By Serge Vartanov
Disruptive innovation is fundamentally simple: Given the opportunity, people will change their behavior and migrate to products and services that better meet their needs.
Look at consumer lending. Consumers crave convenience, transparency, efficiency, choice, and empowerment. And the same disruptive forces that displaced the horse-and-buggy with the automobile are at play right now in the financial services industry. What has changed is the velocity of change. With the rise of fintech, innovation that once took decades can now take years—or even just months—to play out.
Consumers have new opportunities. What does that mean for lenders?
A generation of innovators has set its sights on finding new and creative ways to unbundle the bank and offer a new suite of options for every financial service imaginable. Moreover, consumers have access to more information than ever before—right at their fingertips. That empowers them with the confidence to take on financial decisions, creating new markets for self-service offerings.
That also gives lenders large and small a unique opportunity to attract the growing segment of digitally savvy consumers.
Smaller financial institutions may have the advantage of agility and the ability to quickly adopt and experiment with new technology.
Alternatively, larger name-brand lenders may have more resources to invest in innovation. And they’re able to leverage the strategic value of their brand with new customer segments through new digital experiences, potentially at national scale.
For institutions of all sizes, here are three initial steps to take toward adapting to this new environment:
- Understand your customer’s unmet needs firsthand.
The best way to give consumers what they want is to truly empathize with their experience working with you versus working with alternatives. This is even truer if you don’t have complete control of the customer experience. This is the case in car financing, for example, where car buyers may only have access to your automotive loan and leasing products in the dealership finance office. To realize new opportunity the way a successful start-up would, you must use a start-up playbook: Put on your mystery shopper hat and spend a day or two trying to procure some of your financial service products yourself, as well as competing offerings.
- Empower talent that lives and breathes emerging technology.
Quite often, the employees that have the most authentic experiences with the next generation of mainstream technology are also the ones who have the least tenure in your company. They may not have the pedestal they need for their insights to be heard. While there is no benefit to deploying technology solely for the sake of technology, digital innovation often sits at the intersection of unmet customer needs and new technologies that allow businesses to solve those needs in ways previously unimaginable. How do the next generation of consumers—those who grew up with a smartphone in hand—use technology to interact with each other and make their lives easier? To get ahead of the innovation curve, you have to be willing to elevate their voices.
- Embrace the fintech ecosystem—build, buy, and partner only where it makes sense.
Whether you’re a community lender or a multi-national banking brand, there is an army of fintech entrepreneurs who would move heaven and earth for the opportunity to meet with you. It’s worthwhile to take regular meetings with the forces disrupting your industry—if only to educate yourself on how new entrants are approaching familiar problems. In doing so, you may determine you’ll be able to realize the potential of emerging technology to solve real customer problems. To inoculate yourself against fallout from disruption, you might need to become the disruptive force in your industry, through symbiotic partnership with emerging players. Building such relationships will allow you to see firsthand the potential of a new approach to serving your customers—without having to take on the burden and risk of building the new approach yourself.
Growing the market.
It’s human nature to put off inconvenience and seek empowerment. As financial transactions like opening an investment account or financing a vehicle become easier, customers will become motivated to stop procrastinating and follow through on them.
Lenders who embrace innovation through firsthand research, empowerment, and partnership don’t just stand to win share. They also stand to increase the size of their addressable market—and they put themselves into a unique position to take advantage of it.
Serge Vartanov is the chief marketing officer of AutoGravity, where he leads marketing, product and design teams to transform auto financing and champion the AutoGravity brand. Prior to AutoGravity, Vartanov was a consultant with The Boston Consulting Group, where he led cross-functional teams of designers, engineers and product managers that supported senior executives and sparked innovation, accelerated business growth and managed digital transformation to stay ahead of disruption. Email: [email protected].