re building trust and relevance in the era of digital-first finance.

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How Transformation Can Help Insurers Win With Rapidly Evolving Customers

Insurance brands must find new partners, focus on value-added services and transform their business model.

Insurance customers’ needs are rapidly changing, but the industry is not. With insurtech companies – like Hippo, Root and Lemonade – overwhelming the market, longstanding insurance leaders can’t shake organizational norms and industry standards, preventing them from connecting with digitally native consumers ahead of new disruptors.

We often hear our insurance clients ask us, “How can I best prepare for the future needs of our customers?”

Insurers are ready to mobilize their transformation efforts to become more customer-centric businesses, but they often implement new technologies or point solutions without a clearly defined digital strategy to guide their efforts. Without a holistic understanding of digital transformation (which goes well beyond technology implementation), insurance companies miss the mark with their customers. They struggle to find the true sweet spot between consumer privacy and personalization – while providing the right level of transparency and autonomy. Not to mention, customer expectations are changing each day making it extremely difficult for legacy insurers to keep up with their demands.

“Without a holistic understanding of digital transformation insurance companies miss the mark with their customers.”

Prophet’s new research report, The Insurance Customer of the Future, was written to highlight the most pertinent market trends set to impact the insurance industry in the next decade and explains how these trends are changing the relationship between customers and their insurance providers.

We centered the research around “Jamie,” an insurance customer living in 2030. By understanding and anticipating the generational trends and technological possibilities that will shape Jamie’s environment, insurers can make the right transformation moves to win Jamie’s – and her peers – business in the future.

But it won’t be easy to become the kind of insurance company Jamie wants to choose. While battling new entrants and advancements in technology, insurers need to keep their ever-evolving customers’ needs, values and expectations at the center of their transformation agenda.

Here’s how insurers need to transform their businesses over the next decade:

  1. Go beyond personalization
  2. Find partners to build holistic ecosystems
  3. Transform business models to serve next-generation customers
  4. Double down on capital-light, value-added services
  5. Reimagine the mind, body and soul of the organization

FINAL THOUGHTS

Plain and simple: the insurance industry is ripe for disruption. Insurers will either be disrupted by insurtech or be the disruptors. By prioritizing these five core areas as a part of their transformation agendas, insurers will cater to their future customers and achieve the disruptive growth they crave. The report gives insurance leaders the research, insights and ‘action items’ needed to capture the future market and create a new standard for customer experience within the industry. Read the report today.

Are you looking for a partner to usher you along your customer-centric transformation journey? Prophet can help. Reach out to our financial services team today.

REPORT

The Insurance Customer of the Future: Welcome to 2030

Take a closer look at the broad demographic, social, economic and tech trends that will define the next decade.

Meet Jamie, the insurance customer of 2030. What will it take to win her business?

The Insurance Customer of the Future report is the latest research from Prophet’s Financial Services practice. It explains how insurers can drive growth by putting their customers at the center of their transformation strategies. The first step? Understanding their customers on a deeper level. Not only understanding who they are, what they value and what they need in the present, but also several years down the line.

Prophet’s experts centered their research around Jamie, an insurance customer living in 2030. By understanding and anticipating the generational trends and technological possibilities that will shape Jamie’s environment, insurers can make the right transformation moves now to win Jamie’s – and her peers – business in the future.

Read this report to gain deeper insights on:

  • The digital transformation trajectory of the insurance industry and its implications for business leaders
  • The broad demographic, social, economic and technology trends that will define the decade ahead for insurers and their customers
  • The evolving consumer demands that will shape the future of insurance
  • The ways insurers need to transform their businesses to win in the “new world”

Download the full report.

Download The Insurance Customer of the Future: Welcome to 2030

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REPORT

How To Sell Insurance in the Post-Pandemic Digital Age

Agents need organization structures to help navigate a fast-changing, digital environment. Our roadmap helps.

