|Julia Bloch Mellon|
Apple Pay and Google Pay own the digital wallet market. Amazon and Alibaba have already loaned billions of dollars. And Facebook wants you to use Messenger to pay your friends back for dinner. Make no mistake, Silicon Valley tech giants are climbing into the financial services playground.
In the decade following the recession we’ve seen fintech startups precipitate incremental change in the financial services space. Disruptors have reimagined components of the financial services puzzle and nudged Wall Street into the digital age, creating the competition necessary to force traditional financial companies to compete on multiple fronts: product innovation, user experience, transparency and value.
|This article is featured in O'Dwyer's Aug. '19 Financial PR/IR & Prof. Svcs. PR Magazine.|
But ultimately, fintech startups and Wall Street giants played nice. Many financial services companies saw the writing on the wall and decided that if they couldn’t move quickly enough to incubate those innovations in-house, they could join forces with newcomers through strategic partnerships. It turned out this was the beginning of a mutually beneficial friendship, resulting in a huge win for consumers.
In 2015, Jamie Dimon gave his ominous warning that “Silicon Valley is coming.” Wall Street was able to weather the storm in subsequent years, but they’re not out of the woods.
With a deep user base, tech looms large
For Wall Street, Big Tech poses a threat to financial services that is, well, bigger. Amazon, Apple and Alphabet—currently the second, third and fourth largest companies in the United States—have something that the small fintech start-ups lack: Scale. A lot of it.
If Fintech 1.0 was all about plucky startups working to elevate the standards that consumers expected from financial services companies, Fintech 2.0 is about Silicon Valley behemoths turbocharging that mindset to their expansive user base with the backing of billions of dollars of capital.
These companies bring to the table the best cloud, data and AI resources on the planet. No one knows better than these giants how to surround a customer with an experience so seamlessly connected that the ease of use is worth the sacrifice of privacy (something traditional financial firms have struggled to deliver).
This is, in part, because most tech players have maintained reputations as friendly giants. Their Net Promoter Scores soar high above big banks. People are willing to give a company like Google all their information if it makes it easy to toggle between their laptop, their phone and an IoT device. What if Google’s deep data troves could give you a holistic view of your financial picture too?
What does this mean for Wall Street? The bar for best-in-class UX is about to be raised again.
2020 could impact competition
Regulatory headwinds could slow Big Tech’s penetration into finance. Just last month, Congress made moves to stymie Facebook and friends from launching their take on a cryptocurrency, Libra, with the aptly named “Keep Big Tech Out of Finance Act.” And, in the first Democratic debate, Senator Elizabeth Warren called for the breakup of America’s largest tech players. With an election around the corner, it remains to be seen whether the House and Senate will turn red, purple or blue. But the political parties in power certainly will influence the future role that Big Tech can play in the financial services ecosystem.
Regardless of how things evolve, in the early innings of Fintech 2.0, Big Tech has already changed the game.
The future of financial marketing comms.
Let’s face it: Wall Street and Silicon Valley come from very different marketing communications schools of thought. As they square off in the fight for share of wallet, there are marketing and communications lessons that Wall Street and Silicon Valley can learn from one another.
Dear Big Tech, don’t forget thought leadership: In the years following the Financial Crisis, finance became commoditized—in product and cost—and the best way to win customer trust was in a race to capture share-of-voice through thought leadership.
Big firms launched thought leadership programs—often composed of a combination of proprietary research, earned media, content, and social/digital activations—that dug into consumers’ emotional relationships with money, explored the role gender dynamics plays in investing and provided the tips to help people navigate financial decisions. Part group therapy, part actionable financial insights, consumer finance marketing communications became more human. This financial expertise and thought leadership is what sets traditional financial players apart from tech giants.
As Big Tech matures in the financial services realm, it could stand to take a leaf out of Wall Street’s book, by going to market above product, addressing consumers’ real desire for financial tips, education and empathy.
Wall Street, it’s time to evolve your value prop: Wall Street also has a big lesson to learn from Silicon Valley.
If Big Tech knows how to do one thing, it’s to cultivate a user experience that is simple, well-designed and engaging. As these tech players dive fully into the financial services competitor set, customer expectations for user interface, PFM, smart analytics and AI are about to climb yet again.
In order to continue to thrive, traditional financial players will need to prove that they can match their counterparts in cultivating a compelling user experience that centers around an excellent product. As tech players challenge traditional financial models, Wall Street will need to make sure they’re focusing on price, product and innovation as much as their competition is.
Wall Street has shown itself to be resilient and—by and large—willing to evolve to keep up with their customers’ expectations. If they can continue to lead the way in financial thought leadership while delivering on UX, they stand in good stead for the future.
The financial services marketplace is entering a second wave of rapid evolution. But if Wall Street and Silicon Valley can learn a little from each other, then, ultimately, the end user will come out on top.
Julia Bloch Mellon is Senior Vice President of Financial Services at Bliss Integrated Communication.