Oliver Wyman SOFS 2018 Report Says Big Tech Offers Important
Lessons for Financial Services Incumbents in the Race to Create New
Value for Customers and Drive Growth
NEW YORK & DAVOS, Switzerland -- (Business Wire)
According to global management consultancy Oliver
Wyman, traditional financial services firms will need to accelerate
customer value creation or risk conceding an increasing share of
customer attention and wallet to other firms, primarily to ‘big tech.’
Although the largest financial services firms in the world trace their
histories back, on average, nearly 150 years, the largest ten consumer
tech leaders have reached an average market capitalization 2.3x that of
global financial leaders in just 1/5th of the time.
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The
Oliver Wyman State of the Financial Services Industry 2018 report
titled, The
Customer Value Gap:Re-calculating
Route, finds that while financial services incumbents have largely
recovered towards relative health ten years on from the financial
crisis, and conditions have improved significantly, there is a gnawing
sense of concern regarding the prospects for future underlying industry
growth.
The most prominent concern highlighted is that a group of highly
successful big technology firms are generating new customer value at a
much higher rate than financial services firms. “The lessons from big
tech in the last decade are not just about gaining and growing customer
mindshare; they also reveal the nature of future competition they will
pose,” said Rick
Chavez, report co-author and partner at Oliver Wyman. “The basis for
competition has shifted from products to active solutions, from
product-selling to problem-solving for customers with systematic
improvement in the overall value delivered to customers.”
The
21st annual Oliver Wyman report looks at the global mass market as a
case study to demonstrate the customer value gap in financial services,
and utilized extensive primary and secondary research, including a
survey of approximately 4,000 mass and mass affluent customers across
the US, the UK, France and Australia on customers’ perception of value
and their unmet financial needs.
“Financial services firms need to quantify the other side of the
customer value exchange, and assess how much value their solutions
actually deliver to customers,” said Aaron
Fine, Oliver Wyman partner and report co-author.
“These incumbents have focused on three categories of historical
financial need: Borrow, Safeguard and Grow, but there are actually three
others: Earn, Spend and Transfer. Our global survey of consumers
indicates that four of the top five current needs for the mass market
customer relate to these three additional categories. In the case of the
US, if you could reduce the amount an average mass market customer
spends by 4%, that would create $1,000 in annual value. To have the same
impact on financial life through an increase of deposit and investment
yields or interest and principal paid on borrowings, you would need to
increase the return by 33x or reduce the amount paid by 15 percent. So
we see these sorts of areas as the coming battlegrounds for new value
creation in Financial Services.”
According to the report, it is in these additional categories that new
value is being created by new companies already. For example, the report
calculates that in the US since 2010, $1 trillion of new value has been
created in the borrow, save, secure businesses – largely by incumbent
banks, asset managers and insurers. But an additional $1 trillion of new
value has been created in businesses focused on spend, earn, transfer
and this has largely been created by new firms such as Big Tech firms.
In addition, six plays are outlined in the 2018
SOFS report to provide practical orientation on what financial
services firms can do to move forward and combat the gnawing sense of
concern originating from the erosion of structural advantages, such as
risk-free returns on deposits, lagging industry growth, and the
competitive forces emerging primarily from big tech.
Oliver Wyman’s Managing Partner for Financial Services Ted
Moynihan said, “Over the last 10 years, the Financial Services
industry has fought its way back to relative health. But, in the
meantime the techniques used to create new customer value have
dramatically changed and the Big Tech industry are dominating customer
mindshare and reaping the rewards. It’s time for Financial Services to
learn and react, or continue to watch value shift to other parts of the
economy.”
The Oliver Wyman State of the Financial Services Industry 2018 report is
available here.
Key exhibits from the 2018 report include:
-
Exhibit 1.1 The Gnawing Sense of Concern
-
Exhibit 2.1 Oliver Wyman Customer Value Framework and Survey Results
-
Exhibit 2.2 Relentless Focus on Customer Value and Growth – The
Flywheel Effect
-
Exhibit 2.3 Bonding Comparison Across Industries
-
Exhibit 3.1 Global Real Income Growth for Median Household
-
Exhibit 3.2 Deteriorating State of US Mass Market Finances
-
Exhibit 3.3 The Customer Value Exchange
-
Exhibit 3.4 Oliver Wyman Financial Needs Hexagon
-
Exhibit 3.5 Top 5 Global Financial Needs for the Mass Market
-
Exhibit 3.6 Sensitivity of Impact Across Mass Market Financial Needs –
By What % Would Each Category Need to Improve to Create $1,000 of Value
-
Exhibit 3.7 Market Growth Across Financial Needs
-
Exhibit 3.9 Bonding Gap Between Mass Market and Mass Affluent
-
Exhibit 4.2 Example Innovators Addressing Evolving Needs
-
Exhibit 5.1 Focus for Getting on the Growth Flywheel
-
Exhibit 5.2 Changing the Way You Change
About Oliver Wyman
Oliver Wyman is a global leader in management consulting. With offices
in 50+ cities across nearly 30 countries, Oliver Wyman combines deep
industry knowledge with specialized expertise in strategy, operations,
risk management, and organization transformation. The firm has more than
4,500 professionals around the world who help clients optimize their
business, improve their operations and risk profile, and accelerate
their organizational performance to seize the most attractive
opportunities. Oliver Wyman is a wholly owned subsidiary of Marsh &
McLennan Companies [NYSE: MMC]. For more information, visit www.oliverwyman.com. Follow
Oliver Wyman on Twitter @OliverWyman.
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Contacts:
Media Contact:
Oliver Wyman
Jung Kim, +1-646-364-8355
jung.kim@oliverwyman.com
Source: Oliver Wyman
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