08/03/2022 | Press release | Distributed by Public on 08/03/2022 07:38
Financial services firms must evolve their value proposition to survive and thrive for the long term. Consumers and high-net-worth individuals need support not just with financial needs, but on a wide range of personal and family-related objectives. Business owners need help not just with banking but with strategy, operational, and HR questions. Firms that fail to expand their value proposition beyond the traditional realm of credit, deposits, cash management, and investments risk being superseded by emerging competitors.
The threat to financial providers is not merely some academic risk on the distant horizon. It is immediate, and recognized by leaders all across the industry. Consider for example that:
The threat, simply put, is that non-traditional players, and non-industry players altogether, are aggressively working to take market share from legacy financial providers. Examples abound. In consumer banking, firms like Apple and Facebook are disrupting lending and payments. Within commercial banking, Shopify offers "Shopify Balance" for business customers. In wealth management, Overstock.com launched a robo advisor service in 2018. While this offering failed to take off, many other technology firms and non-traditional providers have similar designs on serving high-net-worth individuals. The trendline of financial services industry disruption by non-traditional players is clear. It raises the question for clients: why should I work with a traditional bank when my banking and non-banking needs can be serviced simultaneously by a non-traditional provider?
In response, many industry players seek to boost growth and relevance by expanding their value proposition beyond traditional financial services. The proportion of banks investing in open banking and APIs, many with the intent to expand their offerings beyond traditional industry boundaries, roughly doubled between 2019 and 2021. And 82% of financial services technology leaders state that their firms are currently partnering with fintechs, the goal of many of these partnerships being to launch fundamentally new offerings outside typical financial services.
But confidence remains low that these investments will succeed. In a recent poll of financial services leaders, close to half indicated that they are not confident in their ability to "evolve products to meet changing customer needs" and "explore partnerships/ecosystems with other companies."
However, some providers are succeeding in evolving their offerings and value proposition beyond financial services, becoming indispensable partners to their clients in the process. They are building digital ecosystems that intersect with platforms where clients shop, socialize and conduct business. They are helping clients meet needs that range from healthcare, to marketing, to government relations, to talent management.
A review of these examples reveals eight key success factors that enable firms to expand their value proposition beyond traditional financial services. None of these are necessarily easy to execute on. They involve shifts in technology, ways of working, and cultural norms. And yet proof points from successful firms exist all over the industry. Specifically, leaders at firms successfully expanding beyond financial services:
As noted above, there should be no illusions that these steps are easy. Just getting stakeholder buy-in to explore a new value proposition can be a tremendous battle, to say nothing of the steps listed above. At Gartner we have the greatest respect for leaders who are piloting their firms on this journey.
And that is also why our experts are here to help. You can find numerous resources on our web site to help your firm along this journey, including resources to help build required new skillsets and integrate acquisitions that might be necessary to adopt this new strategy. For more information, please schedule an inquiry with our experts to discuss how Gartner can help build your proposition beyond financial services to achieve growth and transformation.