The insurance game is changing. The past year has seen life completely upended for insurance agents, whose success once hinged on a certain skillset, often with physical touchpoints. While many insurance providers have raced to increase digital selling efforts in reaction to COVID-19, the results have been mixed. It’s going to keep changing too, so it’s time to adapt to fuel a post-pandemic recovery and lead the way to future growth.

Embracing Digital Selling from our dedicated Financial Services practice outlines a roadmap for digital selling with the steps to take now in order to create a strategy that supports new digital tools, efficient models and the development of the necessary capabilities.

In this report you will learn:

  • The four primary challenges insurers need to overcome to compete in the digital world
  • How insurers can maximize digital selling efforts for both short and long term growth
  • A roadmap to guide how to install a structure that helps agents navigate a fast-changing, digital selling environment

Download the full report below.

Download The Insurance Customer of the Future: Welcome to 2030

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Top Digital Transformation Challenges in Financial Services

Collaboration and personalization can help legacy firms outpace fintech upstarts.

When it comes to digital engagement, some of the biggest names in financial services still can’t seem to move fast enough.

While upstart brands like Cash App, Alipay, Monzo and Robinhood rack up millions of new customers, many legacy financial services companies are plodding along. There is progress, but many digital transformation initiatives are underperforming.

“Many digital transformation initiatives are underperforming.”

There’s no question that companies like Capital One and USAA are breaking new ground. But despite increased spending, many others are lagging behind – both in how they think about digital transformation strategy and how they execute it.

At Prophet, we wanted a better sense of what’s holding these companies back and how financial services compared to other industries. Our digital transformation research dug into the details of transformation, surveying 476 digital executives worldwide, including 150 who work in financial services.

One major finding? If efforts are uneven, it’s not necessarily because they’re underfunded. Digital marketing budgets in financial services now comprise between 50 and 70 percent of marketing resources. That’s up from a range of 20 to 40 percent in 2018. And while COVID-19 is causing some firms to cut spending as part of overall cost reductions, most execs recognize the need for more digital marketing in an increasingly virtual world.

The 2020 State of Digital Transformation research uncovers three key digital transformation challenges found in the financial services industry:

1. Missing Objectives

Financial services firms still focus on traditional marketing objectives, like increasing brand awareness or developing brand reputation. Those goals matter. But it often means that they pay less attention to higher-impact digital targets, such as adding customers (which ranks as the first priority across all industries) and increasing revenues from key customers and accounts (ranks as the second priority). And they lag even further behind financial disruptors, which use marketing to generate leads.

2. Gaps in Personalization

While almost half of the financial services respondents rank personalization as a top priority, the industry is lagging in delivering those experiences, something that is considered table stakes in other industries. While dynamic personalization is a key characteristic of digitally mature enterprises, less than half of financial services believe they can personalize at optimal levels. And 16 percent of firms don’t personalize at all across channels. There’s also a worrisome level of false confidence. Almost half do not use marketing technology (martech) platforms to scale personalization efforts, despite the general consensus that martech is needed to deliver optimal levels of personalization.

3. Lagging in Collaboration

Certainly, marketing teams at financial services companies understand that it’s essential to work closely with other business functions, especially sales. They know they need to continue to prioritize this cross-functional collaboration. In the context of demand generation and B2B2C marketing, this increased collaboration is crucial to ensuring a lead doesn’t get dropped and is ultimately converted. About three-quarters of financial services respondents plan to invest in cross-functional efforts going forward, indicating that plans are taking this collaboration need into account. While the mindset and plans for the future are good news, it’s still worth noting these efforts lag in practice. About two-thirds of respondents increased collaboration with sales over the last two years, compared with 75 percent of respondents in all industries. Almost a third of respondents actually cut back on collaboration.

The Underlying Challenges: Integration Struggles and Skill Shortages

There are two underlying areas to address that are critical to solving the above problems. First, financial services still struggle to integrate the technology they already have. Almost half of all financial services firms say they lack the budget and integration mechanisms for their technology, specifically the martech stack.

