Why financial services companies should be in fear of the tech disruptors
- 15 June, 2018 08:20
Financial services companies have long feared the world’s technology giants would start coming after their customers, and it appears those fears are not without foundation.
A new report from Capgemini has found that despite the millions of dollars insurers spend on building their brands, many younger customers would be quite happy to shift their business into the hands of the world’s tech giants in exchange for a better experience.
It is a finding that should be concerning for brand owners across the financial services sector.
According to Capgemini’s annual World Insurance Report 2018, almost 30 per cent of customers globally are willing to buy insurance products from big tech firms such as Amazon and Google. That has grown significantly from the 17.5 per cent who reported they would do so in 2015.
Vice-president for Capgemini Australia, Mohit Jain, says that rate of change will only go up.
“The market is not fully tested, and they have not launched,” he says. “But very subtly - and in some geographies not so subtly - they have been marketing themselves and promoting in social media what they are doing.
“These results really help reconfirm for these big tech firms that there is a market getting ready for it.”
The report points to numerous examples of big tech firms investing in financial services products, such as the Amazon Protect service, which launched in the UK in 2016 offering protection against accidental damage, breakdown and theft of Amazon purchases. Amazon is also collaborating with Berkshire Hathaway and JPMorgan to create a healthcare company to serve its employees in the US.
Similarly, Apple has been making inroads into health insurance, while Google’s owner Alphabet has invested in numerous insur-tech firms. Jain says the attraction for big tech firms to move into financial insurance comes from their common origins as data-driven industries.
“There in lines the threat to the incumbent firms, is that the big tech firms have been natively built as data organisations, able to harness real time insights,” Jain says. “Once the big tech firms sort out the trust factor with the underwriting process, and they sort out their distribution channels, this will go quite explosive, very quickly.”
That big tech firms have any chance of winning customers away from traditional insurance providers is based in the experience consumers believe they will provide. Jain says the report reconfirms Gen Y and the tech savvy groups are far more likely to churn for better user experience with the big tech firms.
“They have simplified customer experience for their own native flagship products,” he says. “With the financial institutions, typically they have not been as simple.”
Hence Jain says there has been a concerted effort among incumbent insurance firms to change the user experiences that they offer, along with the operating models that sit behind them, to create simpler and more flexible products. And in many cases, they are doing so in conjunction with fin-tech firms.
But it seems they still have plenty of work to do. The report found that Ausrtalian insurance firms had the greatest lag in customer experience when compared to their counterparts in banking. While 42.3 per cent of respondents had a positive experience with their bank, only 29.2 per cent could say the same about their insurer.