A recent Gallup report revealed that engaged customers bring 37 per cent more annual revenue compared to disengaged customers. Yet, according to another Gallup report, only 32 per cent of Americans report feeling confident in banks and only 21 per cent of Europeans feel that their bank wants what is best for them, which suggests that far too many banks still have inadequate engagement strategies in place. With the next big intergenerational wealth transfer on the horizon, in which an estimated £5.5trillion of wealth is set to move hands in the UK, the need for banks to attract and engage the next generation of customers has become even more critical.
Henrik Rosvall is the CEO and co-founder of Dreams, a provider of engagement banking solutions which operationalises insights from psychology, neuroscience and behavioural economics to enhance emotional engagement and financial wellbeing of banking customers. Its platform enables end-users to become better at saving, investing and living more sustainably, while helping banks cater to the needs of new target audiences, increase customer engagement and drive digital sales.
What has been the traditional company response to financial technology innovations nationally?
Back in our home country, Sweden, we’ve been fortunate enough to have access to advanced payment rails and identification infrastructures for many years now, and these have facilitated a number of collaboration opportunities between fintechs and incumbents. Nowadays, the most successful fintechs tend to be those that embrace collaborations with financial institutions which is why banking partnerships are increasingly becoming a natural and fundamental part of their strategic planning.
Look at Stabelo, for instance, which now offers mortgages to larger banks’ end-customers, or Doconomy, which supports banks with carbon footprint trackers. For us at Dreams, we started building savings, investment and debt management services together with Ålandsbanken back in 2015 and then with Storebrand in 2018. I believe that most banks in Sweden have realised that in order to deliver modern and personalised services that suit their customers’ needs, it is a lot more advantageous to partner up with fintechs than to develop the products in-house.
How has this changed over the past few years?
When we first founded Dreams back in 2014, most banks initially disregarded fintechs as insignificant competitors. They started setting up big internal R&D departments that were supposed to revolutionise the way they were building customer experiences. Very few of those initiatives, however, have seen the light of day. Risk-averse cultures combined with a lack of ability to attract tech talents have made it difficult for banks to modernise their approaches and operations, and keep pace with technological innovation. Nowadays, there has been a big shift in attitudes towards building a product in-house versus buying it, with most banks now actively looking for fruitful partnerships, and trying to set up processes that speed up dialogues.
Is there anything that has created a culture of change inside the company?
Technological advancements in IT capabilities have definitely driven a significant amount of change within the industry. Banks have become a lot more inclined to move towards cloud-based solutions, and open up their IT policies to allow third-party collaboration and use of micro-services. Initially, Dreams launched as a B2C money-saving app in the Nordics, but with these technological changes and attitudinal shifts, we noticed a significant opportunity to expand our business model into the B2B space, and we evolved our services as a provider of embedded SaaS solutions for financial institutions.
What fintech ideas have been implemented?
Over the years, we have embraced a number of collaborations with some of the largest banks in Europe including BNP Paribas, Ålandsbanken and Storebrand to build sustainable banking services. Our methodology – which is rooted in psychology, neuroscience and behavioural economics – has allowed us to offer something of a unique proposition to our partners. Our in-house science team continuously collaborates with leading research institutions around the world to help our product development team discover new ways to engage customers, improve their financial wellbeing, and drive sustainable behaviour change. The Dreams platform leverages these behavioural science insights, and combines rich intent data with transactional and open banking data, for a uniquely personalised experience. In turn, we provide banks with a CX layer, which can be fully white-labeled and seamlessly embedded into their existing applications.
What benefits have these brought?
These various collaborations have brought a number of benefits, for all parties involved. The banks have been able to engage and attract new customers, significantly improve and expedite their go-to-market strategies and drive higher revenues for both financial and non-financial products. The end-consumers have benefitted from first-class digital user experiences, and a financial tool that helps them become better at saving and investing in a way that is both good for their wallet and good for the planet. For us, we’ve been able to vastly accelerate our international expansion strategy, and get a significant step closer to achieving our mission of making financially sustainable living an everyday reality for people.
Do you see any other industry challenges on the horizon?
In general, I believe that behind every challenge lies a great opportunity. For instance, we will no doubt see more and more regulations enter the consumer lending space over the next few years. Strict and thorough guidelines surrounding the selling of a credit portfolio will continue to come into place, while national debt registries will gradually move away from the control of private companies towards that of the state. This, among other things, will contribute to further levelling the playing field between incumbent banks and their competitors. Then of course, as customer expectations, needs and wants continue to evolve, the levels of innovation and competitive intensity within the industry will skyrocket, as fintechs, banks and financial institutions will be forced to innovate in order to stay relevant.
Can these challenges be aided by fintech?
Absolutely, fintechs tend to be quicker at adapting to challenges and I believe they will be a vital part of the solution for incumbent banks. In partnering and embracing collaboration, forward-thinking fintechs and established, capital-rich banks can create truly innovative services that are relevant, tailored to the specific needs of their customers and have a big impact on today’s society.
I believe CX is the new black. Customer needs are constantly evolving, as they increasingly come to expect services that are emotional, fun and engaging, and banks are simply not keeping up. Banks are very functional today, but very few of their customers are driven by functional values. This will change and fintechs will be absolutely integral in supporting banks in that transition.