Banks and insurance companies are too slow to react to digitization
Banks and insurance companies are too slow to react to digitization. While fully-digital newcomers continuously launch new, extremely customer-friendly products, the financial sector is trying to digitize its traditional processes and products step by step. But this is not enough to keep their market share, much less to grow. A new strategy is necessary: one that ensures rapid, complete digitization.
This is one of the findings from Plan D – Digital all the way: How financial service providers can protect their livelihood with end-to-end digitization published this month by Roland Berger, where the consulting firm examined how banks and insurance companies are tackling digitization, how big the threat is from new providers, and how established players should respond.
With the help of digital technology, these newcomers – often not subject to the same regulations as established players – are gaining more and more market share. On the German market, digital brokers for savings and loans saw their market share grow from 17% in 2010 to 35% in 2016. The newcomers are especially good at playing to consumer expectations. "In other sectors, consumers are used to looking for products online and buying them," explains Mark de Jonge, Partner at Roland Berger in Amsterdam. "They now expect the same of banks and insurance companies."
Established players have launched modern websites and apps in recent years, but when clients actually want to buy a product they are still often stuck with paper. Finalizing the sale can take several days, when online it would only take a split second – a fact that is gaining traction as the EU law allowing digital signatures comes into effect mid-2016.
"Behind their modern websites and apps, traditional banks and insurance companies are continuing their traditional processes," continues De Jonge. "This is because they lack a comprehensive strategy to take on digitization." He argues that banks and insurance companies have only one option: end-to-end digitization of all products and processes. "This alone will empower banks to meet consumers' main demands: simplicity, speed, efficiency."
Total digitization will also make banks and insurance companies more efficient. The digitization of processes and products also enables the incumbents to cooperate with successful newcomers. As De Jonge points out, "It's a bit unorthodox in the sector, but it also opens up a new world of strategic possibilities."
But end-to-end digitization at a bank or insurance company cannot happen overnight. That is why Roland Berger developed a seven-step "Plan D":
● Ascertain the digital potential and develop simple, standardized processes and products as a starting point for digitization
● Set clear goals based on typical client buying behavior
● Involve all relevant business units in the digitization process in order to link ICT-investments to the strategic ambitions
● Build a sustainable digitization strategy that encompasses risk & control and reporting tools
● Develop manageable projects so that the end-to-end digital strategy can be implemented steadily
● Modularize the product offering so that products and services can be adapted to individual client wishes
● Be available to clients 24/7 – that is what they expect
A previous Roland Berger study found that consumers do not easily entrust their banking affairs to tech companies. "Banks and insurance companies have a good starting point," De Jonge explains. "They have large numbers of clients and in-house expertise. But time is running out: to survive this market, companies must become digitally mature in the near future."
To reach Mark de Jonge, please contact Eline van Loon: 020-7960611 or firstname.lastname@example.org
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