And second, finding and hiring the right talent is still difficult. More technical skills are central to digital marketing talent needs, especially data analysis, marketing automation and software expertise.


FINAL THOUGHTS

As financial services firms look to improve and accelerate their transformation efforts, here are five ways to increase the pace of change:

  1. Use digital marketing to drive growth through generating leads and acquiring more customers, rather than simply building brand awareness.
    Integrate a marketing technology stack that enables personalization.
    Prioritize cross-functional collaboration between marketing and other departments, especially sales, for the greatest business impact.
    Focus on integrating martech into the existing technology stack by ensuring adequate budget and resourcing is in place.
    Develop recruiting strategies and revamped employee value propositions to fill talent gaps, especially in the ability to make existing martech solutions work better.

Is your business equipped to compete? Our expert Financial Services practice can help to devise a clear strategy to move your business forward in 2021 and beyond, get in touch today.

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Head of Digital at MB Bank Discusses Fueling Growth Through Digital Transformation

Becoming a truly digital-first organization requires a fundamental change in how companies do business.

In today’s corporate world, is there a more highly sought-after term than “digital transformation”? Probably not. COVID-19 is acting as a catalyst in accelerating many organizations’ digital transformation agendas. New technologies and business models are putting many existing players at risk with disruptive forces. Becoming a truly digital-first organization requires a fundamental change in how business is done. Corporate leaders understand the criticality of digital transformation, however, many are struggling with how to advance it.

We had the pleasure to interview Mr. Vu Thanh Trung, Head of Digital Banking at MB Bank. MB Bank (Military Commercial Joint Stock Bank) is one of the largest financial services groups in Vietnam. Over the past few years, MB Bank initiated a multi-year transformation program to become a digital-first bank. As part of the transformation, Prophet worked with MB Bank on customer expansion strategies and helped to pave the way to a more modern, digital and customer-centric bank. In this interview, Mr. Trung provides valuable insights on how to transform and what it takes to be a digital organization today.

What drove MB Bank to embark on a digital transformation agenda?

The banking industry in Vietnam is a nascent market with considerable room for growth. With a wide penetration of the Internet and smartphones and a growing digital-savvy population, Vietnamese consumers are rapidly shifting towards digital and mobile banking. They desire more seamless digital banking services with a more personalized customer experience. To meet the increasingly demanding expectations of customers in the region, MB Bank needed to fully embrace digital transformation to capitalize on the boom of digital adoption.

What has MB Bank done so far to digitally transform?

We started the digital transformation from scratch almost four years ago. A new digital bank was set up as an independent business unit at the end of 2017 with our own balance sheet, separate from the legacy bank. Our digital transformation efforts focus on two fronts: externally, we want to better understand the marketplace and the customer needs; internally, we want to introduce collaborative and nimble ways of working across divisions.

Prophet has been our indispensable partner on this multi-year strategic growth and digital transformation journey to become more customer-centric and more innovative. We started with an in-depth segmentation of our customer needs, behaviors and attitudes. Then we mapped out a roadmap with clear growth moves focused on innovating and transforming our digital offers. An important part of our digital transformation is to instill more agility and cross-organization collaboration. Prophet showed us how to innovate faster, pilot and launch quicker. We were able to revamp the digital banking app within three months, which normally would take 12-18 months.

Lastly, I want to talk about the achievement we have made on the people front so far. We started with a team 100 percent from the legacy bank and then recruited external technical expertise to fill the functional gaps. We now have a well-balanced commercial and technical team (some 400 in-house engineers) and work more cohesively in a start-up-like environment to drive towards our digital transformation ambitions.

What are the priorities for your digital transformation?

Among all things, we focus on our PEOPLE first. Digital transformation is not about technologies, but rather about changing the mindset of our people – our organizational culture and processes. Hence, we think people should be the ones to drive the technology and not the other way around.

