Start-up, scale-up or established player, the way in which financial services firms conduct business has always been influenced by customers, explains Growth Street GC Simon Coles ahead of his session at the In-house Financial Services Conference.
Have customers changed the way financial services conduct business?
Looking at how financial products and services are created, deployed and marketed (and the types of businesses which offer them) it is clear that there have been plenty of changes in the past 20 years. There are the “easy” reasons for change in the sector: regulation, new technology and good old market forces. Then there are the more subtle reasons: a change in what the workforce wants or needs, social and demographic change and, of course, environmental change. But customers themselves being a reason for change? Massively over-generalising, the simple answer is, of course.
We would not have had the revolution in payment services if it was not for customers wanting to be free of the shackles of coins and notes floating around in their pockets. We would not have had regulators on a global basis marching toward protecting customers were it not for harm that has (and continues to be) suffered by them (of all types, not just retail). We would not have had the glorious emergence of fintech (yes, I’m biased) seeking to disrupt (by doing it faster, cheaper, better) the ancient financial institutions of yore… But start-up, scale-up or established player, the way in which financial services firms conduct business has always been influenced by customers.
The difference now is that firms, both new and old, are not taking a purely reactive approach, but proactive. Horizon scanning, anticipation of wants and needs and designing products around the digital savvy, all demonstrate this to some extent. But even this has started to evolve to the next level. We are now seeing the way financial services firms conduct their business itself being the cause of change in customers – a case of the tail wagging the dog? Perhaps – something I expect we will be discussing at the In-house Financial Services Conference in March 2020.
Traditional firms and emerging tech start-ups have very different business models and are both successful in their own way; what does the future hold for the FS sector?
Success is a wonderfully malleable word.
Company 1: I have created a brand new way of delivering an age old product and it is faster, better and cheaper than what came before. But if I can’t work out whether I am going for a volume play (pile ‘em high, sell ‘em cheap) or a margin play (reassuringly expensive) and then, crucially, how to actually get the right people to buy my product with the right frequency, then it does not matter how clever, how quick or how good I am, I will fail.
Company 2: I am delivering something which has been around for ages. I’ve got market share, I’ve got cross-selling opportunities across the board and my TrustPilot reviews are on the right side of OK. Then come the upstarts (sorry, start-ups) threatening my market share, threatening my ability to cross-sell and making my TrustPilot reviews look decidedly pedestrian. If I don’t address this, then the slow steady decline into the dusty books of financial services history has begun and I have failed.
How can we ensure both businesses above mitigate the risk of failure? Collaboration. By working together to serve customers, being open and honest and yes, accepting some pain along the way, what we end up with is a credible customer acquisition and growth strategy for Company 1 and a sustainable, evolving path to continuing relevance for Company 2. We have seen this type of collaboration in the market. We will see more of it in the future. It is no easy ride and a break down in trust, communication and faith will surely kill any good faith required to make it work. But this is the future, not just in financial services, but in the legal profession too.
What role does legal currently play in product development?
I am sure the answer to this will vary hugely across organisations. To be fair, the answer in my own experience varies a large amount. The closest I got to being at the beating heart of product development was actually when I was in private practice. I had a fintech client who wanted to develop a lending product which was “new and funky”. Cue pizza, alcohol and a whiteboard and me sitting in a room with the CEO, the “tech person” and the “finance person”. Several hours later we came up with something that looked like a loan, smelled like a loan, but wasn’t actually economically anywhere near as onerous (and no, it wasn’t equity either) and could be marketed as something transformational for potential customers. The product this gave rise to continues to thrive today.
Whilst in-house I have had varying experiences, ranging from being given a fully baked concept before being asked to double check whether it was fine from a regulatory perspective (it wasn’t), through to being invited a lead development of a product we were considering pivoting to (we didn’t, but it was flattering to be involved from the outset).
Ultimately it varies, but my advice to others would be: don’t use a stick to force yourself into product development, dangle the carrot of opportunity. “What opportunity?”, you might ask – find out at the In-house Financial Services Conference in March 2020.
If you had to be stuck in a lift with one person, who would it be?
Michelle Obama – I listened to the self-narrated audiobook of her biography last year. I have rarely been so inspired. I would love to go into more detail with her on how she demonstrates her strength, drive and commitment. Of course, to be fair and balanced here, if Michelle Obama had to choose who to be stuck in a lift with, it most certainly would not be me.