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White paper September 2012
Daoud Fakhri
Senior Analyst Retail Banking
I joined Datamonitor as an analyst in 2009, having previously worked in market research, and I specialize in the retail banking sector. The succession of bankingrelated events over the last few years have made this a very interesting field to work in, and I have written numerous reports on topics such as the prospects for new and non-traditional entrants in the sector, the future of branch banking, developments in online and mobile banking, and the vexed issue of consumer trust. I have also spoken at several industry events, including a Financial Services Forum seminar on the future of branch banking, a Digital Banking Club presentation on meeting customer needs in digital banking, and a Marketforce panel discussion on the customer experience and digital banking. I have also spoken on BBC radio about the recent service failure at Royal Bank of Scotland Group. If you have questions about the research, data, and findings within this document you can put your questions directly to the analysts. Simply email your questions to askfs@datamonitor.com. To find out more about Datamonitor Financial contact us at: email datamonitor_fs@datamonitor.com phone +44 20 7551 9437 Visit our website: www.datamonitorfinancial.com Or follow us on Twitter: @DatamonitorFS
DISCLAIMER While every care is taken to ensure the accuracy of the information contained in this material, the facts, estimates, and opinions stated are based on information and sources which, while we believe them to be reliable, are not guaranteed. In particular, it should not be relied upon as the sole source of reference in relation to the subject matter. No liability can be accepted by Datamonitor, its directors, or employees for any loss occasioned to any person or entity acting or failing to act as a result of anything contained in or omitted from the content of this material, or our conclusions as stated. The findings are Datamonitor's current opinions; they are subject to change without notice. Datamonitor has no obligation to update or amend the research or to let anyone know if our opinions change materially.
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The Financial Customer Intelligence framework presents eight mega-trends that help us to understand the needs, preferences, and demands of consumers. It is vital to understand the attitudes and behaviors of consumers in order to design products and services that align with these demands.
Source: Datamonitor. Marketing Strategies for Rebranding Financial Services (2012)
This document will focus on the Convenience mega-trend. Convenience is one of the eight mega-trends that Datamonitor has identified as being a significant driver of consumer behavior in relation to the purchase and use of financial services and products.
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Consumers today are busier than ever before, having to combine longer working hours and complex family commitments with increased demands on their leisure time. Datamonitor's 2011 Financial Services Consumer Insight (FSCI) Survey provides evidence for this, finding that 39% of consumers worldwide think that their lives are becoming more stressful as a result of these and other pressures, and 23% believe that their work-life balance is worsening.
In order to help consumers more effectively manage the increasing demands on their time, banks and other providers need to enable them to carry out their financial activities as quickly as possible and to do so at times of their choosing. Consumers are looking for solutions that will let them manage their finances with as little effort as possible.
Source: Datamonitor. Marketing Strategies for Rebranding Financial Services (2012)
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Datamonitor's Financial Customer Intelligence framework summarizes these two Convenience trends as Time Scarcity and Ease of Use. This white paper will use current case studies to illustrate how each of the sub-trends is now impacting on the financial services industry.
Consumers want to be able to conduct their financial chores whenever and wherever they are. Technology that facilitates this and makes conducting chores quicker must be available to consumers.
Most major banks now offer dedicated mobile banking applications, but some offer a much more sophisticated user experience than others. Caisse d’Epargne’s app was rated the joint best mobile banking app in the world by MyPrivateBanking in 2011, on the strength of its design and functionality.
As well as offering the usual range of transactional facilities, this app lets users perform tasks such as communicating securely with their advisors, accessing their revolving credit facilities, managing their investment portfolios, and checking their insurance coverage. Users are therefore afforded much greater freedom to conduct their financial activities when and where they please.
Banks have traditionally lagged behind the retail sector when it comes to fitting in with modern lifestyles. Whereas shops are generally open until late and throughout the weekend, most bank branches close at 5pm and have very limited weekend opening hours.