As I mentioned, we started off with a team 100 percent from the legacy bank. We want to create a more entrepreneurial environment where people are empowered to make a difference to MB Bank in a more cohesive and dynamic way. This is rather different from the culture of our legacy bank. So, we need to train our people with new skills and more importantly, shift their mindset towards a digital culture while building up our technological capabilities.

“Digital transformation is not about technologies, but rather about changing the mindset of our people – our organizational culture and processes”

Prophet helped us to implement a nimbler way of working to get closer to the customers and shorten the time to market. We set a shared purpose and vision to help our people to be more personally and emotionally invested. We broke down the silo way of working and replaced it with a collaborative approach. With this new way of working, we managed to revamp the digital banking app at least four times faster.

The results so far have exceeded our expectations. In the midst of the pandemic last year, we launched our new digital banking app, which became the No. 1 app in Vietnam surpassing even Facebook and TikTok. Within nine months of the launch of the new app, we had 1.8 million new customers. A feat we are very proud of given the harsh pandemic landscape and lockdowns.

What advice would you give to leaders looking to drive transformation and ensure the organization has what it needs to succeed?

Leadership is an absolute requirement for any successful digital transformation. It’s not only about setting the vision, defining the strategies and building C-suite commitment. Leaders must “walk the talk” to establish a digital culture so that everyone is on board.

The success of digital transformation must be paired with a comprehensive talent strategy that sets your people up for success.  In order to do so, we aligned incentives with staff performance to drive target reaching, providing tools and opportunities for upskilling and collaboration to help employees reach their goals.

Why do you think cultivating an innovative culture is important in a digital transformation program?

To me, digital transformation marks a reimagination of how an organization uses its technology, people and process to fundamentally change how we run the business. Digital transformation doesn’t come in a box. It provides the guidelines to steer people’s behaviors that advance our company’s goals.

A lot of organizations fail in digital transformation by ignoring the importance of culture. For MB Bank, we instilled an innovative culture through new ways of working. The agile way of working spurs our innovation process through cross-functional collaboration—allowing our people to take risks, fail fast and learn.

What are the challenges you have faced in your digital transformation journey?

We are still at the early stage of our journey. We need to continuously work on integrating technology seamlessly into every aspect of our organization to unlock the full potential of digital transformation. We need to reboot the parts of our operating model that pose hurdles for more cross-functional collaboration and operational efficiency. Then there is the holy grail of data — we are reorganizing our customer data as it is currently scattered across different legacy systems. We are in the process of integrating and synthesizing this data more effectively so that they can provide more meaningful, actionable insights for business units.

So, what are your next steps?

We are rebooting our operating model into a more unified structure and working to enhance collaboration across all business units. We need to further instill the innovative culture to fully tap into every individual’s potential and reap the benefits of agile methodology. And finally cracking the data issue across different systems so we can design more products and services to better serve our customers. We are really glad to have Prophet be our partner on this journey, helping us transform and steering us to become the leading digital bank of the future.


FINAL THOUGHTS

Read our case study to learn how we helped MB Bank refresh their brand platform to embark on a digital transformation journey.

If you’d like to discuss your organization’s digital transformation agenda and journey, reach out to our team. We’d be excited to partner with you.

REPORT

Reclaiming Interest: A Transformation Playbook for the Insurance Industry

Learn to transform your organization from the inside-out, adding the capabilities and talent needed right now.

While insurance companies have made much progress in reinventing themselves for today’s customers, the results are clear: there’s still some way to go. As many turn their attention toward planning and formulating their strategies for the year ahead, this playbook from our Financial Services practice outlines the different levers to pull in order to speed up digital transformation efforts and customer experience initiatives.

