The change horizon
Sarah Kocianski, Head of Research, looks at two of the key trends driving change in financial services
The 11:FS research department is approached by firms in all areas of financial services, big and small, from all over the world with requests for insight.
Over the past 18 months, we’ve noticed a number of trends in the industry that have captured the collective imagination. But two stand out. So, what are these heat spots and why are they causing such interest?
Pioneered by fintechs, an onboarding journey that is digital end-to-end is fast becoming a hygiene factor for financial services firms in Europe, particularly the banks. The best digital onboarding journeys are fast (a matter of minutes), require the customer to supply minimal information and result in an instant decision, with the customer receiving their account and virtual card details almost immediately if approved.
There are a number of drivers behind the increasing need for onboarding processes that meet these criteria. They were originally born out of necessity, as digital-only startups had to find a way to enable potential customers to apply in a compliant way that didn’t require capital outlay on physical premises and extra staff. But additional benefits soon became apparent. Those include reduced applicant drop out, increased customer satisfaction at a process that can be completed by those with even the most challenging work or sleep patterns, and the ability to reach a broader demographic, including those who are unable or unwilling to visit a branch.
Adding to this trend there has been a change in customer expectations more broadly. People now expect to be able to complete applications for any kind of account entirely online and lose patience with firms that don’t offer the service. The end result is financial firms of all sizes looking for ways to implement entirely digital customer onboarding. If you want to find out the best way to do that, check out my report on Best In Class Onboarding at https://pulse.11fs.com/research.
SME financial services Around the time of the global financial crisis, several startups spotted an opportunity to profitably offer SMEs financial services tailored to their unique needs. They were targeting a demographic that had been hugely underserved by incumbent firms, who essentially charged high fees for little more than a standard current account.
From the original digital lenders, the ecosystem of fintechs serving SMEs has boomed in the last 11 years. There are now hundreds of companies across Europe offering every kind of financial service an SME might need, including, but by no means limited to, lending, payments, cash flow management, accounting, invoicing and bank accounts.
Incumbents were relatively slow on the uptake when it came to offering services to compete with these fintechs, but in the last few years they have begun launching competing products, often in partnership them.
In the UK, the Banking Competition Remedies (BCR) Capability and Innovation Fund has spurred a new wave of interest in the SME space. After the recipients of Pool A funding were announced, which showed that it wasn’t just the expected players who were in with a chance of success, activity in the space has ramped up even further.
Despite all this, the SME segment remains woefully underserved in many areas, particularly when you look at the group that falls between sole traders and firms with more than 50 employees. And while the BCR Fund is stimulating the environment in the UK, the rest of Europe has, by and large, been slower to wake up.
That means there are plenty more opportunities out there for innovatively minded firms. You can find out the best way to start capitalising on those opportunities in my Best In Class SME Financial Services Report, also on https://pulse.11fs.com/research.
If you or your team are interested in finding out more about 11:FS research services, or want to discuss themes or topics you feel are underserved, drop us an email at [email protected]
This article was published in The Fintech Finance Magazine: Issue #12, Page 13.
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