The Evolution of Convenience in Financial Markets

Posted on October 8th, 2021
Convenience in Financial Markets

The Amazon Effect has woven its way into every corner of our lifestyles. It’s worn down our patience for waiting and encouraged us to try new brands in the pursuit of speed and convenience. And every business sector has been affected.

Of course, retail was the first to experience the Amazon Effect. During the 2000s, Amazon enjoyed explosive growth. Eventually, its retail competition realized that making changes to win back customers would involve changes. As such, many retailers began investing in mobile technologies and reimagining their service offerings.

The result has been a massive shift in shopping opportunities for buyers. Today, they can order an item and pick it up in the store. They can even pull up to the curb and have their pre-purchased product delivered right to their trunk. Or, they can order something online, have it delivered overnight to their house, and bypass brick-and-mortar forever.

But the Amazon Effect isn’t limited to purchasing shoes, apparel, and housewares. It extends to everything from garden hoses and groceries to coffee and cars. Millennials especially like using services such as Carvana to order vehicles on their devices and have them brought to their homes. In fact, Millennials are leading the online car buying crowd, although it’s thought that Generation Z will echo the habit sooner or later.

So does that mean the Amazon Effect has zero holdouts? Not entirely. For a long time, the financial convenience sector wasn’t sure how to make pivots. After all, finance is a far different beast than retail. Nonetheless, financial leaders knew that a massive shift had to come—regardless of the challenges inherent to serving up Amazon-style speed and support.

Historical Challenges to Providing Amazon-Level Convenience in the Financial Realm

The financial industry isn’t just about moving money around. Indeed, money and economics are at the heart of finance. Yet finance also involves regulation, compliance, geography, and many other considerations. Unfortunately, all of the regulations have made it challenging for many financial professionals to adopt an Amazon mindset.

One of the top obstacles to offering speed and convenience for customers is that finance involves both short-term and long-term considerations. For example, the same customer who wants a paycheck deposited instantly may wish to set up a retirement account that will grow over 40 years. Under those circumstances, finance companies have the burden of keeping the retirement account customer feeling engaged with their brand. Otherwise, the customer might be wooed by a different financial institution—and might move the accrued money accordingly.

Other Financial Challenges

Another Amazon Effect barrier for finance regards compliance. Like healthcare, finance involves tremendous security considerations. It’s not enough to gather people’s information and push out messaging, as retail establishments do. Financial entities must protect their customers, including in a digital sense. Consequently, banks, investment brokerages, and insurance agencies must put measures in place to avoid data breaches. At the same time, they must keep countless records and data to show they’re doing their due diligence.

What’s a final challenge for financial leaders? Most people historically haven’t thought about dealing with money like dealing with goods or other services. This is changing, though, as younger generations are becoming more comfortable with digital solutions. Millennials have grown up with the Internet. Generation Z has grown up with devices in hand. Plus, members of Generation X and Baby Boomers have by and far become more adept at using technology.

The bottom line is this: No matter what roadblocks financial industries have faced before, the time to evolve is now. Jumping on the Amazon Effect train might seem like a leap of faith. However, many financial players have already done it—and reaped the benefits of their bold choices.

Strategies Financial Companies Are Using to Scale-Up Convenience

Finance-related organizations like banks, credit unions, credit card issuers, and brokers are all testing the waters when it comes to convenience. Together, they’ve come a long way toward making finance more future-forward and future-proof.

What are financial entities doing to reduce friction points for both consumers and business clients? Below are some of the top ways that the biggest movers in the finance market leverage the Amazon Effect to disrupt their systems.

1. Make online submission of private data safer and speedier.

It’s no secret that the real estate market has enjoyed a steady post-Covid boom. Though it’s likely to level off soon, individuals, families, and commercial buyers will still be on the market for properties. Why not? Low mortgage rates are an attractive draw, and they might not be around forever.

The issue, of course, is taking away any worries about submitting private information through the Internet. In answer to this concern, software provider Meridian Link has developed a product called MeridianLink Mortgage.

MeridianLink Mortgage features an Open API framework that allows real estate market players to connect securely to vendor partners. Each partner can then satisfy some aspect of the loan application and house buying journey. By providing a tight link between vendors and real estate professionals, the software fills a potential gap in the safety system. It also serves as a real-time systems integration vehicle for companies aiming for true digital transformation of their workflows in 2022 and beyond.

2. Move money swiftly between accounts anywhere.

A huge sticking point for consumers and companies has been how long it takes to send and receive money. Decision engines, including RealNET from FIS are moving toward using existing money rails to get as close to immediate money transfers as possible. In addition, FIS’s work in this realm has opened the door to discussions about how to move large and small sums through geographic borders.

The ability to move sums through global borders is a critical step in providing Amazon-type services in the finance market. Currently, businesses of all sizes are exhibiting a global mindset, making financial convenience even more feasible. That is, they’re hiring remote workers around the world and boosting their number of international suppliers. In a borders-agnostic working world, moving funds rapidly between merchants through all significant banking institutions makes sense.

Near-instantaneous money exchanges can also help from a socioeconomic perspective. Getting people in underserved communities, cities, and countries money or charitable support can significantly impact moving toward equal access to funding. Having money a day early could mean the difference between paying bills or being hit with late fees. Innovative companies like FIS should make it possible for digital money exchanges to be nearly as immediate as an in-person counterpart.

3. Enable full-scale, comprehensive banking from supported apps.

Financial institutions have offered their customers the convenience of app downloads for years at this point. However, the apps haven’t always provided more than the ability to look at accounts or set up a withdrawal. This is all changing at a time when consumers want to be able to do more from their homes rather than walk into a bank or credit union branch.

Banks and lending institutions such as Bank of America, Chime, and Discover make waves with their outstanding finance apps. For example, Bank of America has added an AI assistant to its app to provide customers with extra money management support. Likewise, Chime has tried to make sending money between other Chime accounts effortless with instant transfers via the app.

As smartphone technology continues to improve and expand, banking apps will no doubt morph as well. Though it might appear that financial institutions’ apps can’t get much more advanced, they can and will. It’s none too soon, either: Most consumers average around 40 active apps on their smartphones. Therefore, they’re comfortable using apps as portals to get what they need, when they need it from brands they trust. And that includes finance-related brands.

Looking Ahead Toward the Next Generation of Financial Freedom

There’s a reason that so many people are getting more invested in becoming better personal and professional money managers: They like being able to stay on top of their assets. It’s much better to know what’s happening financially than to be surprised down the road.

With this in mind, financial convenience institutions of all shapes and sizes have the chance to break into new markets and bring in more consumer and commercial customers. First, however, they need to focus their attention on becoming the Amazons of their sectors. This means applying innovative, agile thinking practices to inventing new ways for people to interact with their brands.

The basic principle of finances hasn’t changed and won’t change. Even with the emergence of cryptocurrency, the financial market tends to operate on the same principles. Nevertheless, the way people interact with their preferred financial institutions has changed radically. It will continue this change over time, too, as society continues its move toward the AI-heavy Fifth Industrial Revolution.

No one could have guessed that the founding of Amazon in the mid-1990s would completely change the face of business in a few decades. Nonetheless, the Amazon Effect is real and powerful. As more financial institutions get creative with their offerings and delivery methods, they’ll be in a position to snag more of their target markets. Who knows? They may also cause a new effect that will bear their business’s name.

Peter Daisyme

Peter Daisyme

Peter Daisyme is the co-founder of Palo Alto, California-based Hostt, specializing in helping businesses with hosting their website for free, for life. Previously he was the co-founder of Pixloo, a company that helped people sell their homes online, that was acquired in 2012.

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