There are few industries which undergo more rapid metamorphoses than the financial services. Still experiencing the after quakes of its 2008 crisis, the world of finance seems in an ongoing process of redefining itself. Of course, the media plays a key role here, as banks and major financial institutions gear up their PR teams with new techniques for forging closer relationships with investors and clients.
Go Digitise Yourself
We researched the media coverage of six of UK’s biggest banks during the first quarter of the year to identify the hottest topics of conversation, and that brought out clear results: the most widely discussed issue was digital transformation. This was followed by closely related topics such as fintech, cybersecurity and cryptocurrencies.
In a nutshell, digital transformation is all about embracing new technology and putting this in the heart of all business practices. Doing so is estimated to bring $18 trillion in additional income worldwide, according to market intelligence provider IDC. Moreover, it is not just a matter of growth, but a question of surviving – a recent study conducted by software company SAP found that for 84% of businesses worldwide, digital transformation is crucially important to their survival in the next five years.
While a wave of digitalisation has swept over all industries, from retail and media to construction and transport, the tendency is increasingly conspicuous in the financial services sector. “Becoming a digital business” is a top priority for financial services CIOs, as a recent Gartner research concluded. Their digital enthusiasm is far greater than the average across other industries and beats other objectives such as profit growth and consumer satisfaction.
Of course, the financial world has been subject to digitalisation since the advent of computers – so why the rush now? The main reason is the market disruption caused by the booming fintech scene.
Often headed by tech-savvy 20-somethings with a digital‐first attitude, start‐ups offer fast, sophisticated and bespoke solutions. Many operate on relatively limited budget, offering their services via interactive smart phone apps, without opening any branches, and using cloud computing to spare the costs of data centres. Utilising machine learning and artificial intelligence, they have conquered all aspects of the financial ecosystem, from payments and savings to investment and insurance.
Big players have usually relied on their established brands, but their legacy back office structures and high regulatory standards, coupled with the post-2008 distrust in major banking institutions, have left them scrambling to keep up with the emerging fintech trends. Feeling the urgent need for innovation, many are looking for new ways to keep pace with the myriad of tech-based challengers.
As a result, the inevitable digital transformation includes upgrading the application programming interface, designing more agile frameworks, concentrating on better customer experience, while automating routine tasks and stepping up the use of advanced analytics, cognitive computing, process robotics and visualisation.
Lloyds, a bank founded in 1765 and having UK’s largest retail network, invested £1 billion in its digital modernisation over the course of last year, and announced that it will set aside another £3 billion to upgrade its IT capacities during the next three years. This is in stark contrast with the £750 million that the bank had spent across the three previous years. The bank’s transformation will be all about “simplification and progressive modernization” of its data and IT infrastructure, and “technology enabled productivity improvements across the business”.
As a consequence, marketing themselves as ready for the increasingly digitised world seems to be a top priority for the banks’ PR teams. Lloyd’s investment injection explains why it is ahead of the media coverage game. Meanwhile, Barclays is in a process of technologically renovationg its branch network – it recently opened its flagship digitally boosted branch in Belfast. HSBC is often mentioned in reference with its new Beta app which provides consumers with a “joined-up view of their financial life” and gives them “helpful nudges” if they spend their money too recklessly. The bank will set aside $2 billion and 3,000 employees for its digital push.
Our media analysis shows a more specific matter of interest within the digital transformation debates – the so-called Open Banking initiative. The term stands for the new way in which banks handle their customers’ information, advanced by UK’s Competition and Markets Authority (CMA) and aligned with a new EU regulation called ‘the second Payment Services Directive’ (PSD2), which came into force in the beginning of the year.
Open Banking means that UK-regulated financial institutions are allowing individuals to share everything about their spending and saving habits with third parties, including firms or other banks. This aims to increase competition and innovation in the sector and ideally lead to better financial solutions.
For instance, consumers will be able to share their bank statements with an app which will examine the way they manage their money and propose a new solution, or they could put all of their accounts with several providers in a single app. This opens the door to more and more startups, and creates the opportunity for big players to join forces with fintech firms.
Our research revealed which tech-based challengers are in the forefront of the media attention. Most of them are discussed namely in the Open Banking context.
The leader in mentions, mobile-only bank Monzo, became one of the earliest app-based challenger banks when it was founded in 2015, and became known for setting the record for the quickest crowd-funding campaign in history after raising £1 million in 96 seconds via the Crowdcube investment platform.
Revolut (also founded in 2015) offers currency and cryptocurrency exchange, providing instant access to Bitcoin, Litecoin and Ether by exchanging 25 fiat currencies, while Starling (established in 2014) orders transactions into relevant categories like shopping or eating out, and also divides savings depending on their goals.
Meanwhile, three-year-old firm Bud, which employs 23 people, signed a deal with HSBC in 2017 and raised £1.5 million. The start-up will help the bank by designing an app for managing account information from multiple provers.
Although the financial world is still in the initial stages of its digital transformation, one thing is for sure – the way we spend and save our money is becoming more and more personal, interactive and mobile-friendly. The battle for dominance in the financial services market has quickly turned into a battle for technological supremacy. Spreading the message about their digital advantages is now a matter of existential importance for big players and emerging competitors alike.
Image: Created by Macrovector