Paud O’Keeffe, head of innnovation at BNP Paribas Securities Services in Dublin, looks at young people’s digital experience.
While Generation X – or those born roughly between 1964 and 1980 – have adjusted to technological innovation and digital disruption, millennials are the ones actually propelling it. Most young people today will use online apps to shop for groceries; get a cab; read the news; or find rental accommodation. The huge leaps in technology and its capabilities have made this possible. An iPhone 5, first introduced in 2012, has 2.7 times the processing power of a 1985 Cray 2 super-computer, and this accessibility has helped transfigure daily life and working practices.
Financial institutions have been waking up to the fact that millennials are the next generation of investors for some time – despite perceptions that they are a demographic with less cash and a poor understanding of personal finance. The latter shortfall can be solved fairly easily through better education, but long-held views about millennials’ lack of disposable income should be put to rest now. Research by the Center on Wealth and Philanthropy at Boston College estimates $59 trillion will be passed down from 93.6 million US estates between 2007 and 2061, in what will be the greatest transfer of wealth in history and millennials are likely to inherit a significant proportion of this total. Wealth preservation needs will require this demographic to save and invest for the future.
But millennials are not just the investors of the future – they are the employees too. An Ernst & Young (EY) report said 75% of the global workforce will be millennials by 2025, and a significant percentile of this demographic is already employed in management roles. The EY study said 62% of millennials work in management, putting them ahead of the baby boomers. These are the clients of tomorrow. The financial services industry is making inroads with this group, and online banking perhaps is the best-known example, but how are asset servicers helping bring about digitisation and abridged user-experiences to millennials?
Appealing to a younger generation
Generational shifts mean that end users of services – whether it is a fund manager or institutional investor – will have markedly different expectations over the next few years. The words ‘instant gratification’ are often used liberally to describe millennial expectations, and it is a fitting reflection. Younger people will frequently complain if there is a slight hold-up to an online delivery or movie streaming service. As such, millennial clients will increasingly demand investment exposures; performance metrics; risk analytics; counterparty risk details; liquidity data; client reporting; or information about collateral movements in real-time.
Those providers who insist on manual processing of reports and templates will be disadvantaged in this new digital age. Forcing clients to log into websites utilising a physical token to access data is no longer going to be acceptable. Asset servicers need to ensure that reporting is through systems or technologies that are embraced by millennials, whether it is via smartphones, tablets, APIs, or online chat facilities. Information must be accessible anywhere in the world given the increasingly mobile nature of workforces. Furthermore, such automation of services will lead to lower costs, and this will help the client.
Many of the existing processes around reporting will require a complete regeneration of how they are delivered to clients. This is not a case of bolting on a piece of software to legacy systems, but revisiting and reforming service delivery. Financial institutions should look to the leading innovators of the day such as the technology giants for inspiration. Take Amazon Dash, for example, which is allowing consumers to buy everyday household products at the push of a button rather than logging into their Amazon account or visiting the shops. This is the sort of approach towards innovation that asset servicers need to take if they are to appeal to millennials. That is making processes and services incredibly simple and accessible.
Financial institutions need to go beyond simply introducing a mobile app or website functionality. Industrialist Henry Ford’s famous quote – “if you had asked my customers what they want, they would have said a faster horse” – rings particularly true here. Banks have to start thinking on another level to address customer concerns, such as the arduous on-boarding process, for example. These consumer-facing challenges will not be solved by a mobile application, but by industry standardisation and shared intuitive platforms and concepts.
Delivery of services will not only need to become more seamless but more personalised and this can be achieved through intelligent use of technology. This personalised approach is already being deployed by television and movie streaming services such as Netflix, which uses sophisticated analytics to recommend programmes to its audience based on previous viewing habits. In fact, Netflix used big data on its subscribers as a determinant to buy the House of Cards series and to commission original programming based on what its algorithms think consumers will watch. Financial institutions are taking a similar approach by not only engaging with clients about what they want, but utilising empathy mapping, ethnography and technology to tailor solutions and experiences accordingly.
In terms of technology, big data, artificial intelligence (AI), and machine learning can be leveraged to identify what clients’ particular needs are in terms of information requirements. This can be obtained by assessing what materials the client is looking at; how long they are spending reviewing the information; the times they are logging on, and so forth. With this information, client reporting offered by service providers can become more bespoke and individualised for the end user. It can also allow providers to anticipate and model what the client will want to see and how they would like it to be presented. This will dramatically enhance the user experience. Such data science and behavioural analytics will drive innovation in service delivery to younger demographics.
But there are challenges to innovation, which service providers cannot ignore. Legacy technology continues to be a barrier for financial services, and at times does occasionally disrupt innovation. The risks of removing legacy platforms have to be factored in, but change can be achieved safely by operating a bifurcated development model whereby existing systems run alongside new products or innovative technologies. This is perhaps most evident in Blockchain, where some financial institutions implement parallel operating structures for distributed ledger technology and legacy systems so as not to risk causing disruption. Equally, security must also be prioritised during innovation as new technology can often lead to different and unanticipated risks.
Planning for the future
At its core, intelligent design is often very simple. Those banks which successfully reimagine the way they do business – removing the bumps in the road, and providing the seamless service expected of millennials – will take the lead. Those banks which can take this further, by providing a truly personalised service, could be the ‘banking Amazons’ of the future.
Millennials are rising up through the ranks, and are increasingly the clients of banks and fund managers. This generation will expect superior technology and service, and providers have to ensure these demands are met. This can be achieved through intelligent innovation, which makes service delivery more personalised, efficient, and user-friendly.
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