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Metro Bank, which launched in the UK in 2010, is changing this. Its branches are open until 8pm on weekdays, until 6pm on Saturdays, and are even open until 5pm on Sundays. The bank is thus fully able to cater for consumers who work long or unpredictable hours. Adding to the air of convenience, Metro Bank offers instant account opening with on-the-spot printing of debit cards and chequebooks. Source: Reuters/Toby Melville (2010)
In a related move, banks in markets as diverse as the US, Thailand, and South Africa have taken to opening branches within retail outlets. As well as offering obvious cost savings, these instore branches are generally open for extended hours and allow customers to conduct their banking activities at the same time as doing their shopping, helping them to save time.
Consumers want to save time on conducting their financial affairs. Outsourcing these chores to financial advisors or financial management tools helps consumers to save time by reducing their personal effort.
Managing an investment portfolio can be daunting and time-consuming for many consumers, particularly when it comes to monitoring performance and managing risk. InvestorBee, a new investment-focused website, aims to make the task easier by harnessing the wisdom of crowds. Its website has details of over 1 million investors and has classified them into different categories according to Source: InvestorBee (2012)
their attitudes to risk and investing.
Users can then compare the composition, performance, and volatility of their portfolios to a benchmark comprising likeminded investors. Visual tools let them
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easily see the effect of different strategies on portfolio performance, and they can also view recommendations from over 700 funds based on their attitudes and investment goals.
InvestorBee therefore does most of the legwork on behalf of investors, saving them time and allowing them to make more considered decisions.
MoneyVista, from Royal London, is a comprehensive online financial planning tool. Upon completing a detailed questionnaire, MoneyVista gives users a customised financial plan based on their income, expenditure, life expectancy, financial holdings, and goals. This plan appears as an interactive timeline that visually depicts expected changes in income and asset values, as well as the impact of key events, projected as far ahead as retirement.
The main value of the service lies in its holisitic, integrated nature. Users can manage all aspects of their finances, including budgeting, monitoring savings and investments, and analyzing the impact of changes in expenditure and other parameters on goals such as retirement provision. Users also have access to a range of explanatory videos, calculators, financial guides and articles, and discussion forums.
The all-encompassing nature of MoneyVista sets it apart from its competitors and will appeal to consumers who are are happy to manage their own finances but are looking for some extra guidance.
The packaging of products and services reduces the number of purchases and points of contact for consumers, saving them both time and effort.
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In addition to their standard free-if-in-credit current accounts, most providers now offer so-called added value accounts that include extra features such as travel insurance and breakdown cover in return for a fixed monthly fee. These products offer obvious advantages to consumers looking to save time and effort when organizing their finances. However, there is growing concern that the lack of flexibility to choose specific benefits means that these accounts may not be suitable for many consumers.
Barclays has addressed this issue by introducing a range of tailored packages that cover home, travel, and technology. Each bundle includes closely related benefits, with the “Home Pack,� for example, offering extended warranties on domestic appliances, satellite and TV equipment cover, a PC troubleshooting service, and a concierge service. Customers can choose any or all of the packages that best meet their needs.
Although this approach does not offer complete flexibility, it is a significant improvement on what is available elsewhere, and will widen the relevance and appeal of these accounts to consumers.
Consumers demand high performance products that save them effort. Products must be efficient and effective, and produce the results expected by consumers.
The process of buying a new home can be a very stressful and time-consuming experience for consumers. They need to deal with several issues, such as working out budgets, researching locations, choosing a suitable property, and arranging finance.
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Commonwealth Bank in Australia’s mobile Property Guide app aims to make the process easier. It uses augmented reality to clearly present property information to users when exploring neighborhoods, provides access to sales history, current property listings and recent sales, offers a step-by-step guide to buying a home, includes a mortgage repayment calculator, and allows users to make appointments with an advisor.
Not only does the Property Guide app bring together all the information and tools that consumers need to research the market and buy a home in one place, it allows them to do this while in the field, thus helping to simplify what can be a highly complex process. The concept has proved very popular, and banks around the world, including CIBC in Canada with its Home Advisor app and Halifax in the UK with its Home Finder app, have followed suit and brought out similar services.
