Financial Services by Design
Updated: Oct 12
Banks aren’t getting disrupted by FinTech, they’re getting disrupted by customer expectations. Global enterprises (Apple, Google, Virgin, Philips, Amazon), social entrepreneurs. (Facebook, LinkedIn), and other innovators (IDEO, Fjord, EY Seren) have all used human-centered design (Design Thinking) to create solutions for many different types of challenges and business opportunities. Design thinking has been applied to service, product and client experience design, fuelling growth of new startups disrupting well established industries (AirBnB, Uber, Spotify, Dropbox, Simple Bank, just to name a few).
Design-led companies such as Apple, Philips, IBM, Nike or Procter & Gamble have outperformed the S&P 500 over the past 10 years by an extraordinary 219%, according to the assessment by the Design Management Institute.
Banks aren't getting disrupted by FinTech. They are getting disrupted by customer expectations.
In the recent years design thinking has also been adopted across financial services, where successful FinTech startups such as Transferwise, Monzo, Back Me Up, Nutmeg, or eToro emerged to challenge well established global players and legacy banks.
A strategic focus on the ‘end-to-end customer experience’ drives the competitive advantage as much as an effective business model or a unique product offering. This focus is demonstrated through excellent user experience design, innovative approach to service touch-points across various channels, application of new digital technologies or automated investment services (Robo-Advice), all resulting in a seamless, intuitive end to end customer journey aligned with customer goals, objectives and needs. The big banks and wealth-management firms already employ large teams of designers, including user-experience designers, customer experience and service designers. An approach to products and services based on ‘design-led thinking’ becomes essential for financial services companies if they are to remain competitive in the years to come. Every successful company mentioned above has recognised that it has been in the business of crafting customer experiences.
The legacy banks have responded to developments among FinTech by either investing in new emerging startups, take-overs (Capital One take over of Adaptive Path), or partnering to generate new ideas and innovations. While rebuilding trust they are capitalising fully on FinTech’s biggest advantages: ease of applying innovative design thinking, not constrained by legacy systems, outdated IT infrastructure and internal company politics; capturing and leveraging data, and hands on access to customers. Next few years have the potential to put transformative tools in the hands of the companies focusing on customer experience. Recent advancements in data collection and algorithms are helping to better identify and analyze consumer needs, expectations, behaviours and experiences.
The future of FinTech and banking depends upon collaboration with traditional banks or other global brands as both have equal opportunity to leverage each other’s strengths and create significant value for their clients. Banks can learn from the startup experience by looking externally and challenging safe home grown industry thinking; learning how a millennial tech-savvy generation is often rejecting the traditional, legacy models of services, overly complex processes outdated interfaces and service channels.
Success in business depends on answering some key questions:
What do my customers want?
How do they want it?
How are their expectations changing?
What will my customers want next in 5,10 or 15 years?
Design thinking helps businesses to answer these questions by ensuring that appropriate time, expertise and resources are allocated to discovery and ideation phase of any project or initiative. Design thinking principles focus on delivering outcomes on the crossroad of what is desirable (by customers), feasible (often technology wise) and viable (from a business point of view).
Applying human centred design principles to testing and prototyping ideas guarantees that any project scope is grounded in customer insights and backed by external research.
Design thinking minimizes the uncertainty and risk of innovation by engaging customers or users through a series of prototypes to learn, test and refine concepts.
Practitioners rely on customer insights gained from real-world experiments, focus groups and research, not just historical data, anecdotal evidence or market analysis. This in turn helps to ensure, for example, that any application of robo-advice, which offers low-cost and automated online banking and investment services, does not cut out human-touch in favour of technology and digital interactions. More and more consumers expect Amazon-like experiences across the spectrum of services they receive, regardless if they are opening a new bank account, managing their ISA account and choosing funds to invest into, ordering a meal from a local restaurant, buying an airline ticket, or even obtaining government services.
Design thinking approach first seeks context through understanding and through empathy with the intended end-user / customer – their motivations and needs. This frames the design challenge, whether the ultimate goal is to design a product, redesign a service model or a single service touch-point. It starts with exploration – the discovery phase – which includes immersion in and observation of the client & service landscape, mapping out ‘as is’ customer journey map, creating client / user personas, conducting interviews and research, analysing identified pain-points and moments that matter, and looking for external benchmarks and inspirations. You explore multiple alternative design options before picking and refining a particular direction, taking a customer perspective. Great design has the “wow” factor that makes services more appealing to users and products more desirable. Ultimately the goal is to synthesise discovery findings into compelling needs and insights and turn these in to actionable opportunities for further design, development and delivery. It is a collaborative effort on the cross-road of disciplines that aims to deliver innovative, tangible ideas that leading to a new client experience proposition. The customer journey mapping, service blue-prints, prototypes, are just a very few tools widely adopted by design thinking practice.
Design thinking minimizes the uncertainty and risk of innovation by engaging customers or users through a series of prototypes to learn, test and refine concepts. Practitioners rely on customer insights gained from real-world experiments, not just historical data or market research. Great design has the “wow” factor that makes services more appealing to users and products more desirable.
The are number of examples of commercially successful recent developments grounded in religious focus on the end-user/ client experience. Monzo offers a simple, convenient and accurate bank card management App which allows for receiving instant notifications of transactions / purchases, scanning and uploading receipts linked to specific transaction, blocking and unblocking your card with a single button, as well as obtaining an overview analytics of spending habits based on the transaction history. This is something that large high street banks like HSBC or Barclays yet failed to deliver which results too often in inaccurate account balance or delays in reporting fraud or disputing transactions. In addition Monzo, founded in 2015 in UK, offers some of the best rates on the market for foreign currency transactions, without any additional commission fees. In early 2016 it set the record for one of the quickest crowd-funding campaign in history. Although the App might not be for everyone, it certainly satisfies those customers seeking convenience and technical innovation.
