Accelerating Digital Channels in Financial Services

A woman works on a laptop and smartphone, representing the adoption of digital channels by financial services businessesHow the pandemic accelerated migration into digital channels

The COVID-19 pandemic prompted numerous changes for most companies and businesses as they evolved to meet the pandemic’s unprecedented challenges. The pandemic changed the way businesses serve customers, how they interact with them, and also how customers make buying decisions and interact with their financial services and insurance providers.  Below are several of the key changes.

Channel shift in favor of direct to customer

The world before the pandemic had a relatively balanced combination of channels: some companies served customers in person, others opted in favor of phone (i.e. contact center), and some embraced digital (e.g. online and mobile). Many companies understood the value of serving customers via numerous channels resulting in a multi-channel operating model.

A massive shift toward direct-to-customer channels took place over a very short period, as the business world established a new normal. With the pandemic putting an indefinite stop on in-person channels, many businesses started shifting or accelerating their shift towards direct channels such as call and digital for sales and customer support activities.

Forcing product simplification and accessibility

One of the benefits of in-person communication is the ability to guide customers through more complex products, such as financial advisory. In-person communication also enables better risk assessment, such as in-person medical assessments in life insurance. With the shift towards direct channels, a need for different types of products arose. Financial services businesses created simpler, more streamlined products that can be explained in a quick call or on a screen. Insurance companies adjusted their risk tolerance by increasing coverage rates for insurance products without a medical exam.

Blurring geographical limits

Seattle city skyline with arc representing how businesses and customers are connected through digital channels

In the past, the ability to connect with customers in person was perceived as an added value. When the only interaction possible is via non-physical channels, the importance of geographical proximity decreased, both for service providers and their customers and for employees and their employers. Some businesses were able to tap into new pools of resources in further corners of the country or even abroad. Simultaneously, businesses with a limited footprint could expand their reach and start serving clients in other parts of the country.

Increased number of cyberattacks and scams

Digital attacks were on the rise, year after year, even before the pandemic. However, given the pandemic and focus on digital channels, that pace accelerated further, with both companies and consumers becoming victims. Interpol and the FBI reported an increased number of cyberattacks; WHO (World Health Organization) reported a fivefold increase in cyber attacks.

These attacks come in different forms, from phishing emails to target cyberattacks on digital platforms or intrusions into virtual communication channels (e.g. video conferencing), posing new digital security requirements. Also, the number of unsolicited marketing emails, spam, and other digital pollution went up.

How financial services and insurance players have fared during the pandemic

Given all these new challenges, it’s no wonder that companies found themselves in a new competitive environment, which brought both winners and losers. Let’s look at them.

Those that benefited from the pandemic

Some financial services and insurance players had started investing in digital capabilities long before the pandemic, including digital platforms, straight-through processing, AI-enabled digital solutions, and other digital capabilities. Today, they are among the biggest winners as the market sees a massive shift towards digital channels supported by contact center capabilities. Direct banks and direct/digital insurers are among such players. Also, online aggregators are among the winners in the current environment. Many of them have seen unprecedented growth rates after the first months of the pandemic were behind us.

Those that were heavily impacted

Historically, there were many financial services and insurance providers, especially, who believed in the power of face-to-face interaction. Such companies often relied on 3rd party distribution channels such as brokers, advisors, and MGAs (Managing General Agents). These companies found themselves struggling more than others in the current environment, given that the physical channel diminished or became nearly non-existent for an indefinite period. Financial services and insurance players focused on industries impacted by the pandemic were badly hit, with travel insurance companies like Travel Underwriters and Allianz Global Alliance among the most prominent examples.

Those in between

Many financial services and insurance players had some direct or digital capabilities before the pandemic, allowing them to shift into direct channels when physical channels eroded. Among these are companies with established call centers but basic digital capabilities. These companies felt both positive and negative impacts: positive in getting more business at the expense of other companies with only physical channels, and negative in the sense of increased call/work volume driven by lack of comprehensive self-served and digital capabilities.

Read more about how Burnie Group's management consultants support clients in financial services.


Five key areas to accelerate digital channels in financial services and insurance

Based on our experience and the work we do with the leading financial services and insurance providers, we were able to identify five digital capabilities that matter in helping to accelerate digital channels.

1.   Acquiring customers through digital channels

a person confirms an online purchase made through a smartphone

One of the main challenges that businesses face across any channel is how to capture new business. Digital channels offer superb opportunities to acquire customers. Those financial services and insurance companies that embrace digital marketing overperform their brick-and-mortar competitors greatly in terms of growth and acquisition cost.

Paid digital marketing capabilities, such as digital display ads and Google Ads, are leveraged more frequently now that they are easier to implement. However, the return on investment is lower than digital organic capabilities. Getting digital organic capabilities right, such as search engine optimization (SEO), can be a real competitive advantage. Only a few players in the Canadian digital financial services and insurance market overperform on these capabilities.

The best digital players balance both paid and organic capabilities. With paid capabilities, companies can gain speed and match competitors. With organic capabilities, they can drive sustainable long-term growth that is not truly relying on marketing spending.