In this playbook you will learn:

  • How insurers can transform their organizations from the inside out by effecting culture change and equipping the business with the right talent and capabilities to succeed in 2021.
  • How a customer-centric approach can help your business, how to get started and how to measure you efforts.
  • What the state of transformation is in the industry today and the reasons to hit the gas now.

Download the full report below.

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How to Effect Culture Change in Financial Services

By dialing up agility, empathy, inclusivity and curiosity, companies can inspire effective transformation.

Financial services companies have been pursuing transformation for years, but the events of 2020 have only underscored the need for these firms to rapidly evolve. In a few months, the world has achieved years of digital progress, shining an unflattering light on the many companies that lag. Many legacy financial services organizations, hierarchical and slow-moving, stand to lose as much as 35% of banking revenues to more tech-savvy rivals. That’s on top of an estimated $1 trillion in losses the sector may give up as a result of COVID-19.

Legacy companies are difficult to change by design. They were built for capital longevity and regulatory compliance, not agility and innovation. But they can’t afford to stand still. The ones that are making the most progress are moving forward at two speeds. First, they’re executing multiple plans at lightning pace to get teams and market positions back to “normal.”

But they’re also operating at a second speed, radically reimagining their future. They know that to survive, they have to innovate. And they have to create change throughout the entire organization – to transform, in the truest sense of the word. Prophet’s Catalysts in Action: Applying the Cultural Levers of Transformation report analyzes how companies around the world are achieving that transformation, identifying four essential pathways of change:

  • Defining the Transformation
  • Directing the Transformation
  • Enabling the Transformation
  • Motivating the Transformation

Here we dive deeper into each of these pathways with some industry examples:

Defining the Transformation: Driving Clarity

This step establishes a unifying ambition that is powerful and actionable, and that appeals to all levels of leadership.

We recently ran research with hundreds of leaders to study the cultural levers of transformation, including 100+ from financial services companies, who were more likely than average to say that their initial transformational efforts are proving effective.

But there are still roadblocks. Financial services companies often stumble when developing a transformation mission that is clear and actionable throughout the organization. It’s essential for leaders to get key stakeholders throughout the enterprise on board with the transformation plan in order for it to succeed.

Capital One, for example, has achieved extraordinary success by committing to a clear technology mandate. With a rallying cry of ingenuity, simplicity and humanity, the mission makes as much sense to thousands of software engineers and cloud executives as it does to customer-service representatives. Not only does Capital One excel among its peers, but its recruiting clout is on par with the best tech firms.

Directing the Transformation: Adapting the Operating Model

Financial companies, with their complex hierarchies and sprawling brand portfolios, often find that changing their operating model to support these ambitions is daunting. It involves overhauling governance, processes, roles, systems and tools. But these changes are essential: All parts of the organization need to line up with this leaner, faster thinking.

“Many legacy financial services organizations, hierarchical and slow-moving, stand to lose as much as 35% of banking revenues to more tech-savvy rivals.”

American Express offers an example of successfully directing the transformation. When it decided to shift its operating model away from relying on merchant fees to increasing card use, it re-engineered itself so that all functions could support the company’s new goals. That means decisions can be made quickly and laterally, without hierarchical delays.

But others struggle, in part because once a plan is prepared, executives are reluctant to share those roadmaps throughout the business. Our research finds that financial services companies tend to restrict these blueprints to the C-Suite – only 34% make it visible to the broader organization. That guarded attitude impedes financial-services companies from successfully adapting their operating models. Everyone needs to know where the company is headed in order to direct the transformation

Financial-services companies do have some advantages, though. Compared to other industries, they are more likely to update their roadmaps often, with 42% evaluating progress on a weekly basis compared to 31% in other industries. They’re also better at developing key performance indicators – 78% believe KPIs were well executed and measured transformation progress well.

Enabling the Transformation: Building a New Talent Model

None of these changes can take hold if the right people with the right skills aren’t in place. That requires shaking up methods of finding new talent and developing skills and competencies among current employees.

