In a digital universe where technology is advancing faster than financial services companies can keep up, staying relevant means adapting to consumer wants and needs in order to retain their business. Fintech startups are making their services more approachable, transparent and not as daunting. However, the insurance industry has been lagging in this transition. Where many personal finance startups are reducing apprehension and making significant strides toward putting consumers in the driver’s seat of their finances, insurance platforms could still use some work. Here’s where financial services innovators are succeeding:
Empowering the customer: Financial technology is bringing companies and consumers closer together by giving them direct access to products they need, such as loans. While banks take deposits in the form of savings and checking accounts, and lend that money to individuals or businesses, peer-to-peer lending companies like LendingClub take large institutions out of that equation. LendingClub is an online marketplace connecting borrowers and investors directly. Lenders can choose borrowers from a collection of online profiles seeking a loan and lend money directly to the individual or invest in a group of loans packaged as an investment product with measured risk. For many, peer-to-peer lending has provided a solution that banks have been unable to provide – a loan and savings vehicle where the customer feels like they are choosing the best option for them. Not the only one that’s available.
Making typically complicated processes simple: Platforms that allow customization and instant access appeal to today’s on-demand consumers. Automated services that be can tracked at the swipe of a finger are increasingly adapted and sought after. Mint, for instance, allows consumers to manage their financial life from their phone and view all account balances in one place. It offers trend feedback and graphs about spending habits and helps set individual budgets. Aside from predefined goals – covering objectives such as paying off credit card debt, saving for an emergency, buying a car, and taking a trip – Mint also offers the option to create a custom goal to cover whatever specific objective you have in mind. Users can easily create a budget based on spending patterns, see how much you’re spending on what, and create and adjust budgets as you go based on what you actually do. It’s personal finance gone simple, pliable and interactive.
Bringing transparency into the process to enable better decisions: Planning for income during retirement is a huge personal finance challenge for many consumers, and retirement plans can be difficult to assess and select. To alleviate this pain point, personal finance startup BrightScope is providing a solution that helps employees gain better control over their retirement planning choices. Realizing that 401(k) plans are hard to evaluate from the plan descriptions and prospectuses available, and that employees can’t always choose the most suitable investment options for them, BrightScope enables employees to evaluate their company’s 401(k) plan by comparing it with that of peer companies. If a user has two job offers and wants to compare compensation, they can take the quality of the 401(k) plan into account by researching these companies on BrightScope. Each company receives an overall rating as well as scores in important categories. BrightScope is bringing transparency to the often opaque retirement market in order to drive better decision-making and create consumer confidence
Reaching the finish line first
Because fintech companies are digital and web-based, they tend to be much more agile than traditional institutions and can more easily adapt their offerings to customers’ evolving needs. This digital disruption is resulting in collaboration with larger companies that are looking for new ways to embrace such technology without needing to start from the ground up.
Obstacles to adopting new financial technologies? These may be neither financial nor technological but psychological, as it may take time for digital processes to gain public trust, and the financial space has long been dominated by big firms that are resistant to change. Yet when you think about what Google, Facebook and Amazon started out as, and what they’ve become, it’s easy to imagine the fundamental shift possible. Instead of viewing technology innovation as a threat, it should be embraced as an opportunity to improve how consumers view an industry that has struggled to maintain a positive consumer image.
Adopting new technology and consumer engagement options will be key to the insurance industry’s continued relevance and, most importantly, long-term consumer sales. There is much to gain from adopting new technology, given the opportunities it offers for capturing the growing consumer base of millennials and younger generations born into a hi-tech world.In fact, arecent report by Goldman Sachs says that over $4 trillion in addressable revenues and $470 billion in profit at traditional financial services companies is at risk of being disrupted by new technology-enabled entrants. While some say the fintech industry is maturing and others say it’s still in its infancy, one thing’s for sure: The positive impact is here to stay.