The future of financial services: Striking the balance between human and machine

An opinion piece by Matthew O’Neill, Industry Managing Director, Global Industry Solutions Group, VMware

The drive for digital is happening in banking and financial services before our eyes. Just ask anybody who wants to pop into their local branch or speak to a friendly manager regarding their finances. It simply doesn’t happen anymore and this is symptomatic of a wider drive to online. And this isn’t just in banking either. These days, many insurers are online (indeed, consumers are rewarded with cheaper premiums for choosing online-only providers) and there are investment companies such as Nutmeg that only exist on-screen.

But for all the advances made in the financial services sector, there remains much work still to be done when it comes to improving customer sentiment and experience, as our recent Digital Frontiers study uncovered. It found that, for all the drive to digital, consumers still see huge value in having people in the process.

Placing an over-emphasis on digital

For years, the financial services market has become much more transactional. In a race to the bottom on price, consumers have been more concerned with who doesn’t charge maintenance fees and who has the best interest rate for their cards or rewards system for their policies.  There has been less value perceived from who has the most convenient high-street locations, delivers the most effective (and empathetic) telephone support, and who provides the best overall customer service. This has placed an over-emphasis on digital, particularly as generations have grown up so that now, the thought of going to a branch office is seen as an alien concept to younger customers.

It has created a dichotomy whereby large swathes of society are now totally reliant on digital financial services – a figure that is only going to increase as digital identity verification becomes more widespread. But at the same time, the narrative to consumers is to ‘protect their data’. As a result, it is creating an environment of mistrust, concern and paranoia, rather than an excitement for what safely sharing data can enable.

A fully-digital banking network is a long way away

This is certainly what our Digital Frontiers research identified. It found that two thirds (67%) of European consumers don’t know who has access to their personal data and how it’s used – just 12% do with any certainty, while the majority (59%) of the public are increasingly concerned about the security of their online digital footprints and how purchasing data is used, interpreted and shared. Indeed, 41% now feel paranoid that organisations are tracking and recording what they do on devices.

At the same time, the near extinction of humans in the financial services sector is creating a void that consumers are not yet prepared to take the leap of faith to cross. Yes, our research uncovered an acceptance that technology can play a vital role in managing our finances – 31% of consumers would trust an app to manage all of their finances if it meant it generated greater returns each month, 39% expect their financial services provider to use technology like artificial intelligence and machine learning to help protect their funds and personal details. However, it also highlighted that a fully-digital banking network is a long way away. Only a third (30%) of consumers would choose a different bank or financial service provider if their existing one expected them to visit a branch in person. Indeed, only 37% agree that in-person interaction in financial services is almost dead. According to our research, almost two-thirds (64%) of consumers expect the financial services industry to support traditional and in-person services that they do not rely on but know other people may highlighting that this is not just a generational issue, it is also a societal one.

It’s clear that for digital in financial services to reach its potential, people still need people; not necessarily in the high-street, but at the end of a message, phone or video.  People want to talk to people, especially when things go wrong or are not as easy to navigate down a rigid customer journey when a customer’s needs are not ‘as per the design’ or product criteria.

The choice of engagement is down to the customer

Despite the advancements in financial services to date, and the comparisons with sectors such as healthcare or retail – both of which are adopting digital at a rapid rate, the research clearly paints a picture where consumers are looking for are for financial services institutions to build their offerings with a digital-first mindset and not digital-only, which is good news for traditional establishments – less so for fintechs and NeoBanks. This isn’t a digital versus physical discussion but more about creating a blend where the choice of engagement is down to the consumer: from efficient app-based banking to speaking with a real-life person via chat, phone, video or in-person, when required. Data lies at the very heart of this.

Away from devices and evolving customer expectations, there is another driver of change for financial services at a macro level. Governmental and regulatory expectations have translated into a need for banks to play a fuller role in meeting society’s financial needs. Our digital economies depend on organisations and companies being able to unlock the value of data – using it to improve products and services and improve society as a whole. For example, banks are increasingly expected to improve financial inclusion. According to a recent report, seven million adults in the UK are at risk of financial exclusion, meaning that they do not have sufficient access to mainstream financial services and products – something exacerbated by the ongoing branch closures.

Totally secure, friction-free financial interaction

The financial services sector may be embracing digital quicker than you can say, ‘biometric identification’ but this cannot be at any cost to consumers. People want totally secure, friction-free financial interaction with absolute trust in how their data is captured, stored and used. But they also want personal service and human interaction.

If the financial services sector harbors ambitions to excite consumers, bank the unbanked, connect communities and shape society for the better it needs to get the balance between human and machine right.