It’s time for the financial services sector to reinvent itself, with purpose

It felt like progress to see ‘national connectivity for ideas and education’ cited as a goal for the newly-launched UK Centre for Finance, Innovation and Technology (CFIT).

The UK financial services industry faces threats from several fronts: disrupting new technologies; challengers attracting younger customers, and a skills lag where financial services expertise meets data science.

Ideas and education will be key to reinvigorating a sector that, with its comfortable past, has been slow to innovate. And, as CFIT chair Charlotte Croswell said, working with universities is one way to drive growth in the sector.

Innovation culture

Universities like Edinburgh are focussed on innovation – the translation of cutting-edge research into real world solutions to the challenges we all face, such as climate change, harnessing data for good and improving public health and wellbeing, including financial. We know this means collaborating with others in new ways, such challenge-led industry-research partnerships.

Large financial services companies have not traditionally worked with universities, or had an in-house research and development function, or even a culture of long term innovation planning – they haven’t needed to. Disrupted by new technologies, for example, they have often responded by buying fintechs, rather than exploring how they can disrupt in turn.

Purposeful technology

One option for them would be to look beyond technology and focus instead on purpose. Tech-wise, all FS and fintech actors are running in the same direction – digitising and building better banking and investment apps. And this is only what millennials and Generation Z expect.

But what these younger customers also expect is more progress from those with power in solving some of the world’s wicked problems - climate change, data for good and financial wellbeing - and this frustration is driving them away from traditional banks.

The sector should not be looking to which company will offer their services first in the Metaverse, but at which company is proving to their customers that they are better – for them, their community, and the planet. Being able to demonstrate purpose could give large financial services companies the edge they need.

Issues of financial vulnerability and capability are obviously connected to wider societal problems of poverty and inequality and, recently, high inflation. Companies could think about how to support customers beyond their core services and build trust. Being able to pay in installments with Klarna, for example, is very popular, but could traditional banks provide a more responsible ‘buy now pay later’ service? A more positive example is NatWest providing services on fintech Inbest, which helps people identify benefits they are eligible for.

Collaboration

Innovation isn’t easy, and it’s risky. Real innovation in financial services is complex and requires an interdisciplinary approach from fields including economics, ethics, marketing, sociology, law and data science.

Engaging with universities can build these collaborations, and allow companies to explore the role of financial services in improving people’s lives. Our University is already working with NatWest banking group on climate change and sustainability education, with asset managers abdrn on investing innovation, including environmental and social governance, and with insurer Aegon on financial wellbeing.

Innovation helps forward-looking companies differentiate themselves from competitors, brings sustainable growth and supporting them in adapting to challenges and opportunities. And if it can also make positive change in the world, then those companies will be giving customers what they want.

This article was first published in The Scotsman

Header image - Sergey Nivens

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