Signs of major transformation in the financial industry. The key lies in "redesigning the customer experience."

As the online shift accelerates across all industries, bringing major changes to consumers' values and purchasing processes, there is now a demand for new purchasing experiences that seamlessly connect online and offline.

In February 2021, the Dentsu Group in Japan launched "dentsu SX" ( ※1), a project to design new "shopping experiences" for the OMO (Online Merges with Offline) era. The name SX embodies both "Shopping Transformation" and "Shopping Experience," offering one-stop support from strategy to implementation and operation for customer experiences tailored to the coming era.

The theme of this third installment is finance. Dentsu SX project members Naoki Mori (Dentsu Inc.), Taro Ishizaka (Dentsu Live Inc.), and Yoshiki Maeda (Dentsu Digital Inc.) discuss the major tectonic shifts occurring in the industry and the future of finance centered on customer experience.

[Previous articles in this series]
Part 1: Future Shopping Experiences Beyond Merging Physical Stores and E-Commerce
Part 2: Enjoying "Buy → Try → Sell" Online! Diversifying Cosmetics Consumption During the Pandemic
 

※1 dentsu SX
A project by seven domestic Dentsu Group companies designed to create integrated online-offline purchasing experiences aligned with the OMO era from the customer's perspective, contributing to business growth in the retail sector. Integrates the Dentsu Group's accumulated business expertise with the insights of strategic partner frog design inc. By combining Dentsu Inc.'s proprietary customer behavior data and cutting-edge technologies like AI and cloud computing with creativity that captures customer insights, it creates unique shopping experiences for brands from the customer's perspective. ( See release for details )

 

Financial DX Struggles to Gain Momentum. The Bottleneck Lies in the Japanese Mindset

──First, could you tell us about the current state of DX in Japan's financial industry?

Maeda: As is well known, traditional banking operations continue to face a challenging environment. This is due to prolonged low interest rates, competition for users from new players, and restrictions on user behavior caused by the pandemic. Financial DX, represented by fintech, is gradually gaining traction as a strategy to overcome these difficulties.

However, in Dentsu Digital Inc.'s 2020 "Survey on Digital Transformation in Japanese Companies," which polled approximately 300 key financial figures, only 42.3% responded that they were "engaging in DX in some areas." While this figure is neither particularly high nor low compared to other industries, considering the long history of fintech adoption, financial institutions seem to feel that results have been slower than expected.

Excerpt from "Survey on Digital Transformation in Japanese Companies (FY2020)" survey data

Mori: From a user perspective, when considering financial services, consumers now have increased exposure to new UI/UX. This includes apps created by non-financial players in finance-related fields, as well as sophisticated non-financial services available in society. Compared to these, it seems there are many cases where consumers feel dissatisfied with the services and support provided by traditional financial institutions.

The proliferation of digital devices has significantly altered consumer behavior. Access to financial and banking services via web, mobile, and apps is now ubiquitous, and payments using micropayment services and electronic money are already commonplace. In response to these major shifts, we must rethink the overall design for providing superior UI/UX to users from the ground up.

Ishizaka: Cultural factors unique to Japan, such as a strong preference for "safety and security" and a "cash-based mindset," also contribute to the slower adoption of financial DX compared to other countries. Of course, a clear distinction between online and offline channels is necessary. While everyday transactions have shifted online to a certain extent, consulting with financial institutions remains indispensable when handling asset management or complex financial products.

Fundamentally, we cannot say services promoting understanding of asset management's importance or financial products are well-established. Therefore, I feel it's crucial to revisit and rethink the customer experience itself, before even considering online/offline distinctions.

In an era where non-financial players are entering the financial domain, challenging the very purpose of banks

──While financial DX faces many challenges, there are also emerging movements to challenge new initiatives. Could you share a few topics you're particularly watching?

Maeda: The trend toward "digital banking" has accelerated in recent years. For example, Fukuoka Financial Group launched "Minna no Ginko" (Everyone's Bank) in May 2021. Positioned as Japan's first digital bank, it offers services allowing account opening, deposits/withdrawals, and money management entirely through a dedicated smartphone app. The key point is its focus on a comfortable, easy-to-use UI/UX, targeting Millennials and Generation Z as its main audience. We see this as a noteworthy effort to create touchpoints with younger demographics, a major challenge for the financial industry.

Indeed, data shows that 30% of millennials (ages 18-34) with bank accounts in the UK primarily use smartphones for banking, and 45% conduct banking transactions via apps several times a week (※2). This trend will undoubtedly spread to Japan sooner or later.