It is important to mention that these capabilities need to dovetail into efficient sales and processing capabilities such as lead management and straight-through processing. Our team has helped numerous financial service and insurance companies build their digital acquisition capabilities, setting them up for success.

2.   Self-service capabilities

Many insurance and financial players have recognized the importance of self-services due to its multiple benefits, including 24/7 availability, higher customer satisfaction, timely execution, and increased efficiency. Historically, the banking industry has been more advanced than insurance regarding self-service capabilities, offering online banking and direct investing.

We predict that the insurance industry will benefit from increasing the range of self-service capabilities. The most common self-service capabilities in the insurance industry are the simplest: enabling customers to update their personal information or download key documents, like a copy of their insurance policy. Some insurance companies stand out because they managed to migrate end-to-end sales and service processes online e.g.

  • Sonnet Insurance offers customers the ability to purchase a policy online and manage most of their existing policy aspects.
  • Square One Insurance offers the ability to purchase and manage a tailored home insurance policy online. This company exclusively focuses on home insurance allowing it to fine-tune its customer experience.

Due to the increasing commoditization of insurance and banking products, self-service capabilities will become a key opportunity for smaller and mid-size companies to compete in the digital space. The time is ripe because most consumers are savvy enough to find, buy, and manage financial and insurance products online via self-service capabilities, often preferring it to other channels.

3.   Multi-channel contact center

Interaction with customers looks different in the digital world. Unlike in the physical world, the direct-to-consumer space is characterized by various sub-channels such as call, online, chat, email, mobile, SMS, social media, social media direct messaging tools, and many more.

It is important to remember that some direct channels are more cost-efficient than others. For example, one employee can serve only one customer through a call channel. By contrast, one employee can serve 3-4 customers through a chat channel. An AI-enabled chat, such as Ada, can automate most conversations so an employee can focus on the most complex customer interactions that can not be handled by AI.

We believe that call, online and mobile are the key channels both for sales and servicing. Even if an online channel offers superior capabilities, most financial services and insurance companies still need to complement their online capabilities with strong contact center capabilities due to finance and insurance products’ complexity and the service level customers require.

Today, it is more important than ever to use the contact center as an integration point between different direct channels, such as taking inbound client calls, delivering outbound campaigns, handling online inquiries, servicing human-operated chats and handling exceptions in AI-enabled chats. Consequently, financial services and insurance companies need a modern, multi-channel contact center that leverages such technologies as virtualization, advanced IVR (interactive voice response), CTI (computer-telephony integration), call recording and tagging, voice recognition, intelligent workforce management, and many more.

4.   Digital reputation management

a woman posts a review from her phone

Due to a massive shift of consumers into digital channels, it is more important than ever that companies ensure their brand appears in a positive light. Most consumers visit multiple online platforms and sources of information before making their decisions.

For companies that want to be ahead of the curve, digital reputation management means proactive management on general reputation platforms, like Google reviews and social media, business-specific platforms, like Better Business Bureau (BBB), and industry-specific platforms, like InsurEye.

Proactive reputation management means asking new and existing customers for reviews to ensure that even if a negative review comes in, the volume of positive reviews is much higher, reflecting the excellent service a company delivers. Companies can also integrate reputation management tools like TrustPilot into their digital platforms.

Digital reputation management requires tools, processes and resources dedicated to ongoing tracking of reputation online. In so doing, companies can address issues before they can impact their brand reputation.

5.   Digitization paired with automation

Running a business in a digital environment means providing services in a digital form (e.g. application for a new product, purchasing an insurance policy, or making changes to the existing product). It also means rapid turnaround times from the customer experience (e.g. immediate emailing of a purchased insurance policy, immediate claim submission and processing).

Several elements of the operating model must be reworked to enable digitization in financial services and insurance companies. First, companies must digitize their process inputs. They can do so by collecting data in a digital form via online forms, web triggers and APIs. Alternatively, they can convert physical inputs, such as physical mail and paper applications, into a digital format via optical character recognition (OCR)/ intelligent character recognition (ICR) solutions, such as Abbyy and SoftSpoke. A combination of text recognition technologies and AI significantly increases the quality of text recognition.

Often, multiple IT applications are involved in processing transactions. These applications have to be integrated to ensure straight-through processing. Alternatively, robotic process automation (RPA) preserves the IT systems while intelligent bots execute transactions across multiple systems following the logic a human would use.

There is no recipe for immediate digitization and automation of all processes. Instead, it is advisable to focus on the processes that drive the most benefits for the organization and the highest client impact. Once completed, the scope of digitization and automation can consequently expand.

How to get started

Changing from an old way of running a business to a new one does not happen overnight. It involves careful planning, design, change management, and tight project and execution management.

Our experts at the Burnie Group have unique experience helping organizations assess their businesses for digital fit, re-engineering the business to operate via digital channels, and supporting transformation and digital capabilities implementation. Contact us to find out how we can support your organization.

About the author

Alexey Saltykov

Alexey Saltykov

Practice Leader, Post-Merger Integrations

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