Personal finance goes digital. How ready are you?

Retail Financial Services

James Goad

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As regulatory change and technological advancement drive innovation in digital personal finance it is essential that businesses are fully prepared to capitalise on this opportunity. Building trust via the digital channel, educating your customer on what is available and ensuring you have the correct digital tools in place are paramount to success.


  • A confluence of factors including regulatory change and technological progress enables a new digital customer engagement model.
  • At the same time, a shift in pension responsibility from the corporate to the individual and the rise of the gig economy has put retirement affordability, and personal financial wellbeing, firmly in the spotlight.
  • However, the lack of human involvement within digital has to date restricted the ability of businesses to build trust with the customer through the digital channel. Combined with limited financial literacy this continues to restrict the adoption of digital technology.
  • Digital has significant potential to streamline processes and improve the customer experience if applied in the middle and back-office. There is a widely held view that ‘digitalisation’ of the middle and back-office hold significant opportunities in the short term.

Key issues and challenges

  • Adoption of digital technologies have to date been slow due to a combination of:
    - Lack of trust
    - Limited financial literacy and/or understanding of technology
    - Customer communication not keeping adequate pace with progress in digital application
    - Digital tools not perceived to be ‘fit for purpose’
  • The importance of financial decisions combined with decades of mis-selling issues means trust is front of mind when consumers engage with financial services providers, regardless of channel.
  • Consumers are concerned about the risks-reward trade-offs and digital transactions, that do not involve human interactions, are felt to be less transparent, and thus associated with a level of risk.
  • Financial and technology literacy is a key challenge in the take-up of digital with many customers being classed as ‘digitally excluded. Consumers want to know what products and services they need and want to be able to benefit from digital tools at the point of distribution.
  • Financial services providers have a significant role to play in educating consumers about their financial needs and the products available to address these. Before this understanding exists, digital will be a secondary engagement tool at the point of sale.
  • The current population of building society customers are not technologically savvy and will continue to require a significant level of human engagement. This requires the development of a hybrid model which allows businesses to cater for emerging generations of customers who are more comfortable with the digital media alongside the current, less technologically savvy heart land customer base.
  • Digital innovation has revolutionised the way consumers are able to transact and engage with product and service providers. However communication aimed at educating the consumer has not evolved at the same pace, which is hampering take-up of digital at the point of advice/sale.
  • It is the responsibility of the financial services community to learn from social media in terms of how to communicate effectively with consumers in a way that engenders trust and educates e.g. through the use of videos, chatbot’s, augmented reality etc.
  • There is a considerable gap between what digital engagement tools can offer and what consumers want: the tools currently available are not fit for purpose as they lack the ability to build trust and provide the level of guidance and advice needed to give the individual customer the necessary level of comfort and support. This explains the high abandon rates in the digital processes.
  • The combination of more data, machine learning and AI represent significant opportunities for the industry to develop increasingly personalised products, but ensuring the data is clean and ‘safe’ to use from a regulatory perspective presents a significant challenge.
  • Only a limited number of businesses enjoy strong customer relationships from the perspective of the customer. Increasingly, businesses will collaborate in eco-systems of product and service providers to meet a broad range of customer needs.
  • Individual businesses needs to think long and hard about the strength of their customer relationship and determine if their brand and customer affinity positions them as the custodian of the customer in the eco-system or if they should pursue a role as product / service provider.  
  • Whilst the regulatory environment has made some progress to enable businesses to experiment with potential future, digitally enabled engagement models, more needs to be done to make the Sandpit feel like a ‘safe’ place.

Conclusions and solutions

  • In the short term, digitalisation holds the greatest potential if adopted in the middle and back-office as means of delivering process efficiencies and thus improved customer experience, greater control and reduced compliance risk.
  • Successful digitisation of the customer engagement will require improved communication and education of the customer to build trust and increase adoption of digital models and build the necessary levels of scale required to make the models economically viable.
  • Until higher levels of financial literacy in the mass market have been achieved, the digital solutions will need to combine the best of man and machine, supported by data to gain insight about customer motivations, build the necessary levels of trust. e.g augmented f2f guidance to be ‘where the customer is’.
  • Partnerships and alliances – potentially with ‘frienemies’ – will play an increasingly important role in the delivery of digitally enabled products and services.

Moderator:  Tina Hansen, KPMG
Expert:  Joe Parkin & Henry MacLeod, BlackRock iShares