The financial sector in the future

The financial sector is facing some major challenges in the years to come. For many years the sector has been customer oriented – at least in its own opinion. From the customer’s point of view it is mainly the commercial area in which the customer has been focused on. In relation to private customers and small businesses far too many financial institutions use the one size fits all concept. They want customers, who are happy with the solution they have to offer – i.e. a joint account for both adults of the family in the same bank.

Customers want something else. The success over the past years of the small banks shows that clearly. The challenge is to adjust the services of the banks to the customers – and not the other way around. You must solve problems for the customers instead of selling them ready solutions. There are lots of areas to work on: Individualised pension savings instead of solutions from cooperation partners you may happen to have. Home-financing tailor made for each family with a suitable mix of interest-only, savings and possibility of re-pairs/renovation. Financing of the senior life or solutions for the young people on the run.

This new professional competence is called family sociology. Financial institutions must un-derstand people’s lives – and understand why you have cigar box accounts for holidays, communions, etc. You have to work with the fact that Danes have four types of private fi-nances:

• He surrenders his pay check and receives an allowance
• They have joint finances and a joint account in a bank
• They have joint finances and each have a bank account – possibly in separate banks
• They do no have joint finances and each have their own bank

Items 3 and 4 are increasing at the moment. If you do not understand why, you will treat your customers the wrong way.

It does not require new knowledge of financial services. These qualifications are already pre-sent in the sector. It requires knowledge of people – sympathetic insight, the ability to com-municate, understanding the customers’ needs and a desire and will to solve problems. Those are the most important qualifications for future financial institutions. But that is not the picture that the sector shows outwardly. Since we are moving into a period with small year-groups of young people – the next 5 year-groups of 21-year-olds are the smallest in 100 years and the next pensioners are at the same time the largest – it will be hard to at-tract young people with those abilities, since they will typically look for other sectors. It will be necessary to recruit more broadly than today and to upgrade its employees in these ar-eas. At the same time there is a need for more people with key competencies in the profes-sional areas. So the future employees must be great judges of human nature and highly trained financial experts: More from the soft part of the educational system and more from the business colleges.

The other great challenge is to use the Internet to something sensible other than bookkeep-ing. There must be advice, guidance and real contents on the Internet. It has started a bit, but there is still a long way to go. We have only just started the second IT wave. Technology always comes in two waves – first as a bobble that bursts and then as a 10-15-year above-average growth.

The alternative is to continue with one-size solutions. Then the services must be of the best quality and at the lowest price possible. That is the development that characterises the large banks within the private customer field. But it is a very difficult road to follow for small and medium sized financial institutions.

Published here, 2008