Posts filed under ‘financial services’

Customers of the future

Alex Oliver writes: At the Marketforce conference I spoke at last week, I may have unwittingly cast a further cloud over my audience on a gloomy Wimbledon June day.  The conference was on Operational Efficiency in Financial Services, and my topic was Customers of the Future. I chose to focus on the behaviours and attitudes of two distinct generation cohorts – the 45-54 younger boomers and their 16-24 year old children. Both groups are facing significant challenges in terms of personal finance and long term financial security. But their responses are very different.

The older cohort is savvy and technologically competent, easily able to navigate their way through a range of online tools to find the best products and deals. But they face an uncertain future with huge financial pressures resulting from changing family structures as well as the economic context. The prospect of higher tuition fees and levels of youth unemployment at 20% mean that their children will struggle to repay debts and start to buy housing, often enforcing a longer term dependency which neither they nor their children want.  And with the spending cuts only just starting to bite, they are well aware that they cannot rely on the state to support their own future pension, health and social care needs – nor those of their aging parents.

So, what of the kids? Interestingly, our research shows that the 16-24 cohort is one of the last still to be financially optimistic, even insouciant, which may be more driven by ignorance and naivety than realism. Despite some anxiety about finding a job (half of them say they are worried), a staggering 62% of them believe things are going well or fairly well with their financial situation. And unlike other groups across the population who are actively seeking out ways to save money, this group still wants to spend, with almost half of them saying they like to ‘splash out’. But when it comes to financial management, their interest is very low indeed. They prefer to delegate decision making and reveal a worrying confidence in their friends and family to provide answers.

The conversations I later had with the conference delegates revealed the extent to which these findings rang true from personal experience. Could it be that we are raising a generation of young people which assumes that we can ‘bail them out’? If so, with their parents under financial pressure, we could be staring at an inter-generational flashpoint.

27 June 2011 at 12:47 pm 1 comment

After bling

Alex Oliver writes:

There are some perks in being a consultant, and being invited to speak at a conference in Paris on managing change in consumer credit and debt behaviour, as I was last week, is one of them. The conference was organised by the European Financial Management and Marketing Association, and was hosted at the elegant Paris Concorde Opera hotel.  The two day conference  tackled a number of difficult credit management issues, including the best approach to sustainable and responsible lending in an environment still reeling from the shock of the global economic crisis, where regulation is increasingly restrictive and consumer demand remains sluggish.

Drawing on our Global Monitor international trends data, I explored the implications of the ‘New Normal’ for European consumers whose attitudes in relation to spending appear to have shifted permanently.  Aspirations have changed: the era of ‘bling’ and platinum credit cards is behind us and although consumers may still be willing to spend, they need to be able to justify doing so. They’re searching for reassurance around value and reduced risk.  And regardless of pressure from the regulators, consumers themselves are scrutinising choice in a way they may not have done before and looking for new tools to give them greater levels of control.

Other speakers also explored the attitudes and behaviours of the Millennial generation and whether this target is really attractive to credit providers or too fickle and costly to be of real value.  Our data suggests the challenge for financial services providers is to be authentic and transparent in their dealings with this group, offering regular communication through multiple channels and inviting, sharing and acting on honest feedback.

The potential prize, for those willing to invest in the relationship, could be a loyal base of young customers, who become brand advocates and – as illustrated a fellow speaker from FICO with reference to US trends – are also willing to prioritise repayments for those credit providers with whom they feel affinity above others – thus also reducing the credit risk for providers who get it right.

The photo is from Donald Townsend’s photostream, and is published under a Creative Commons licence. It is used here with thanks.

25 February 2011 at 9:06 am Leave a comment

Millennials and money

Alex Oliver writes:

We’ve been out and about talking about the millennials generation and their financial attitudes and behaviours. At the Financial Services Forum event in the City of London recently I presented some of our proprietary research about the millennial cohort growing up and ‘coming of age’ with lifestyles to match.  Millennials are now fluent consumers and intuitive users of technology, and are clearly adept at navigating the increasingly blended worlds real and virtual, work and play, but their self-stated lack of engagement and frequent misunderstanding of financial matters is stark.  Tough economic times, alongside a general lack of interest in managing their finances means millennials need support to weather the storm.