Source: Commonwealth Bank (2012)
In the US, there is no real equivalent to the direct debit system for paying regular bills that is so widespread in the UK. Responsibility for ensuring that bills are paid on time therefore lies with consumers themselves. Not only does this mean that extra time is spent on keeping track of upcoming bills, it also means that there is increased scope for missed or late payments. Consequently, there is a need for services that can help consumers to keep on top of their bills.
One such service is provided by BillTracker. This paid-for app Source: BillTracker on iTunes (2012)
allows users to organize all their
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bills, including loans, credit cards, mortgages, utilities, and others, in one easyto-view calendar that clearly highlights due dates and outstanding amounts. The app also maintains a history of previous payments, allowing users to track their outgoings over time. It therefore becomes much easier for consumers to keep on top of their obligations and minimizes the risk of missing payment deadlines.
Growing pressures on household budgets mean that consumers are now much more focused on reducing their debts, with the result that there is a market for debt management services.
DebtMinder, another paid-for app, tracks a user’s outstanding debts and calculates a personalized repayment schedule to pay off those debts as quickly as possible. Users can amend their plans to focus on paying off either the highest interest debts first, or following the popular snowball method for debt reduction, the smallest balance debts. The app also offers the facility to show debt reduction progress in a visual format.
Source: DebtMinder on iTunes (2012)
These three examples all show how the provision of carefully thought-out new services can make the everyday business of financial management simpler, less stressful, and less prone to error.
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The increasingly complex and busy nature of modern lifestyles highlights the importance of providing services that save consumers’ time and effort, and this is nowhere more apparent than in the financial sphere. This paper has identified several examples of products and services that have helped to simplify the way in which consumers can conduct and manage their finances.
Datamonitor's Financial Customer Intelligence framework helps to identify the different issues that providers need to be aware of when trying to devise convenience-maximizing propositions.
Consumers, on the whole, do not enjoy spending time on managing their finances. Unlike other activities, such as shopping, there is little that is intrinsically appealing about this activity, and most consumers regard it as a chore to be endured rather than something to be enjoyed.
Financial institutions are therefore under greater pressure than almost every other kind of provider to ensure that the products and services they bring to market are designed from the point of view of the consumer. They must offer clear benefits with respect to making the task of financial management quicker, simpler, and less demanding.
This means that products need, in the first instance, to save consumers time. This can be done by allowing them to carry out tasks when out-and-about, for example when commuting. Processes can also be speeded up through the
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ability to carry out or automate tasks that were previously the responsibility of the end user.
Another tactic to maximize convenience is to reduce the effort consumers need to put into managing their finances. This can encompass the provision of all-inone, integrated solutions that save them the trouble of having to use a range of different providers. Alternatively, it can mean offering innovative services that allow consumers to carry out tasks efficiently and effectively ranging from routine chores such as paying bills to more complex activities such as buying a house.
Financial institutions that prove themselves the best at providing convenient solutions that save consumers time and effort will gain a vital competitive edge over their less customer-centric rivals and stand to improve their market share.
Help consumers to save time – The ever increasing time pressures on consumers make any methods of saving time an attractive proposition.
Allow consumers to conduct their finances on-the-go – Mobile and online banking facilities are essential to many consumers; providers that do not offer these will lag behind.
Bundle or package products and services – Save consumers’ time and effort by offering bundles or packages of products to reduce points of contact.
Use technology effectively – Technology can make processes much quicker and easier but only if used intelligently to reduce the time that consumers spend on their financial chores.
Allow consumers to outsource where possible – Tools and calculators that help to reduce the effort required from consumers will improve convenience.
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At Datamonitor Financial, we deliver intelligence-led insight and data on financial services markets, competitors, and consumers. Our robust forecasting methodologies, proprietary databases, and the experience and knowledge of our in-house analysts help clients to make better strategic decisions in the areas of Retail Banking, Cards & Payments, Savings & Investments, Private Wealth Management, Life & Pensions, and General Insurance. Our research on cards and payments covers competitor developments, consumer attitudes, market forecasts, and technology developments, highlighting current and future trends. The Global Payment Card Analyzer, our proprietary online tool, includes market size, consumer, and competitor data for 60 countries.
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