This includes hiring a diverse workforce and learning to listen to what they say. Leaders “who are inherently inclusive and collaborative and encourage good ideas to surface from wherever” are critical, says Mary Ann Villanueva, head of brand culture and engagement at Citi.

Our research finds that financial services companies are somewhat more willing to train and upskill employees than other sectors. One recent home run comes from JP Morgan’s $11 billion annual investment in tech, including an army of 50,000 technologists. That powered it to record results before the pandemic and continues to fuel the company’s exceptionally resilient performance so far this year.

Motivating the Transformation: Inspiring the Change

This aspect of change requires leaders throughout the organization to bring the transformation plan to life. In companies that are successfully transforming, executives don’t just talk about change – they exemplify it in ways that inspire employees to become evangelists for the new ways of working. Above all, they cultivate a tolerance for failure. Missteps are inevitable and failure is where an organization often finds opportunity. When teams fear failure, they seek broad consensus, which slows decision-making.

“We’re trying to enable employees to fail on small things, such as experiments in the innovation lab, to achieve success on the big targets,” Trung Vu Thanh, head of digital banking for MB Bank Vietnam, tells our research team. “We’re trying to push to the limit and use innovation, as more ideas will help.”

It’s hard to find a better example than USAA in this realm. USAA is best known for its intense focus on families and pride in military service. But its commitment to customer-centricity is so deeply ingrained into the test-and-learn culture that employees submit more than 10,000 customer-experience improvement ideas each year. Almost 900 are so good they’re patented. (And 25 of them came from a security guard, who – like all employees – is also a customer.) It’s an organization that draws its strength and energy from trying to find new ways to excel.


FINAL THOUGHTS

Taken together, these four pathways – harnessing curiosity, agility, inclusivity and empathy – can help financial services companies navigate their transformation. They build deep cross-functional engagement and collaboration. When combined with a shared sense of purpose, they can follow the transformative path to uncommon growth.

If you want to learn more about how our expert team can help your company accelerate change by transforming from the inside out then contact us today. 

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Digital Transformation for Financial Services: Three Reasons to Hit the Gas

Legacy companies are moving faster, keeping up with their fintech competitors.

While the financial services industry is undergoing almost constant transformation, fintech startups drive most of it. As these rising stars continuously find new ways to introduce customer-centric innovation, incumbent financial institutions are struggling to keep up. “The 2020 State of Digital Transformation,” a new report from Altimeter, a Prophet company, finds that even as these tech-savvy newcomers surge to record valuations, 68% of traditional financial services companies report that they are only in the early stages of digital transformation. And they say that COVID-19 has slowed their progress even further.

While validating the obstacles many legacy companies face as they navigate their way forward, this research makes clear that this is no time to slow down. The sooner companies lean in and accelerate digital efforts, the more revenue and market share they can reclaim from newcomers.

Fending off the fintech onslaught

There’s no doubt that capital markets are favoring these fintech startups. In 2019, KPMG reports that investment hit $135 billion. These companies are growing in scale and revenue, with 68 achieving “unicorns” status, a valuation of at least $1 billion, as of this past September, according to CB Insights. And while they span consumer banking, payment solutions, insurance technology and trading, they have plenty in common: They’re disruptive, customer-centric and digital to their core.

Chime, a neobank startup offering digital cash management services and debit cards, is one of our favorite examples. It has tripled its transaction volume and revenue this year, achieving a $14.5 billion valuation.

“The sooner companies lean in and accelerate digital efforts, the more revenue and market share they can reclaim from newcomers.”

And Robinhood, a commission-free brokerage platform, saw daily average trades skyrocket to 4.3 million in June, surpassing all traditional brokerage firms. Among the household names left in the dust: TD Ameritrade, with 3.84 million, Charles Schwab at 1.8 million and E-Trade at 1.1 million.

