“Capitalism as we know it cannot continue with the levels of inequality that we have in the world.” Christine Lagarde’s closing line of her opening session at the Milken Institute’s 2019 Global Conference highlights that roots, culture and inclusion are essential at all levels of the economy.
As the linchpin of the economy, the financial services sector plays a critical role in ensuring follow-through. And pressure from the public to act is building: 70 percent of respondents in the 2019 Edelman Trust Barometer: Financial Services report agreed it’s important for the industry to lead on social issues that make the world a better place for everyone. The most important issue? Income inequality and financial security. So, how do we address it?
It comes down to re-inventing the way financial services brands interact with customers and communities to keep up with — if not pace ahead of — the speed of innovation. Over the next 10 years, these are the three key themes we’ll see innovation driving forward in financial services that can help close equality gaps:
- Customization: Looking for a home will look like this: Typing in a zip code reveals, in addition to existing properties, mortgage rates, resale values, cost of various insurance needs, and how data will optimize utility costs. Maybe even the decorating budget needed to keep up with the Joneses. Intuitive, personalized, contextualized, data-driven, hassle free (or greatly reduced). Financial services are catching up, but there is room for improvement. The No. 1 most useful innovation the public expects of financial services companies, according to the Edelman Trust Barometer, is a platform or service that integrates all aspects of their financial lives. This kind of customization is critical for better user experiences and improving long-term, holistic financial outcomes for consumers.
- Digitization: Forget the death of cash. It’s already dead in China, where Tencent and Alibaba leapfrogged traditional confines. And Gen Z has no time for “dirty money” or loose change. They are more interested in “playing” the stock market with gamification tools until they are ready for prime time.
- Refrigeration: Big bank tech is frozen with behemoth legacy mainframes that cost a fortune to protect data. Tech-first companies can move light years faster. The result is that fintechs are winning big time on customer experience. Incumbent financial institutions and fintechs must partner faster to bring innovation at scale to thaw out intolerable operations and customer experiences. There’s significant progress already, as almost 80 percent of financial institutions have entered into fintech partnerships, according to McKinsey Panorama.
Innovation is helping companies across the financial services sector not only improve their operations and customer experience, but also can and should help solve for a range of inequality challenges. Doing so won’t just help them best their own profitability, but also build deeper, more trusting relationships with consumers.
Deidre Campbell is global chair, Financial Services.