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Here’s why Digital-only financial providers are taking the lead

While traditional financial institutions have several advantages, they must transform faster to meet the digital-first challenge.

August 09, 2019 / 05:44 PM IST

When it comes to switching to a digital-only financial provider, consumers in Asia Pacific are amongst the advanced. And Indian consumers lead the pack when it comes to openness in considering digital engagement with financial services.

73 percent of Indians who participated in a recent survey believed they should be able to accomplish any financial task on a mobile device. These were part of the findings of a study conducted by market research firm Forrester Research to understand how consumers prefer to interact with their financial service providers on digital channels especially in mobile-first markets like China, India, Thailand, and Indonesia.

"Consumers are more likely to engage with firms that prioritise helping them improve their financial well-being," said Dane Anderson, Vice President, Research Director and Region Manager at Forrester. "We expect that customers will dynamically deconstruct their personal financial services ecosystems and reassemble them with newer and better players. Traditional institutions have several advantages but will be left behind if they do not transform faster to meet the challenge."

According to Zhi Ying Barry, Senior Analyst at Forrester, the high levels of empowerment of Asia Pacific consumers affect how they choose to interact with their financial services providers. Many prefer digital channels over physical ones, especially in mobile-first markets like mainland China, India, Thailand, and Indonesia. “For life insurance customers, the situation is more heterogeneous across Asia Pacific markets, with digital channels being preferred in markets such as mainland China, Thailand, India, and Australia. In Singapore and Malaysia, agents are still the preferred way for customers to interact with their life insurance provider. That’s not to say that financial services firms should ignore non-digital touchpoints,” she noted.

Tech companies preferred over traditional firms


According to the firm, many customers trust payment firms and technology firms over traditional financial services providers to help them better manage their finances. The scepticism that non-traditional digital players won’t make a big impact in the financial services sector is fast disappearing.

Already, global technology giants like Google Pay, payment providers like Paytm, e-commerce players like Amazon Pay and even ride-sharing leaders like Ola Money are threatening established financial firms by offering simple, convenient, and more personalised digital experiences.

While banks lead in consumers' trust to act in the best interest of their financial well-being, a surprising cast of digital characters is not far behind. In India, Google beat out banks as the most trusted company to act in their best financial interests whereas in China, Alibaba and WeChat are slightly behind banks, and across all countries, insurers break into the top three except in just two countries -- Hong Kong and Malaysia.

The pace of industry change is about to accelerate, and the stakes are rising. Forrester believes that financial institutions and service providers must understand how consumer behaviour and financial attitudes are evolving, how customers want to interact, and what matters to them when it comes to financial goals. This will have a profound impact on how they formulate their go-to-market strategy, distribution channel strategy, and their firm’s unique value proposition.
Moneycontrol Contributor
first published: Aug 9, 2019 05:44 pm
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