Patrick RuppeNew technologies will help grow the banking and financial services pie for everyone by removing friction from consumer transactions.

Some technology-driven disruptors threaten to take a full piece of the pie away from the traditional banking business. And still other technologies seem better suited to be co-opted by the finance industry as it looks to transform itself for the digital age.

There will be winners and losers, as new Fintech players challenge the established banking and investment community. But the winners won’t always be determined by the best technology or biggest online network. The winners will be the firms that best articulate their value proposition in the new market environment.

Simple, clear marketing communication is always going to make the most impact, but it is nothing short of essential during times of market disruption. Capitalizing on the emerging opportunities will require new thinking and a willingness to explore unconventional territories and potentially redefining how value is measured in financial services industry.

O'Dwyer's Aug. '15 Financial/IR and Professional Services PR MagazineThis article is featured in O'Dwyer's Aug. '15 Financial/IR and Professional Services PR Magazine

For the incumbents, this might require moving away from defining their value in transactional terms and begin thinking how to position the value of their expertise.

One thing is for certain: the old adage that the person who frames the issue wins the debate, should be the marketing mantra for all financial services firms, new and old, during the next five years. Many of the traditional financial services are being unpacked, streamlined and automated. They aren’t changing; they are being improved. And marketers in finance should tap into that truth to communicate what changes mean for their customers.

The dangers of automation?

The rise of the “robo-advisor” is one example of recent upheaval in the financial world. In truth, stories alleging the “fight to the death” between human and robot advisors are greatly exaggerated. The rise of the robo doesn’t spell the end of the human investment advisor and guidance; in fact, it should mean that wealth advisors can spend more of their time solving bigger, more complex issues related to managing life’s more challenging financial questions — strategies for tax planning, philanthropic investments, generational wealth transfer, and business succession planning, among others.

Portfolio allocation and rebalancing is clearly an area of the market that can be made more efficient and less expensive through automation. At its core, portfolio construction and management is binary and data driven, perfect for a machine. Advisors should not shy away from embracing this technology, and most won’t. At the same time, advisors must reframe what their primary value is to the client.

Most investors will become quite comfortable with the knowledge that a machine is running their investment strategy. Where most people will want human guidance is on complex financial decisions that require sober thinking, deep insight and sound planning.

Advisors will need to recast themselves as a “personal CFO” for their clients, helping them navigate complex financial decisions rather than be a gatekeeper to a pool of investment insights. This will require developing a high-touch, low-touch business model and a marketing strategy that focuses on their ability to deliver value and results on the challenging financial issues their clients are facing.

New platforms, new possibilities

Peer-to-peer lending poses a different challenge for the banking community. These platforms have stepped in to fill the void created by reduced lending activity from banks during the downturn and through several years of a near-zero interest rate environment.

With new platforms popping up to connect borrowers with lenders, the crowdfunding era of personal loans has arrived.

While this has historically been a core offering of the community bank, there is no arguing that peer-to-peer lending platforms make it faster and easier to access loan funding. And that is a compelling value proposition, even if rates on peer-to-peer platforms can often times be higher than traditional banks.

It’s possible, though, that banks may not want or need to compete in this space moving forward. Many should, and will, focus on moving upstream and better defining their value proposition for providing and servicing larger commercial loans with higher profit margins.

Disruption in the payments arena, however, offers banks an opportunity to capitalize on the ability of new technologies to exponentially grow consumer transaction volumes.

New payments technologies are removing friction from online and mobile purchasing, making it easier than ever before for consumers to swipe and small business to facilitate non-cash transactions. This is a positive, no matter which way you slice it.

While banks that don’t offer their own digital wallet risk being disintermediated from the transaction, the overall higher volume of transactions should offset any fees that take from the banks’ traditional commission for this type of service.

So while the financial services industry is undergoing one of the most significant transformations it has had to endure, it is best not to view this shift as an existential threat for traditional financial institutions.

The industry is becoming more efficient, and we can expect to see continual technology-driven innovations and improvements to the sector over the next several years. And it won’t be just up to the banks to build that future. Silicon Valley is willing to help. That’s a good thing. This convergence of old and new, however, will require traditional financial services firms to reevaluate how they measure value. Those firms will also have to change how they communicate that value proposition to the market. It is an opportunity, not a threat, and we, as an industry, should embrace it with vigor.

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Patrick Ruppe is Vice President of Financial Services Practice at Bliss Integrated Communication.