Ishizaka: I'm focusing on "subsidy programs" and "legal reforms." The former involves the government subsidizing part of the costs for system integration and other expenses related to regional bank consolidation, which is expected to significantly accelerate the pace of consolidation.

Meanwhile, since the 2018 revision of the Banking Act, we've seen more banks expanding into non-banking services. The Dentsu Group, for instance, established a new company with Sumitomo Mitsui Financial Group to handle advertising and marketing services (*3). This trend of banks exploring new business models will likely intensify.

Mori: Another related topic is "BaaS (Banking as a Service)." This involves providing banks' financial services to non-financial companies via API integration. It's seen as a promising business model that creates new revenue streams for banks and generates new customer touchpoints for the service providers.

Maeda: Additionally, "digital payroll"—paying salaries in digital money without using bank accounts—and "BNPL (Buy Now, Pay Later)"—essentially deferred payment—are gaining significant traction overseas. Regardless of how widely they penetrate Japan, it's entirely plausible these services could become mainstream trends aimed at enhancing user experience. Since some business models can be entirely self-contained by non-financial players, this will increasingly challenge the very purpose of banks' existence.

※2
Source: https://www.salesforce.com/uk/blog/2017/01/insights-into-the-changing-needs-of-todays-retail-banking-custom.html

※3
On July 8, 2021, Dentsu Group Inc. and Sumitomo Mitsui Financial Group jointly established SMBC Digital Marketing Co., Ltd., a joint venture company operating advertising and marketing services utilizing financial big data. ( See the release for details )
 

Reforming Both Customer Journey and Employee Journey is Necessary

──Given the trends in the financial industry discussed so far, please tell us the areas dentsu SX wants to focus on and the capabilities it can bring to bear.

Maeda: While technology itself will undoubtedly continue to evolve, being technologically advanced does not necessarily equate to consumers finding it convenient. Our role is to find the optimal balance between technology and consumer insights—this is where the Dentsu Group's expertise and know-how truly shine.

For example, Dentsu Live Inc. has accumulated expertise in creating offline experiences powered by technology through its track record in corporate museums, branded stores, and events. I believe it's crucial to harness the unique strengths of each group company and deliver value as a unified team.

Ishizaka: Daily transactions like withdrawing cash or paying taxes should increasingly shift online. However, when borrowing large sums or considering financial products, the reassurance provided by face-to-face interactions and the value of a teller's advisory role will persist. The key lies in how we can deliver a rich experience to users in these scenarios.

Maeda: User interviews conducted by Dentsu Digital Inc. also consistently revealed a strong sentiment: "I want to buy financial products from someone I trust." I believe this is one of the unique purchasing characteristics specific to financial services.

Ishizaka: One approach could be to handle the pre-purchase consulting in person, then transition ongoing relationship management—like post-purchase operations and regular consultations—to webinars or online channels. The crucial part is designing these online and offline experiences not as separate pieces, but within a single, cohesive narrative.

Maeda: Banks, including regional banks, have established branches in highly convenient locations and built communities with local residents. As the value of physical branches is being reevaluated during the pandemic, there is a need to redefine their role and undertake renovations and redesigns.

For example, we need to advance substantive discussions on how to utilize the branch asset—whether as experiential stores to build trust with customers, virtual stores for acquiring new customers, or by enhancing their traditional value as community hubs.

Mori: Some younger generations prefer services completed entirely online, and many seniors are also digitally savvy. We should design customer journeys tailored to individual needs, regardless of generation or asset size.

Maeda: Alongside redesigning the customer journey, I believe the employee journey is also key. When we interviewed financial institutions about barriers to DX, the top hurdle was investment cost, but the second most cited was a lack of digital and technology skills and talent. Regarding that, Dentsu Digital Inc. offers DX training programs and initiatives to station DX talent on-site through hands-on support, so we believe we can assist in that area.

Excerpt from "Survey on Digital Transformation in Japanese Companies (FY2020)"

Ishizaka: Especially in scenarios like asset management or financial product consulting, gaining user trust and empathy is crucial. Beyond just digital expertise, I believe the Employee Journey plays a significant role from the perspective of consulting that enhances the user experience.

Mori: The financial industry is currently undergoing major shifts driven by regulatory changes, shifts in the player landscape, and technological evolution. Within this context, we aim to learn with heightened sensitivity and propose the unique value that only dentsu SX can deliver.

dentsu SX welcomes inquiries and questions from companies. If you are interested, please feel free to contact us via our official website.

Next time, we'll explore changes in the shopping experience within the "fashion" industry and the actions companies should take moving forward.

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