Editors Note: Shared finances is an evolving market for financial instituations. Peter Wannemacher of Forrester discusses the void of financial institutions serving the complex financial relationships involving family, business partners, etc. As Millennials become to gain more economic power, it will be critical for both financial institutions and businesses to not be reactive to demands such as these, but ancipatory and predictive for personalized services.
From the time we were very small, most of us were taught to share. Recent research by Forrester suggests that this lesson may be very important to many of us when it comes to our financial activities. In a report entitled "Why Digital Teams at Financial Providers Should Invest in Shared Finances", analyst Petter Wannemacher describes a latent need amongst consumers for services that allow them to act as observers of, partners in, or proxies for others in financial matters.
Wannemacher states that most customers today are not surprised that their banks or credit unions do not support tools to help them manage their complex financial relationships involving family, business partners, et al. However, according to Wannemacher, financial institutions should not wait for these consumers to voice their demands for such. He sees advantages related to customer retention, attraction, and loyalty for financial institutions that are first movers in this area.
These observations by Wannemacher about shared finances raise a broader question. Going forward, will it be enough for financial institutions to respond to customers or will they need to learn how to anticipate needs and offer features that meet those needs before their customers even recognize them as needs? Based on our continuing immersion into the digital world, most FIs likely will. The digital world we conduct our lives in is already a type of augmented reality compared to how "reality" was structured just 10 years ago. Personalization, which some banks and credit unions are starting to incorporate in their digital experiences, is simply table stakes now. Tell me what I need before I recognize I need it seems a likely next step.
It will not be enough for the Amazons, Googles, and Apples of the world to offer this type of "anticipatory" (as opposed to "reactionary") strategy as part of their digital brand experience. It will ultimately be something financial institutions will have to learn to practice as well. That will be no easy feat. Anticipating the needs and desires of consumers is a common element in the lives of successful retailers. It is not something that banks and credit unions have practiced much. In fact, it is not the nature of bankers to behave in this way since their world is built on a foundation of risk avoidance.
This is visible most everywhere in typical financial institutions but particularly so when it comes to evolution of their digital banking channels. The road from online to mobile to tablet to wearable banking has been a reactionary, rather than anticipatory, journey for most banks and credit unions. Look inside the IT infrastructure of many institutions and you will see the result of that - multiple disparate products delivering services from various providers within an inconsistent user experience. Some institutions are starting to build digital strategies around platforms that will equip them from the tools they will need to be less reactive. More probably will once the innovators have tested the water. Still, today, we are a long way from addressing "latent" needs in large segments of the banked public as Wannemacher suggests.
Some believe that financial institutions will never be "first" when it comes to introducing new technology and services. They are just too risk adverse, hamstrung by regulators, and limited by their legacy systems to take the first step regardless of the matter at hand. Maybe. But we are entering a time when the hoards of Millennials taking their place within society will play a key role in determining who will provide them with their financial services.
Though Boomers have proven themselves to be digital savvy enough, these Millennials are an entirely different kind of beast when it comes to how they use their digital "tools." In short, their lives are in their devices and that is where they live those lives out. They are moving targets who expect the companies they do business with, including banks, to anticipate their needs. If your business fails to do so, they will likely see what another provider can do for them.
Whether you agree or not that the Millennials are a "special" or "unique" or (fill in superlative here) generation has nothing to do with this premise. The facts that matter, are that Millennials are the largest, most tech savvy generation to come down the pipe, ever. So, if your business is increasingly becoming digital - which is true of banking - then that business is going to have to deal with what this means.
At a macro level, it means "reacting" to consumer demands for this service or that product is a dead end play. Being able to anticipate the customers' needs will be the new order of the day. Start with what Peter Wannamacher from Forrester is saying in this report. Offer customers an easier way to share the access and management of their money even though the need for this remains latent. Surprise and delight those customers by giving them something they need before they need it.