But some traditional banking institutions, such as Marcus, Goldman Sachs’ consumer banking platform, have also seen rapid growth during the pandemic. It’s grown to more than $27 billion in savings from 500,000 customers, indicating that even legacy companies can successfully transform into digitally-powered institutions.

How legacy companies can catch up on digital transformation for financial services

Altimeter’s report delves into how incumbents are trying to catch up. Based on an in-depth survey of 600 executives, including 137 in financial services, three clear imperatives emerge.

1) Move faster. The majority of financial services firms are still early in their digital transformation journey.

Altimeter’s research measures digital transformation through a five-stage model. First, companies make their case for investing in digital. Next, they develop foundations for more comprehensive investment, seeking to understand customer journeys and improve employees’ digital skills. From there, they build operations, digitizing them at scale. Fourth, they integrate these platforms to use data more strategically, and finally, optimize for growth, leveraging data and AI for great customer experiences.

Only 25% of the companies in our study have moved beyond this to the final two phases. Financial-services execs say they are moving even more slowly. Some 68% say their companies are still in the first two years of their transformation journey, and only 38% say they’ve reached the third phase (building operations). That compares to more than 50% of healthcare, tech and retail companies.

And that’s far too slow for consumers. The latest banking satisfaction research from J.D. Power, for example, shows that the more digital the customer, the more significant the satisfaction gap. And dissatisfaction is highest among Gen Z customers, a fast-growing demographic.


Source: The 2020 State of Digital Transformation 

2) Make new ways to reach customers a higher priority

Optimizing internal processes is a compelling reason to pursue digital transformation, named by 40% of respondents and 33% name responding to COVID-19. And to create the resilience to navigate the current economic and health crisis, financial service executives recognize that their digital transformation should focus on improving operations and enable them to operate in a more agile and flexible way.

But our data suggest that these companies should give more weight to the many ways digital transformation could provide firms with opportunities to reach customers through new digital channels, particularly as more consumers look to engage primarily online.

As the market continues to change, and consumer preferences and tendencies evolve significantly due to COVID-19, financial services brands are picking up on the need to leverage advanced technology and data to become more flexible and agile.

Source: The 2020 State of Digital Transformation 

3) Acknowledge new barriers

Transformation has not been easy, given legal hurdles and inherent resistance to change. And COVID-19 is creating new challenges. With urgent demands for supporting remote work and developing digital marketing and selling tools, the pandemic has hijacked many corporate priorities. In fact, 45% of our respondents say pandemic response and related budget considerations are the most significant challenge they face. And of course, traditional obstacles like risk management, resistance to change or rigid structures haven’t gone away.

Source: The 2020 State of Digital Transformation 


FINAL THOUGHTS

The global economic and health crisis has impacted the way we think about digital transformation. This research underscores questions leaders within these companies should ask, to accelerate the transformation and achieve growth.

  1. How has your organization accelerated or reprioritized its digital transformation initiatives in response to the current environment?
  2. What obstacles are you encountering as part of that acceleration?
  3. Is your agenda building greater operational resilience for your business?

Prophet’s financial services practice has been partnering with many clients in accelerating their digital transformation journey. Please contact us to learn more.

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4 Ways Financial Services Companies are Supporting Customers Through COVID-19

Look for new and empathetic ways to offer guidance and provide relief.

COVID-19 is undeniably reshaping how we live and work. 

Financial services companies may be better positioned than some other industries to weather this storm, but they – and the customers they serve – are nonetheless grappling with a variety of major shifts. 

COVID-19 is not only impacting the way consumers and businesses interact with their financial services providers, but it is also impacting what they need from their financial services providers. For instance:

  • More businesses are seeking small business loans in response to the stimulus package. 
  • More consumers need mobile banking solutions for items they previously would have visited for in-branch.
  • Increasingly, employers need to find the best way to keep their employees updated about potentially changing benefits. 

As the effects of the COVID-19 crisis continue to unfold, we’re seeing four themes emerge.