But although this ought to be an opportunity for financial services providers, there is something of a mismatch between the brand values and service propositions which millennials look for and those which financial services providers tend to have. Millennials want to see  ‘authenticity’ in brands, and they want easier access to services (for example when they’re ‘on the go’ or using dead time to catch up. There are some easier wins for financial services providers – for example, they may be able to nudge them to some good but low engagement behaviours (such as saving more for retirement) by smart service design. But there’s potentially a big win here. The provider which gets this right, at a time when many millennials are financially squeezed, could capture a cohort of customers for life.

The picture is from dcist, and it’s used with thanks.

7 February 2011 at 9:07 am 1 comment

Financial advisors look to the future

Sarah King and Alex Oliver write:

The Futures Company spoke at two financial advisors’ conferences this month during the snowy weather.

At the IEA/Marketforce conference on the Future of Distribution in Financial Services, suited (and wellington booted) financial advice businesses met to discuss the effects of the Retail Distribution Review. The intention of the review is to bring about real change so that (in the words of the FSA) ‘more consumers buy what they need and have confidence in the products they hold and in the advice they take’. From our consumer work we continue to hear resoundingly that trust in the industry is low and so there is a real opportunity to build bridges and reconnect. But some speakers were frustrated by the lack of regulatory guidance around the concept of simplified advice and it didn’t look as if much of that was going to be on offer. As usual, the conversation focussed on that part of the market that can afford to pay for advice. There was some consensus too on the likely shape of the market with consolidation, and little apparent dismay from those present that a proportion, estimated at around 10%, will fall by the wayside.

Similarly, at Owen James’ Meeting of Minds CEO Forum, some discussion was focused on the challenge of meeting clients’ needs in an environment heavily constrained by regulatory compliance obligations.  Financial advice businesses felt that too many limits were being placed on their autonomy in communicating with their clients in ways which truly added value.  But some voices argued that there could be more opportunities to lead rather than follow the regulator – applying lessons from regulation in other industries.  And indeed opportunities to further innovate in communications formats and channels could hold some of the answers to building stronger relationships of trust and confidence in an era where consumers are increasingly wary.

The picture  is from Wikimedia Commons and is published under a GNU Free Documentation licence.

23 December 2010 at 1:00 pm Leave a comment

The brand and the digital conversation

Andrew Curry writes:

I was invited to Munich earlier this week by the insurance group Allianz to talk to its Brand Council about the brand in the age of the digital conversation. The company’s just launched its ‘One’ campaign, which promotes engagement with consumers through sharing. The emphasis is on real people in authentic situations giving or sharing useful advice or a valuable experience. Digital and social media are a central part of the process.

There are two things that companies seem most concerned about when they jump into social media. The first is that they are merely opening up a new channel for criticism and complaint, and they will be overwhelmed by this. But these conversations happen online whether or not the company decided to be involved, as BP discovered, spectacularly, with the Deepwater Horizon disaster.

The second concern is that consumers are interested only in price when they engage with companies online. It’s certainly true that the internet has created a whole new category of intermediaries whose only story is about discounting, and that the insurance industry (selling low involvement, abstract, commoditisable products) is particularly vulnerable to them.

But despite the recession, our Global MONITOR research shows that people are more willing to buy branded goods provided they are persuaded that they are getting value from them. And they need to be convinced of those benefits, in authentic everyday language, without being confronted by corporate-speak. Get it right, and you create a virtuous circle, as in the diagram at the top of this post. Get it wrong, and you get punished for it.

Elsewhere in the financial sector, Nat West has attempted to regain trust with its ‘Customer Charter‘, which has provoked as much scepticism as admiration. But in the digital age, markets and brands are conversations, and conversation is missing from the Nat West model. Their campaign could have run any time in the last 30 years.

In contrast, some of the early Allianz campaign executions involve their customers talking, in branch, unscripted, about what’s important to them. There are risks here, but at least it feels like a company stepping into the 21st century.