New technologies are enabling us to spend money without pulling out cash or a card. Contactless payments, money transfer via chat messages, and geo-fenced interactions are bringing us into a future where we can purchase things from a store or restaurant without ever going through the act of “paying”.
Similarly The Loot app permits its customers to set a budget or savings goal and then track their spending, sending notifications on how much can be spent during the day to stay on course. Its users can compare their spending with peers, and are offered discounts at retailers and coffee shops based on their spending habits. PensionBee has built an online platform that allows customers to track their pensions. Users list their employment history and the platform brings their various pensions into a single plan.
In Germany, Berlin is standing out as a fin-tech hub with its three flagship startups: Fidor, NUMBER26 and Solaris. NUMBER26 offers only mobile first banking in Germany, with simple and fast account opening experience (combined with video identification via smartphone), intuitive mobile app for iOS and Android and full in suite account realtime control on the smartphone. The proposition is great for anyone looking for simple and transparent banking and is especially popular with customers between 18 and 35. It is only a matter of time when other age groups will catch up and discover its advantages.
Visual communication and guidance, simplified digital journey, user experience design principles applied. Brands that make customers’ lives easier, simpler and more convenient win with future consumers.
Another example is TransferWise, which has challenged high street banks in offering low money transfer fees, a convenient, simple and user friendly app that allows its customers to easily transfer funds from their account in UK to their or someone else’s account abroad. Founded in 2011 by two Estonians, it has now offices in New York, Singapore, Sydney and is headquartered in London with over 1 million customers. It stands out with its simple ID verification process (capture and upload ID and proof of address on your phone) and ability to see realtime progress of the transaction. The app can serve as a benchmark for how consumers want to interact with a financial service in a simple, uninterrupted and convenient way; avoiding unnecessary bureaucracy, high fees and wasting time. In 2015 and 2016 it was ranked among top 50 disruptors globally.
Similar principles were applied to the recently launched ID verification app for new HSBC business customers. The app offers a quick and simple way to verify identify and confirm address by taking a selfie, uploading a photo of passport or ID document, along with a valid proof of address. It does, however, create expectations that the rest of the account opening process will be as simple and intuitive, which is not necessarily the case. For large legacy banks it is much more challenging to improve ‘end to end client experience’ across the entire client journey map. This is one of the core reasons why FinTech startups have been successful in disrupting the financial services industry and are much quicker at releasing new innovating solutions or upgrades to their service offering.
The ever-greater pervasiveness of digital technology, services accessible from various screens / devices, with mobile becoming a widely preferred channel among consumers. Managing services / accounts through smartphones becomes ever more universal and impossible to live without.
Nutmeg, the UK online investment management platform, was launched in response to changing demands from younger investors for low cost online investment options that are simple and cheap, including robo-advisers functionality that helps to optimise investment portfolio. It uses exchange traded funds rather than actively managed funds, in order to keep costs down. Lower fees combined with ease of use, raise the pressure on high-end advisers to justify their costs. It also forces the traditional manual service model to reassess how it delivers real value to customers, gather that is in terms of customer experience or access to different managers and platforms.
In Canada, Wealth Simple was designed to make investing easy and simple for Canadian and then American millennials.Another new concept for investment platform is eToro — a combination of fund manager and social network designed to democratise the world of investment. The model of combining an investment platform with a social network gives the company its unique selling point — an ability to “copy trade” whereby users ape investment strategies of other users.
Financial planning is finally becoming accessible to people of all incomes. From automated investing services, to education platforms that leverage social networks, to peer-to-peer lending, services typically reserved for the wealthy are becoming available to everyone...
For the financial services, the rise of FinTech has been helped by the financial crisis and numerous reports of serious misconduct by major banks (most recently Deutsche Bank) resulting in a growing mistrust in the system of traditional financial services. Similarly to the success of many Apple gadgets, the younger consumers increasingly opt to use online services (accessible through various devices) and gradually influence other generations. Millennials were the first adopters of iPhones (that let to a bankruptcy of Blackberry – the first smartphone widely adopted by business world), Facebook, LinkedIn, AirBnB, Uber or even finch startups such as TransferWise or Monzo. All of these have been later embraced also by older generations.
Recently I attended a conference in the City, where speakers shared stories from across customer experience in financial services. It was interesting to learn how well established players such as Bank of Ireland, Danske Bank or Nordea, relatively new entities (Metro Bank, Tandem, Aldermore, Civilized Bank) and also investment managers are adopting the human centred design not only by applying its principles to product or service development but also by making it also an integral part of the company-wide culture.
Challenger banks have emerged from the disruption by concentrating on simplicity and speed to produce products that offer a superior customer experience supported by the latest wearable and mobile technologies.
In wealth management, robo-advisors (online automated portfolio management services) have begun to provide much more substantive advice and recommendations based on a person’s portfolio, risk tolerance and past actions. It seems that in 2017 the digital forefront of the sector will be those utilising artificial intelligence (AI) to further improve customer experience driven by design.
The time is now to start embedding design skills throughout entire organizations, to see more people designing, using design thinking, without needing to be designers first. You don’t have to be a designer to think like one. While learning to be a good designer may take years, you can start thinking like a designer and design the way you scope projects, lead, manage, create and innovate services and products. Design thinking involves learning by doing. After all key organizing principle of customer journey maps apply not only to improving and innovating customer experience, but to also to changing and managing the employee and partner experience.