Written by Mark Michaud on December 18, 2015
in Financial Marketing

Every two weeks, our financial services teams of account people, strategists, content professionals and techies gather in a session called “Before the Bell” to talk, share and educate on matters that affect our financial services clients. We’ve been watching a number of trends throughout 2015, from rising consumer debt to bank cost-cutting initiatives. With a new year upon us, we met today to look at which of these trends will matter most in 2016 for financial services marketers. There were a lot of trends that didn’t make our list but are still important – from the policies of a new federal government to the price of oil – but here’s our take on the Top 5 financial services trends for 2016.

#1 – FinTech disruption

This year, the rise of FinTech almost became an existential crisis for traditional financial services brands. We saw startup – companies from WealthSimple to Zenbanx – introduce new technology-based models of providing financial services across the product shelf. We also saw the big players begin to make significant moves too. Late in 2014, RBC and MasterCard announced their partnership with startup Bionym on a wearable, and this month, RBC announced partnering with Uber on loyalty points. Early in the year, IGM took a significant interest in robo-advisor WealthSimple, and in October, BMO launched their own with BMO SmartFolios. Incubators and hackathons proliferated with efforts from Scotiabank, Desjardins, and . TD partnered with Communitech in Waterloo and MaRS in Toronto.

Why it matters: Two key factors merge nicely here: the key Millennial demographic demands new digitally driven customer experiences, and the drive for cost-savings pushes FIs to find new cost-effective models of delivering services.

In 2016: As robo-advisors proliferate and experimentation continues next year, marketers need to ask themselves:  What’s in it for our customers? We note the research that says Millennials see as much value in the advice of robo-advisers as they do in the technology itself. To win, innovation needs to meet human needs. Sure the tech is cool, but is the customer experience just as cool?

#2 – Millennials matter

This was the year that the discussion on Millennials matured – thankfully! We saw fewer stereotypes about this demographic’s supposedly quirky behaviour and differing values. Why? For financial services, it is clear: Millennials are growing up and into financial services consumers. They have reached the career and family stage where we see an explosion of financial product adoption: mortgages, RRSPs, RRSPs, TFSAs, home, auto and life insurance on top of the core accounts and credit cards they already own. Finally, in our Boomer-dominated world, they matter.

Why it matters: Beyond the stereotypes, some important differences remain. Millennials are still digital natives and their expectations are sky high for service delivery and functionality. And interestingly, they still put a high value on advice and human interaction at key moments on their purchase journey. An important related issue is the extent to which their Boomer parents are digging into their own financial security to help their kids get established.

In 2016: It’s time for financial services marketers to stop learning about this segment from the media and shallow research. Millennials are our customers now and are providing the hard behavioural data to truly understand what matters to them. They are voting with their clicks!

#3 – Household debt keeps climbing

Early in 2015 it looked like we may have been turning the corner on this issue. While still large by historical standards, the rate of growth of household debt began to slow in the second quarter. There was lots of media noise that suggested we Canadians were finally hearing and heeding the warnings about debt and were getting our individual houses in order. But by the third quarter, we were back to setting records with debt growing faster than income. Today, the average household has roughly $1.64 in debt for every dollar of disposable income.

Why it matters: For almost everyone else, debt is debt. But here in financial services, debt is also a product. Do our customers have too much of our product to sell them much more? Depending on which economist you speak to and the day of the week, this is either manageable or one of the biggest vulnerabilities in our economy.

In 2016:  Watch consumer sentiment. So far, consumers have been oblivious to our rising debt loads, buoyed up by  rising home values. As the economy takes shape in 2016 – hampered by low oil prices but juiced up with infrastructure spending – will consumers stay so calm? As marketers, everything from financial planning to credit cards, from fees to financial literacy could be affected by how much debt anxiety we adopt.

#4 – Potential housing market bubbles

Rising house prices felt like The Greatest Story Ever Told for most of the last decade as the net worth of most Canadians rose ever skyward. Now it’s more like A Tale of Two Cities, or three or four. Warnings have piled up nationally and internationally about potential bubbles in Toronto and Vancouver, while Calgary and Edmonton shifted to buyers’ markets as the economy fell into recession.

Why it matters: Directly, of course, in sales of mortgages, home equity lines of credit and home and mortgage insurance. Indirectly, our individual feelings of prosperity drive credit card use, travel spends, investment loans and inflow, and more.

In 2016:  The old truism says all real estate is local. In 2016, this will hold true for mortgage marketing too – and all its ancillary products like HELOCs. Are you still doing national mortgage marketing? Get ready to support your Mortgage Specialist for the conditions they face locally. Even better, use customer data to support individual mortgage marketing based on local conditions. If the bubble bursts in 2016, you’ll need to reset your marketing priorities (see #3 above).

#5 – The branch of the future

With technology innovation screaming for investment dollars within the largest Canadian financial institutions, followed by announcements of cost-cutting, we watched for the inevitable notifications of branch closings. What did 2015 bring instead? Investment and innovation. While many of these investments will have been in the pipeline for a number of years, this was the year we saw the unveiling of large immersive experience branches in premier locations and micro-branches finding relevance at the neighbourhood level. The challenge for the Big Banks is considerable: with over 6,000 branches nationwide, rolling out innovation at the branch level is slow, expensive and difficult.

Why it matters: Despite the digitization of most banking services, customers still want branches for key activities like complex financial issues or problem resolution. But today’s customer will move easily between many channels in a single purchase journey expecting their provider to keep up.

In 2016:  The latest branch investments depend on an omnichannel view to be successful. Financial services marketers who are still planning by channel, campaign or segment need to refocus on planning by customer journey to create the engaging omnichannel experience that customers demand, and of which the best branches are an integral part.

Mark Michaud is a Senior Vice President and Head of Strategy & Research at Ariad Communications

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