Why does financial innovation without design fail?

This article presents content originally published in DesignMind, a design journal operated by frog. It is delivered through translation by Transmedia Digital Inc. under the supervision of Mr. Noriaki Okada of DentsuCDCExperience Design Department.

 

Today, the financial services industry places great emphasis on user-centered thinking, a fundamental principle of design. As digitalization advances and business transformation becomes imperative within the financial sector, what is the essential element for providing products and services that truly meet the needs of each individual?

The Transformation Now Required in Financial Services

Financial services companies must focus their efforts on designing user-centric solutions and transforming their businesses. Shifts in user behavior, coupled with the emergence of new technologies and business models, are shaking up the financial services industry.

A recent Goldman Sachs report indicates that traditional financial services could lose $4.7 trillion in revenue to new companies leveraging cutting-edge technology. While banks are countering this with significant IT investments, business transformation cannot be achieved through technology budgets alone. To maintain competitiveness, financial services companies must prioritize developing people-centered services.

※The English version of this article was published in 2015.

 

Through collaborations with clients and partners, frog has witnessed both established and emerging companies forging paths toward the future while transforming financial services. We gathered with several experts, including clients and stakeholders, to discuss how this industry is evolving, who is driving change, and how companies are achieving transformation.

What we discovered is that innovation in this industry requires customer engagement, products and services that evolve customer needs, and establishing a culture that fosters cross-departmental collaboration. We explore each of these in the following chapters.

ENGAGE

Until recently, financial management was a personal experience. Customers sat face-to-face with trusted tellers, who provided individualized service tailored to each client. As ATMs, online banking, investment services, and automated advisory tools became widespread, the distance between tellers and customers grew, and the role of specific platforms (like bank branches) changed. Today's customers have more financial management options than ever before. However, these options may not always align with individual needs or aspirations.

No one uses financial services just to watch numbers on a screen increase. Everyone saves, invests, and manages finances for significant goals. They may save for their children or invest in personal and professional dreams. They manage money for security, freedom, and quality of life.

Financial services companies must keep these needs and expectations in mind. They need to redesign customer experiences that have become outdated or ineffective, both at physical and digital touchpoints, and rethink how they engage with customers.

For decades, frog has helped financial services companies meet customer needs. Through market research and user interviews, we uncover existing customer behaviors and trends, helping to envision and build a future where people have better experiences.

By creating archetypes that define different customer types, we can explore emotional needs like trust and reassurance from the perspective of real people with specific goals. This human-centered approach focuses first on individual needs and objectives before moving toward concrete solutions.

Steve Monahan, Regional Director at AIA Hong Kong, states: "User-centered design is crucial for any omnichannel development. To achieve significant growth, it's essential to focus on the three levels of the customer journey. It's well-known that people are moved emotionally to make a purchase, then justify it logically, and finally take action when they perceive it as simple. In human-centered design terminology, this is called the ESE framework: Experience generates emotion, Simplicity drives logical decision-making, and minimizing Effort is essential for closing the deal."

Enhancing customer experience prevents customer churn and leads to the discovery of new revenue streams. To capitalize on these opportunities and secure a competitive advantage through differentiation, financial services companies must think beyond existing customer experiences to achieve growth.

ENABLE──Adopt

For financial services companies, leveraging technology to respond to disruptive market dynamics is unavoidable. Mobility takes on new meaning as financial information becomes accessible and managed via wearable devices. Consumers will prioritize privacy and security, turning toward credit monitoring and cryptocurrency. Machine intelligence offers new possibilities for the industry but also risks prioritizing efficiency over the human experience.

One example of how reform-minded financial institutions are meeting new functionality needs is through APIs. By providing APIs to third-party application developers, companies can position themselves as approachable players within a larger technology ecosystem.

※API (Application Programming Interface) is a mechanism that exposes software functionality, enabling it to share capabilities with other software.

 

This relationship establishes banks as technology integrators rather than technology providers, and fintech startups as partners rather than rivals.

Bill Barrett, Global Head of Corporate Digital Marketing at BNY Mellon, a major US bank, said: "At BNY Mellon, we are working to rebuild our legacy systems so that we can connect our unique products with other products via APIs. This will improve our adaptability and enable us to respond more quickly to customer needs. Rather than starting from scratch every time, we are following the example of the consumer industry in efficiently creating new products by combining different technologies."

While it is beneficial to focus on new partnerships and external innovation, as with many innovative ideas, financial services companies will also need to introduce new ways of thinking within their organizations.

EVOLVE──Evolving

External innovation cannot be sustained without internal innovative thinking. Turning great ideas into lasting solutions requires strong leadership and a culture that fosters cross-departmental collaboration.

Read the rest of this article in the web magazine "AXIS".