The future of money relies on digital
by Carlo Lacota, Head of Banking and Financial Services, ANZ at Cognizant
The era of digital disruption has brought new challenges involving security, privacy, and technology access. It is therefore imperative for financial services providers to take stock and consider how to deepen their customer relationships.
The inability to capitalise on the opportunity that digital brings to attract and retain customers will increase churn velocity and further increase cost as customer retention costs far less than acquisition.
Our relationship with money is broken
A recent global study by Cognizant revealed that people’s relationship with money is broken, with over half of the study respondents saying money and finances made for a major source of stress in their lives, and over a third (37%) stating that money alone was the biggest stress in their lives.
A persistent sense of anxiety prevails because people feel like they are not fully in control of their finances, despite the fact that money pervades almost everything of importance.
This is where an opportunity exists for financial services providers to fully utilise the potential of digital to gain a much better understanding of customers’ relationship with money. There’s also much untapped potential to study differing attitudes to what we call “fast” and “slow” money, and provide a much more intuitive service that will also help to ease the monetary worries.
Understanding fast and slow money
“Fast” money is a term that covers daily and short-term spending and is focused on the exchange of goods and services, whereas “slow” money covers things such as pensions, insurance and investments. “Slow money” is assigned to a distant future purpose and is generally more difficult for customers to manage and understand.
While “fast money” has benefited greatly from digitisation, the potential for what digital can do for “slow money” remains relatively unexplored, which is somewhat strange given the fact that it is around “slow money” that people face their biggest financial challenges.
How digital can transform “slow money”
Financial institutions are missing out on a great opportunity to increase customer loyalty, attract new business and have a closer relationship with their customers by not fully utilising digital in the “slow money” business segment.
We estimate that by digitising slow money, banks can achieve an increase in annual revenue in excess of 14% of which 8% would stem from a reduction in customer churn, as an increase in the uptake of “slow money” products increases customer loyalty and lock-in.
By digitising slow money, banks can guide customers through financial decisions and keep them regularly updated on the status of their finances, and translate often complex and unwieldy data into meaningful information, which, in turn, provides a greater feeling of control over financial affairs, and strengthens their relationship with their banks.
Banks can also consolidate a customer’s transactional, behavioural, financial and socio-demographic data into a single view that is shared, remembered and used at every touchpoint, thereby providing a personalised service. A recent survey by WP Engine stated 38% of Australians would actually stop visiting a website if it did not give them a personalised experience, and anticipate what they needed, liked or wanted.
From a bank’s perspective, having a greater customer understanding enables new insights to provide better services. For example, through data, a financial institution will know “life events” such as starting university, buying or moving home, investment changes, and job changes. All have major financial ramifications and present an opportunity to intuitively offer ways in which banks can help the customer prepare for such events prior to seeking alternate relationships.
Customers can be guided along the path of healthier financial behaviours by being presented with easy-to-understand information about their financial situation. Digitally-led initiatives can also offer comparisons between various investment options so customers can easily determine the most suitable strategy for their personal circumstances. This is at the core of a “slow money” digital strategy.
In many ways, banks and financial institutions have already got things right when it comes to using digital for “fast money”, by giving customers convenience with new payments options and online banking services. The challenge they now face is to use digital to provide meaningful guidance in matters relating to “slow money”.
The financial institutions that do so will be leaders in this new banking paradigm.