Here’s how financial services and insurance companies are responding to the crisis today:

1. Providing an empathetic approach to addressing customers’ rapidly evolving needs, even “from a distance” 

Banks, credit card companies, and insurance providers are working to provide easy access to information in a time of high uncertainty. 

Banks that have previously been leaders in offering online banking – like Capital One and PNC – have been encouraging customers now more than ever to service their banking needs online with digital tools and services by reminding them how to check balances, pay bills, and transfer money online. They have also been expanding systems to ensure that they are able to handle an increase in inbound digital servicing. And, where possible, companies are deploying additional digital tools, including options to request payment deferrals and online chat services to enable customers to avoid longer than usual hold times at call centers.

“Companies are deploying additional digital tools, including options to request payment deferrals and online chat services to enable customers to avoid longer than usual hold times at call centers.”

Financial services and insurance companies are also empowering call service representatives to take action and address customers’ concerns directly without additional approvals. To deploy these new working norms, companies are launching additional training for customer service representatives who are bombarded by anxious customers. The trainings are focused on leading with empathy while being empowered to offer additional forms of financial relief.

2. Finding new ways to guide customers through a time of crisis

Some financial services companies are helping customers address their evolving financial situations through either an increase in available information or planning tools that enable customers to better navigate their financial picture given the uncertainty of the crisis. Examples of this response include Vanguard holding live webcasts and using a dedicated section of their website to educate customers on how to navigate market volatility, and HSBC is using its financial expertise to help customers manage their emergency finances with access to an Emergency Savings Fund Calculator tool.

3. Providing direct financial relief to customers or easing the pressure of monthly payments

Financial institutions including American Express, Chase, Discover, and many others have reported offering financial assistance or deferring payments in order to address the evolving financial situation caused by COVID-19. Furthermore, most companies are offering additional forms of relief that may be made available to customers who reach out and explain how COVID-19 has personally affected their personal financial situation or has caused hardship for their business. Depending on the provider, forms of relief include:

  • Waiving interest fees, late fees, or minimum payments for a period of time.
  • Not reporting payment deferrals such as late payments to credit bureaus.
  • Delaying due dates for some borrowers on cards, auto loans and mortgages.
  • Increasing spending limits for certain cardholders on a case-by-case basis.

In addition to providing payment deferral options, the top ten sellers of personal car insurance have pledged to give back more than $7 billion in reduced premiums through programs like Allstate’s ‘Shelter-in-Place Payback’ and Statefarm’s ‘Good Neighbor Relief Program.’

4. Giving philanthropic donations to support organizations that are providing direct aid to addressing the crisis

Many financial services and insurance companies have also already provided philanthropic donations focused on addressing issues of hunger and food insecurity, or to provide direct relief to community development organizations where the majority of their employees are located. Beyond giving donations to local communities and to support basic needs, some financial services companies have also provided additional donations to support broader communities including Bank of America’s pledge to support an initiative with Khan Academy to offer free online learning for Pre-K – Grade 12 students throughout this crisis. While USAA has committed that a portion of its donations will be designated to non-profits focused specifically on helping members of the military.


FINAL THOUGHTS

In the medium-term, we expect to see financial services and insurance companies begin to launch preliminary, near-term strategic responses. Given the continuously evolving nature of this ongoing situation, longer-term strategies will emerge as the pandemic slows and economies emerge with a clearer view of the new current state.

For many companies, the near-term and long-term strategies will require an accelerated digital transformation in order to meet changing customer needs and experience expectations. Companies will need to build smarter, faster and more flexible organizations to create new business models that operate at the pace of ever-changing markets in order to build and sustain crucial brand relevance.

If you need help figuring out what path to take now, in the next 6-8 months, or beyond, please don’t hesitate to reach out. We’re happy to have a conversation. Also, if you have any questions you’d like answered by our experts, drop them into the comments below or reach out directly here.

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