A version of this post first appeared on the blog of the advertising and marketing portal WARC, with which The  Futures Company has a strategic relationship.

12 November 2010 at 9:32 am Leave a comment

Young people and their money

Eleanor Cooksey writes:

How do young people learn about managing money? Earlier this month, we ran a workshop session at an event organised by the Consumer Financial Education Body (CFEB) which was designed to spark debate around how better to engage with young people. The event involved  marketing and compliance representatives from across the financial services industry, and included a short presentation of our recent research for CFEB into how young people make decisions about financial products, and the role of promotions in this process.

Rightly or wrongly, it seems young people turn to their own version of the ‘wisdom of crowds’, which might come from talking to family and peers, as well as referring to online comparison sites and ratings. Echoing findings from our in-house research into the Millennials generation, we also found that young people often identify themselves as confident consumers, perceiving their knowledge of personal finance to be as high as expected to be given the category. This is in spite of a lack of detailed understanding of the terminology required to make properly informed choices. However, when it came to making a decision about which provider to go for or solving problems, the traditional method of talking to someone face to face at a local branch remained very important.

The workshop session triggered useful discussion about how best to address these challenges and balance the risks of under- or misinforming young people by facilitating more peer to peer / youth-focused communication (e.g. the use of part trained online panels of young people), as opposed to failing to engage at all through badly targeted communications which may be disregarded as irrelevant. As one of our respondents noted, ‘facebook is about fun – it’s not for talking about bank accounts’.

The image is from Flickr user Alan Cleaver and is used under a Creative Commons licence with thanks.

17 September 2010 at 3:15 pm Leave a comment

The future of payments

Andrew Curry writes:

I was invited earlier this month to speak on the future of payments at the Digital Money Forum in London, now in its thirteenth year and as provocative as ever. Of course, it’s a future that’s increasingly bound up with technology. My version is based on the work that’s been done by the historian of economics and technology, Carlota Perez (which I’ve blogged about elsewhere, at length) on long technology cycles.

We’ve seen five long technology surges, each of around 50-60 years, starting with steam, cotton and canals in 1771. The first half of the cycle, the installation phase, is driven by investment and finance capital. The second half, the deployment phase, is driven by production capital. And in between the two is a financial crash, when investment expectations get ahead of themselves.

In the current information and communications technology surge, we’re a few years into the deployment phase, when people start to do “new things in new ways” with technology. The smart phone and the tablet computer are archetypal deployment products, and digital payments will inevitably get caught up in the rush, as new applications emerge.

One of the likely effects is the fragmentation of devices, rather than convergence (we may use a digitally enabled key to get into our house, or a card or fob s a store of value, but we’re unlikely to leave them lying on a table during a meeting). We should expect fragmentation of currencies as well; local currencies such as the Lewes pound work much better when they don’t have to be printed.  There are already viable currencies within every online multi-player game (and one of the things I learnt at the Forum was that Chinese workers employed to dig virtual gold in online games earn more than Chinese gold miners who dig the physical commodity, and in much better conditions). One of the other speakers talked about the emergence of currencies backed by units of energy consumption. This isn’t hypothetical.

This potentially represents that same sort of democratisation of production that we’ve seen in other sectors, ending the monopoly of the banks (mostly the commercial banks) on credit creation. This thought seemed to cause some nervousness in the audience at the Digital Money Forum, and the questions turned quite quickly to fraud and regulation, although potential fraudsters in an energy-backed currency would be doing very well to steal a fraction of the money that Bernie Madoff took from his investors.

What’s standing in the way? The banks, who aren’t trusted, and the mobile operators, who aren’t particularly interested in payments, at least not in the rich world. It seems likely that the market will need its own ‘iTunes’ moment, when an outsider steps in to create a decisive disruptive change.

The image above is courtesy of Flickr user Bohman, and is used under a Creative Commons licence with thanks.

24 March 2010 at 9:15 am Leave a comment

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The Futures Company was created through the merger of Henley Centre HeadlightVision and Yankelovich in 2008. This is the blog of the new company - but the former posts from the former Henley Centre Headlightvision blog still can be found here.

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