Could buying your next insurance policy be more like shopping at Amazon?
Of course, it can be. You can browse through various policies as per your needs, compare them, add them to a cart and there you go. In few clicks, you have the most suitable policy delivered to your inbox which otherwise would have taken days. Later on, you would get personalized recommendations, better rates and offers.
Digital innovations like these are getting increasingly adopted across the BFSI sector and some of the Fintech and Insurtech firms are at the forefront of such innovations. Fintech and Insurtech firms perhaps have been the biggest driver of this digital shift in banking and insurance customer experience. And if you take a closer look at these innovations, you will notice how improving customer experience is at the core of all such digital transformation initiatives.
Fintech and Insurtech – The Dawn of a New Era
The convergence of financial services and technology, also known as Fintech/Insurtech, and its rapid emergence is disrupting the entire banking and financial services sector. As per a recent survey by E&Y, around 1/3rd of consumers across the world are now using at least one Fintech app. And why not, these new age products and services are simpler, easier to use, more transparent and offer better personalization and seamless integration with other applications. This in turn is creating a ripple effect across the entire banking, financial services and insurance sector, as today’s digital consumers expect these traits in all financial products, whether it’s in money transfer, payments services, financial planning, retail banking, or borrowing. As per the World Fintech Report 2018, around 90% of Fintech firms consider customer experience of prime importance to gain a competitive advantage.
Adapting to the Millennial Users
Financial services firms have realized it’s no longer business-as-usual with the tech-savvy, always-on millennial generation. According to a recent survey, around 60% of Americans believe that banks and financial institutions will no longer exist in their present form in the next couple of years. Millennials have emerged as a strategic market segment and several Fintech and Insurtech firms have already seized on this growing market opportunity. Another research suggests, one in three millennials would consider changing banks in a couple of months, and they are more likely to compare traditional institutions with emerging startups.
Upstart, a US-based emerging firm has been able to successfully target the millennials with its smart lending platform. The company makes use of AI and Machine Learning to analyze unconventional parameters like past experience and education, to help young people with short credit histories secure a loan. Recently, the Fintech firm CFSG launched a mobile app targeting the millennial investors. The average age of a customer of Robinhood, an emerging brokerage firm is 28 and around three million accounts in Acorns belong to millennials, which is also the most valuable customer base for the firm. Most of these firms are providing innovative mobile-first solutions focused on improving the end user experience and hence they are able to attract the millennial generation.
Automating Customer Experience
The new age technologies like Artificial Intelligence, IoT, Machine learning and cognitive technologies are enabling financial services firms to be more proactive in meeting customer needs. Today, products and services are launched by anticipating what the end user would want, thereby providing a compelling value proposition. Machine Learning is enabling risk managers to identify patterns in market behavior and analyze transactions in real-time. New digital platforms and applications are improving the retail banking customer experience by providing tailored and affordable services to help customers set their investment goals, cherry-pick the right product or service and manage their investment portfolios. The innovations in the area of “robo-advisors” are becoming more and more sophisticated, and many Fintech and Insurtech start-ups are pivoting to enable a digital experience. Automating business processes to provide customer service anytime anywhere is where the future is headed.
Lemonade, a US-based Insurtech firm applies AI at multiple touch points across the customer journey and assesses a customer’s risk level by analyzing their past claims etc. The company has set the standard for the fastest claim processing time when it closed a claim in 3 seconds which typically takes days to get processed. SPIXII is yet another example of how AI-led digital assistants are offering personalized insurance products in real-time by learning customer interactions.
Consumer-focused Business Models
While Fintech and Insurtech firms are delivering compelling products and services, there is also a greater focus on inventing new business models that are customer-friendly. Peer-to-peer (P2P) lending has already forayed into financial services. Companies like Lending Club and Prosper Inc. are gradually increasing their market share of the consumer and small business lending. New payment technologies are allowing customers to transfer funds instantly without any bank involvement. In the digital world, the role of traditional banking will steadily decrease in consumer transactions. Crowdfunding business models are also getting increasingly adopted worldwide. Some Fintech firms have already started adding services to their existing portfolio to create new revenue channels by leveraging the power of data.
Companies like Square, Stripe are completely transforming the payments ecosystem. Stripe’s platform made payment integration with website and apps simple and easy. They are now launching new services making it easier for merchants to run their business. Similarly, Square continues to innovate for improving the customer experience on both the shopper and the merchant side. Both of these companies are one of the highest valued startup in the Fintech space.
Scaling up Product Innovation
Like any other sector, Fintech and Insurtech firms have to realize that starting up is easy as compared to scaling up. You might have launched a game-changing product into the market and, however scaling up and sustaining them in the ever-evolving digital landscape is yet another challenge. As per the World Fintech Report, most Fintech firms have so far focused on a specific functionality and niche market segment and some of them have been successful. However, most of them have struggled to profitably scale up on their own and to build business models which are financially-viable in the long run. From a competition point of view, the focus is now slowly shifting on collaboration between banks and Fintechs rather than banks vs Fintech/Insurtechs. Scaling up product innovation requires proven methodologies and strategies which would work for a long-term and strong partnerships and end-to-end product development capabilities.
Towards a Customer-first World
Most of the banks, large traditional financial institutions and insurers have dedicated IT teams to improve their processes and business efficiency. However, they are stuck with a huge legacy system which involves a lot of cost. Fintechs and Insurtechs, on the contrary, don’t have to think about outdated systems. This helps them minimize costs while enhancing the end user experience. As a result, consumers today are able to make payments, open bank account, borrow money, invest and trade at a fraction of the cost of traditional financial institutions. As Fintech, Insurtech and emerging product startups continue to disrupt the financial and insurance industry; customer-centric strategies will drive all the innovations.
What are your thoughts? Do you agree with us? To learn more about digital customer experience, do write to us at firstname.lastname@example.org
Marketing Manager, RapidValue